The Westpac McDermott Miller Consumer Confidence Index dropped by 12 points to 75.6 in December - its lowest point since the survey began in 1988, Westpac said.

Westpac said the survey indicated that there are far more New Zealanders who are pessimistic about the economic environment than those that are optimistic.

“Households’ finances are being squeezed as we head into the holiday season,” Westpac’s acting chief economist Michael Gordon said.

 “As well as increases in borrowing costs, the sharp rise in consumer prices is eating away at households’ spending power,” Gordon said.

There had been particularly large increases in the cost of food, housing, and petrol prices over the past year.

Consistent with that, the downturn in confidence had been widespread across age groups, income brackets and regions.

“Importantly, for large numbers of households, the pain is still ahead of them,” Gordon said.

 “Many borrowers are still on the very low mortgage rates that were on offer in the early stages of the pandemic.

“However, around half of all mortgages will come up for repricing over the next 12 months. In many cases, borrowers will face refixing at substantially higher interest rates,” he said.

Spending will continue to weaken over the year ahead as borrowing costs continue to push higher, Imogen Rendall, market research director of McDermott Miller said.

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“This time of year often brings with it an uptick in confidence, as New Zealanders look forward to the festive season and a long summer stretching ahead of them. Instead, there are no good news stories this Christmas, with consumer confidence at its lowest point since the Westpac McDermott Miller survey began,” Rendall said.

Many respondents expect bad economic times ahead, not just over the next 12 months but for the next five years, she said.

They are not only worse off financially than a year ago, they expect their personal situation to further deteriorate over the next year.

“With households expected to come under even more financial pressure in the New Year, it remains to be seen how much further confidence might fall,” Rendall said.