Managing Director & Partner
The New Zealand Consumer Sentiment series shares insights from a BCG consumer survey undertaken with our coding and sampling partner, Dynata. The survey aims to uncover how consumer perceptions, attitudes and purchasing behaviours are impacted by the evolving COVID-19 and inflation crisis. This snapshot presents insights from Round 3 of the survey, gathered from 28 August 2023 to 10 September 2023. We have drawn comparisons with research completed in the previous survey rounds (April 2022 and September 2022) and our surveys in other countries. Note that the age ranges used in this analysis are consistent with those used in BCG consumer research around the world. We recognise that other organisations may use different ranges.
As New Zealand’s economy slows and experiences highly inflationary conditions, consumers are increasingly concerned about the country’s economic outlook and their own finances. Consumers are spending more on essentials, have less disposable income and continue to be driven by value. However, sentiment does vary by life stage – with a bright spot in the 52+ age group.
Our analysis found 3 key insights into current consumer sentiment:
For local businesses, it will be important to focus on the fundamentals. Pricing, ongoing cost management and personalisation to reflect value for each market segment will be key to resilience in the current economic climate.
This third consumer sentiment report is informed by 1200+ responses from New Zealanders. It aims to support local businesses to understand the latest in consumer sentiment, trends in consumer spending and implications for strategic priorities in the year ahead.
Consumers continue to feel the pinch as inflation remains at elevated levels and the economy balances on the edge of a recession (with Stats NZ restating GDP for the March 2023 quarter to 0% growth). New Zealanders are more concerned about rising prices and their personal finances than many of our global peers. See Exhibit 1.
We found 74% of respondents expect a recession in New Zealand, up from 67% a year ago. 65% remain worried about their personal finances and the majority believe inflation is here to stay. See Exhibit 2.
These concerns are not surprising when considering that 60% of respondents said their disposable household income has decreased compared to 6 months ago. The ‘financial crisis due to inflation or recession’ was the most cited driver for this decrease. See Exhibit 3.
As personal finances come under pressure, there has been a 15 percentage point increase in consumers stating they are saving less compared to our survey a year ago. And when asked how their situation has changed in the past 6 months, 63% of respondents state they are now saving less of their household income than they did 6 months ago.
Instead of saving or spending on discretionary goods and services, consumers are spending far more on essentials which are rising in price. When asked to compare current spending with spending 6 months ago, 40%–60% of respondents state they are spending more on utilities, housing (mortgages or rent) and groceries. These figures are up from a year ago, as commodity and labour hikes of the last 24 months are now being passed through to consumers in the form of price increases on goods and services. Over 30% of respondents expect the price of these essential categories to further increase in the next 6 months. See Exhibit 4.
Breaking down the results by demographics, we start to see a divergence between younger and older consumers. Consumers in the 18–34 and 35–51 age groups are generally more pessimistic about New Zealand’s economic outlook and their own personal finances, with 84% of pessimistic respondents coming from these demographics. In contrast, the 52+ age group is more optimistic, making up an outsized portion of positive respondents. See Exhibit 5.
Consumers in the 18–34 and 35–51 age groups are typically facing significant increases in rent or mortgage payments. The pessimistic people in these age groups make up 35% of the broader population. They are highly worried about finances and 87% struggle to meet day-to-day expenses.
The 52+ age group is generally more resilient in its employment and financial position. For business, this group is a bright spot, as it continues to grow its spend on discretionary and health-related goods and services, looks to splurge on travel and in-home leisure and enter new investments. The optimistic 52+ year olds make up 9% of the wider New Zealand population. See Exhibit 6.
Across all spending categories, ‘value for money’ was the top driver of purchase decisions. New Zealand consumers are increasingly looking to purchase from more affordable brands, check for low prices online and buy on a discount. See Exhibit 7.
For the 18–34 and 35–51 age groups, this focus on value is tied to an increase in the use of digital channels to research prices, purchase goods or arrange services. The 52+ age group is returning to in-person purchasing post-COVID as they search for value linked to quality and reliability, not price alone.
Even through economic downturns, leading companies can build competitive advantage, grow revenues and increase margins to open a performance gap versus their peers, according to BCG’s global research. We expect this to be true for consumer businesses in New Zealand too; those that focus on the fundamentals to meet the needs of value-seeking consumers or the optimistic and growing silver economy are likely to outperform.
To respond to our current landscape, we recommend 3 key actions for businesses:
The authors are grateful to a number of colleagues for their support and assistance. They include Julie Nguyen and Paul Sutherland for marketing, Rebecca Diepenheim and Debbie Spears for design and layout, and Charvi Aggarwal for web design and upload.
ABOUT BOSTON CONSULTING GROUP
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.
© Boston Consulting Group 2024. All rights reserved.
For information or permission to reprint, please contact BCG at firstname.lastname@example.org. To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcg.com. Follow Boston Consulting Group on Facebook and X (formerly Twitter).