New Zealand’s economy has benefited from a stable political environment and export-oriented industrialisation, bringing steady growth and prosperity. However, in the face of a weakening economy coupled with massive rebuilding costs in the aftermath of the Christchurch earthquake last March, what does the future hold for New Zealand consumers? Will they continue to cross the Tasman to Australia searching for brighter prospects?
NEW ZEALAND CONSUMERS TODAY
We’re worse off than before!
According to New Zealand’s leader of the opposition Phil Goff, New Zealand has not fared well under the current government. Statistics New Zealand revealed 100,000 Kiwis have left for Australia to look for work. “I want to know what John Key (the current Prime Minister of New Zealand) is going to do about rising unemployment, the rising cost of living and the ticking time bomb that is the rising number of young people not in work or training,” announced Phil Goff. Prices in the country have gone up nearly four times faster than incomes over the past three years with the rise of GST from 12.5% to 15% in December 2010 taking most of the blame. According to the Ministry of Social Development, 55,200 15 to 24-year olds are not in education, employment or training and the number of young people on long term unemployment benefit has increased by over 700%.
Unemployment Rate in New Zealand: 2006 – 2011
Source: Euromonitor International from International Labour Organisation
Note: Data for 2011 is forecast
Exotic food and technology the staples
Flatbread, external hard drives and tablet computers are now considered essentials in New Zealand, while gas heaters, dictionaries and envelopes have been consigned to history, according to a report from Statistics New Zealand. Its Household Economic Survey questioned approximately 3,100 households on their spending habits between July 2009 and June 2010. Within the food category, ready-to-eat meals and coffee were found to have grown in importance, reflecting changing spending habits. Flatbread is now regarded as a core household food purchase, reflecting the country’s growing multiculturalism.
Reality of life bites into food budget
Giving up on cheese and butter, switching from fresh to frozen vegetables and forgoing luxuries are among the measures consumers are taking to fight rising food bills. Housewife Leah Morgan said that with a household of five people, they used to get their weekly shopping done for about NZ$160 (US$135) but that in the last two months, this had increased to nearly NZ$200. “We never get fresh vegetables, we buy frozen because it’s cheaper. Most of the things we buy are on special – if you’re not doing that, it would be crippling. To go in and buy a pack of pies instead of salad is cheaper,” she said.
EMERGING NEW ZEALAND CONSUMER TRENDS
A growing wardrobe of American fashion
The Kiwi dollar’s strength against the greenback is proving a windfall for fashion-loving online shoppers, as they snap up large amounts of American clothing and goods. Logistics company DHL Express New Zealand has reported a 26% jump in deliveries from overseas over recent months, and “unprecedented” 40% growth in deliveries from the US between March and September 2011. According to Euromonitor International data, internet retailing sales in New Zealand grew by 60.9% in real terms between 2006 and 2011, to US$453 million. PricewaterhouseCoopers New Zealand retail partner Julian Prior said the internet channel is changing the way New Zealand consumers shop, noting that “The attraction of lower prices, convenience and broader product ranges is swelling the ranks of consumers choosing to shop online on international websites.”
Fresh is unhealthy for the wallet
New Zealand consumers are eating more canned food to save money as the cost of fresh fruit and vegetables continues to rise, according to a recent survey by Canstar Blue, a firm that compares customer satisfaction ratings for brands. 30% of the 2,500 surveyed stated they have increased the amount of canned food they buy. Derek Bonnar, New Zealand national manager of Canstar, said: “The survey clearly showed how shoppers are driven by getting the best price.”
Real Market Size of Canned/Preserved Food in New Zealand: 2007 – 2015
Source: Euromonitor International from trade sources/national statistics
Note: Data for 2011 and 2015 is forecast. Historical and forecast data based on constant prices and fixed 2011 exchange rates. Market sizes based on retail value RSP.
A population’s ballooning waist
New Zealand consumers perceive themselves to be part of a health-conscious nation but the rising national levels of obesity, particularly among lower socio-economic demographics would suggest that greater education and healthcare funding is needed. The Government is currently spending about NZ$70 million a year on nutrition and physical activity programmes. Recommendations included restrictions on advertising, improving health promotion and changing food labeling. However, nearly two-thirds of New Zealand consumers are confused by food labeling and feel producers should make product ingredients clearer, according to a survey of 1,000 people carried out by Impact Public Relations in July 2011. The survey also found that people did not agree on what was the best indicator of a healthy product. Shopper Lexia Bell-Kerr said that the healthiness or otherwise of products “was disguised by meaningless phrases like ‘Lite’
NEW ZEALAND CONSUMERS IN 2020
Surfing the net on the move
According to Euromonitor International’s forecast, there will be 1.6 million broadband internet subscribers in New Zealand by 2020 compared to the current 1.2 million subscribers. If the prediction by an executive at Huawei, a global information and communications technology (ICT) solutions provider, at the company’s Auckland conference in November is anything to go by, three quarters of these subscribers will be accessing the net using a mobile device rather than a computer or television. Vodafone New Zealand chief technology officer Sandra Pickering says: “Most of our customers get on the internet while they are mobile, with the most popular websites being New Zealand Herald and Facebook.” Rob O’Callahan, who runs Mozilla’s Auckland office, added that developers are tending towards writing apps for mobile operating systems, rather than for the web.
Online shopping continues its reign
The ritual of Christmas shopping could be gone by 2020 as the internet’s grip on consumers tightens. Even the concept of unwrapping presents could be at risk with gift vouchers, once considered thoughtless, now topping wish lists. Consumer behaviour expert Mike Lee, of the University of Auckland, said he believed the “Christmas rush” would be gone by the end of this decade. “More and more people are becoming comfortable with shopping on the internet,” he said, adding tools that let a user search for gifts according to their loved-one’s interests, age and gender meant more efficiency than browsing in a mall. Retailers Association spokesman Barry Hellberg predicted the trend of giving gift cards as Christmas presents would only grow stronger in New Zealand.
Staying in the workforce longer
When the general election was imminent at the end of November, Labour leader Phil Goff spiced up the election campaign with his proposal to raise New Zealand superannuation (retirement funds) eligibility from age 65 to 67 in order to create a realistic, affordable and sustainable scheme. According to the Organisation of Economic Co-operation and Development (OECD), the average effective retirement age in New Zealand is 67.1 for men and 65 for women. Many consumers agreed to the pending move, despite the fact that they may have to work longer. A New Zealand Herald reader wrote: “Even though it means I have to work an extra two years, it needs to be done. We don’t want our country to go down like Greece!”
Brighter years ahead
Despite the difficulties the country is facing at the moment, the New Zealand economy is set to recover with total consumer expenditure to grow by 21.7% in real terms between 2010 and 2020, according to Euromonitor International. Wages are expected to increase in tandem with a recovering economy. Per capita annual disposable income is forecast to expand by 23.7% in real terms over 2011-2020 and the savings ratio is projected to reach -2.9% of disposable income by 2020, a marked increase from the current -10.0%. Real consumer expenditure on education, leisure and recreation, and health goods and medical services will also grow strongly leading up to 2020, driven by the spending of the richest households. In line with these forecasts, Bank of New Zealand head of research Stephen Toplis gave his optimistic view of the country’s economy at a presentation in Auckland in mid-December. “Despite the Christchurch earthquakes, we have one of the fastest-growing Western economies – that’s quite a remarkable performance. The economy will continue to grow modestly despite international headwinds, with farming and construction providing most of the impetus.”
Real Consumer Expenditure in New Zealand: 2011 – 2020
Source: Euromonitor International from OECD/Eurostat/national statistics
Note: Data for 2011-2020 is forecast. Historical and forecast data based on constant prices and fixed 2010 exchange rates.