ASB: Fuel spike delays NZ consumer recovery until 2027
Rising fuel costs are tightening Kiwi household budgets and adding to broader inflation and spending headwinds.
ASB economists Yen Nguyen and Kim Mundy (pictured, left to right) calculate that domestic petrol prices above $3.40 a litre are already adding about $16.50 a week to the average household fuel bill compared with pre‑conflict levels.
On ASB’s central scenario – a three‑month conflict and three more months of lingering price effects – total household expenditure is projected to rise by about $55 per week through 2026 relative to 2025, around 50% more than under a “business as usual” path. ASB’s forecasts also have headline inflation peaking at around 4.2% year‑on‑year in the June quarter before easing back, reflecting the way higher fuel costs filter through to a wide range of prices.
Looking beyond the immediate spike at the pump, ASB says most of that $55 increase is fuel related, with higher transport costs also expected to flow through supply chains into other essentials. The bank’s modelling indicates retail spending will weaken through most of 2026, with the trough likely between the June and September quarters before a modest recovery late in the year.
ASB notes that mortgage rate rises are likely to amplify the income squeeze, intensifying pressure on borrowers already juggling higher living costs. The analysis suggests overall retail spending will decline as higher energy costs and tighter financial conditions gradually erode households’ disposable income over the year.
Households retreat to essentials
ASB expects consumers to redirect spending from durables and discretionary items back towards essentials such as fuel and groceries, reversing the pattern seen in 2025.
Combined with soft labour market conditions and a subdued housing market, this points to “sustained multi-layered pressure on NZ household budgets throughout 2026”, with a more meaningful consumer recovery pushed into 2027. ASB also cautions that any renewed weakness in house prices or a slowdown in sales would further weigh on household wealth and consumer confidence.
Those same pressures on household spending form the backdrop to the Reserve Bank’s next interest rate decisions, with ASB expecting the central bank to hold the OCR at 2.25% at its 8 April review, signalling a cautious approach to the oil shock compared with 2022. The central bank is still forecast to keep the cash rate on hold until late 2026, with only a gradual sequence of hikes through 2027, although the risks are skewed towards earlier and larger moves.
For more insights, read the ASB Economic Notes: Preview of the RBNZ April Monetary Policy Review and the outlook for households amidst a fuel price shock.
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