Where have all our dollars gone? Before we have even had a chance to enjoy life, they are gone. Here is what the official data says

Kiwibank recently released its household spending tracker report for the third quarter, based on transactions made with its debit and credit cards.

The report shows: As working from home becomes increasingly routine, more New Zealanders are turning to online shopping and contactless payments, and some spending habits formed during lockdown have persisted.

So, according to the data, where has our money gone over the past few months?

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• DIY home improvements account for a large share

Working from home and cancelled holidays have given people more time, energy and money to spend on their gardens, while also raising their expectations of their living environments.

The surge in spending on home hardware that began after the first lockdown continues to gather pace. People have added swimming pools, reinforced fences, laid paving and more—even bought pets.

With large numbers of New Zealanders switching to working from home, spending on home offices has also increased. Meanwhile, the astonishing strength of the housing market has encouraged people to spend more on their living conditions.

• Online shopping and entertainment spending surge

Some habits formed during lockdown have gradually become second nature. Most businesses and households have quickly adapted to a world with restrictions on face-to-face transactions.

Click-and-collect shopping and online transactions are becoming increasingly common. More people are enjoying the convenience of shopping online, ordering food on their phones and accessing entertainment at their fingertips. While cinemas sit empty, Netflix continues to dominate screens. Streaming has become the new king.

• Domestic tourism benefits considerably

Unable to escape winter in the Pacific Islands, people have had to turn their holiday plans towards domestic destinations, particularly alpine ski fields.

Domestic tourism has benefited considerably as a result over the winter months.

• A shift towards healthier eating habits

The public health crisis has made people more health-conscious, with spending on fresh fruit and vegetables soaring. During lockdown, people bought more fresh produce, partly replacing spending on eating out. But even after restaurants reopened, demand for fresh fruit and vegetables remained strong. This is a welcome change.

• Spending on gambling and alcohol grows

Alongside the development of some good habits, some bad habits have also emerged. Whether as a form of escapism or a way to pass the time while bored at home, spending on gambling and alcohol has continued to grow over the past few months.

Even when people could not visit bars or casinos, they turned instead to socially distanced barbecues and drinks, and online gambling apps.

All these changes in spending share one feature: a sharp decline in cash transactions. Weekly cash withdrawals almost ground to a halt during lockdown, and that trend has continued. If more shopping can be done through payWave or online in future, perhaps banknotes really will become unnecessary.

Is a second wave of pent-up spending on its way?

Kiwibank's transaction data shows that New Zealanders are actively adjusting and adapting to their new way of life.

Auckland's lockdown in August brought back the patterns of daily life seen during the original nationwide lockdown.

Consumer spending fell, and traditional service businesses were hit hard. However, the overall decline in spending differed from that during the first lockdown.

Businesses and households quickly learnt how to transact with less face-to-face contact. Many businesses reworked their business models to meet social distancing requirements while decisively shifting to digital formats.

Some traditional services, such as hairdressing, cannot move to digital or online delivery. Nevertheless, Kiwibank chief economist Jarrod Kerr said: “People have become better at adapting to life under the alert levels.”

Does adapting better also mean spending more rationally? Jarrod Kerr believes another spending rebound can be expected as Auckland moves down to Alert Level 1 on Wednesday. However, he also noted that several factors could affect the spending spree retailers hope to see, as well as the near-term economic recovery.

• People have embraced the shift to working from home. Commuting times are shorter, and they have become more comfortable using Zoom for meetings. Naturally, spending on public transport and spending associated with workplaces will also continue to slow. 

• Border restrictions will not be lifted any time soon. Domestic visitors can hardly match the large influx of overseas tourists usually seen in summer or the economic benefits they bring.

• The wage subsidy scheme supported many businesses and households. Once it ends, further job losses will be inevitable.

Jarrod Kerr said conditions so far had been much better than expected. Debt defaults were extremely low.

But the short-term outlook could worsen before the economy improves.

He believes more economic stimulus is needed now, particularly from the government. “The good news is that more stimulus measures will be implemented.

The COVID Response and Recovery Fund still has ample funding.”