Carolyn Young, CEO of Retail NZ.
“We’re not in that situation, this is quite a different situation. The economic situation would be worse if people don’t come into towns and cities across the country. If people stop coming into town they stop buying. Eighty-five per cent of sales are done in person, in store, people in town. They’re walking past shop windows, they’re seeing items they might need.”
The increased prevalence of working from home through Covid has been credited with changing the makeup of some central business districts around the country.
Young previously told RNZ that she worried that foot traffic levels might never return to where they were, for some businesses.
But Brad Olsen, chief executive at Infometrics, said consumer confidence more generally was likely to be more of a concern for retailers than whether people were working from home.
When people were at home, their spending tended to drift more to food-related items, he said. The pattern of spending could be affected, but the total amount would not be.
“I don’t think it’s a full and complete view that people only spend when they’re working in town and don’t spend otherwise.”
Brad Olsen, chief executive at Infometrics. Photo / Samuel Rillstone, RNZ
But he said the wider economic environment had more potential to dent total spending. “The wider impact of having to spend more on fuel, people are more worried about the economy, that will drive overall spending down. If we see spending activity drop it won’t be because people are working from home, it will be because people are paying more for fuel and worried about their financial lives.”
Westpac chief economist Kelly Eckhold said it would make it harder for CBD retail. “But past experience suggested that there were flows of business to suburban shops and cafes when WFH was more prominent. I would expect the same dynamics again.”
Big hit coming
BNZ chief economist Mike Jones said it would add to all the other headwinds on spending at the moment.
“Chief among them is the big hit coming through on households’ disposable income from the fuel cost spike. Cuts are being made to discretionary spending already. But there’s also a potentially weaker labour market and reduced job security to contend with, broader cost of living pressures, and reduced tourism spending. It’s shaping up as a big hit and consumers are feeling it, as we saw from last week’s slump in consumer confidence.”
But Young said going back to isolating at home would not be a solution to an economic crisis.
“That creates another beast in itself and it multiplies the impact of the inflationary measures if we get to a place where people stop coming into town and they stop buying a coffee and they stop going into the stores to buy things. More businesses will close, which creates greater, you know, demise for the New Zealand economy.”
She said she had seen some positive economic data in the early months of this year and had been hoping that 2026 would be a time of recovery.
“Then of course in March we’ve been hit by this and it feels like another blow and we just can’t seem to get a break.”