The latest ANZ-Roy Morgan survey of consumer sentiment doesn't find much spring in the step of households but it does find some, and in the most surprising places

The latest monthly update on consumer sentiment has thrown up some unexpected confidence among those you might not expect.

In fact, the ANZ-Roy Morgan consumer confidence index has risen to its highest level since early 2022. But having noted that, this isn't a high benchmark.

The monthly ANZ updates are broadly in line with the less-frequent Westpac monitoring of the same.

How confident households in New Zealand are feeling often depends on whether they have debt. ANZ is pointing out that, somewhat surprisingly, some indicators have become a little less pessimistic lately among mortgage holders.

Confidence lifted a little further in September for those paying down mortgages and so too did house price expectations (probably not a coincidence).

Perceptions of whether it was a good time to buy a major household item deteriorated for mortgage holders, but that was on the back of a strong improvement last month, they noted.

Perhaps most interesting, ANZ said, is consumers’ perceptions of whether they are better off than last year. Those paying off a mortgage responded more optimistically in September than those without a mortgage. That’s a surprising result, given fixed mortgage rates continue to edge higher.

The turnaround in the housing market is one possible driver. The level is still very low, but it’s interesting that even as mortgage holders continue to roll onto higher rates, it’s not a case of things feeling ever worse for households with debt. Of course, every average hides 1000 different stories, notes the ANZ economists.

How will the RBNZ view this marginally improving sentiment, and the resilience of mortgage-encumbered households?

ANZ says: One of the many milestones along the road to eventual rate cuts will be a significant reduction in inflation expectations, and September brought some good news on that front: inflation expectations fell 0.4 ppt to 4.2%. That’s somewhat surprising given recent strength in petrol prices, but for now it’s good news nonetheless.

"Consumers picked the surge in CPI inflation well before anyone else did, so it’s worth paying attention to what they think on the way down as well."

"Consumer expectations will also matter for wages, though to what extent depends on labour market tightness. Overall, consumer inflation expectations are consistent with our belief that while a fall in CPI inflation to 4-5% is pretty much baked in, ongoing progress from there could still prove difficult."

The full ANZ review of September consumer sentiment is here. The review of Westpac's MM quarterly sentiment tracking is here.