If it looks like things are getting gloomy and doomy at home, what do you do?
Why, zip off overseas, of course. And take your credit card. And spend, spend, spend.
But then put the card away when you get back. And that's what Kiwis appear to be doing.
New figures released by the Reserve Bank show that spending overseas on New Zealand issued credit cards hit a new high for a May last month.
The $605 million billed to Kiwi cards overseas last month was the highest amount put on NZ issued cards offshore since August 2019 and shows that Kiwis have most definitely rediscovered their wings after the years of being couped up at home due to the pandemic. (Note, the offshore spending figures are NOT seasonally adjusted.)
The offshore spending in the latest month compares with just $436 million in May 2022 and $309 million in May 2021.
In May 2019, before the onset of the pandemic, $552 million was spent on NZ issued cards overseas. The previous record for a May month was the May of 2018, when $554 million was billed to NZ cards.
The $600 million mark had been breached only twice before, with more than $650 million spent overseas on NZ cards in both July 2018 and 2019. So, it will be interesting to see what happens next month...
But while folk appear happy to spend up offshore, back home belts are being tightened. And that certainly applies to credit card use.
The RBNZ reports that seasonally adjusted domestic billings on New Zealand issued cards were $3.771 billion in May, down 1.9% from April 2023. And the April figures were, seasonally-adjusted, down 2.9% on those for March.
Outstanding billings on NZ issued cards were down 0.8% on the month at just under $6.1 billion.
Billings on overseas issued cards used in New Zealand dropped in May from $0.5 billion to $0.4 billion, falling for the second consecutive month, which would be expected with the tourist numbers dropping off with the onset of winter.
Total credit limits on NZ issued cards were $21.2 billion (not seasonally adjusted) in May. This was 0.9% lower than May 2022 and the lowest since April 2015.
The RBNZ said the weighted average interest rate effective on personal interest-bearing advances increased from 18.7% in March to 18.9% in April (this data is lagged by one month). This is the highest since March 2009.
38 Comments
I'd love to dig into this data further and find out a bit more about who's tightening their belts vs. who's spending up large overseas.
Would it be too bold to theorise those who made bank selling off some assets during the housing bubble are now just enjoying the fruits their fortune? Of course it wouldn't be that crystal clear, but one wonders what the winners of the great inflation quietly do with all that spare cash.
My son and his GF are going over....they SAVED and now are going to travel to spend their SAVINGS as the country was SHUT down for basically two and a half years...so of course this was going to happen. Don't panic Kiwis have always traveled, I myself love travelling to new places, not just in NZ, to experience different cultures and climates. Nothing to do with capital gains bla bla bla....have a look next time you are at a airport I'm sure travelers cover every demographic of NZ.
Did I not say last week that money is being spent over seas, hence the data shows spending has reduced a bit.
Still plenty of liquidity in the market and pausing of rates by RBNZ is a big mistake. Inflation will rise and controlling it will be more difficult. Pain to run longer because we are just too soft to take hard decisions.
Must be plenty of punters out there with cash on the hip.
Here's an anecdotal example:
For her sins, my wife is a big Taylor Swift fan (and I'll stick my head above the parapet and admit to quite liking some of her music too).
Her Australian tour dates were announced yesterday, and last night my wife showed me Tik Tok videos various of twenty-something Kiwi women (in the main) booking whatever flights they could find to Sydney or Melbourne at whatever price, and paying through the nose for accommodation. Video after video after video of it.
This is before the tickets have even been released for sale, and realistically it will just be a crap shoot if you get one ... unless you can spring for something like the Amex presale at a cool ~$1000 per ticket (and how many 20-somethings have an Amex card anyway)
There's going to be a flood of people who've bought flights and accommodation at vast expense who won't even be able to get tickets, but the cash is shovelling out the door faster than the speed of "Tay Tay's" private jet.
I'm weighing up taking her as it's a dream come true for someone who has listened to her music for the best part of 15 years, since she was an obscure teenage country artist, but flights went from about $800 return to $2000 return overnight (Chch - Sydney, Air NZ with a bag and meal). Minimum $500 a night for any decent accommodation in central Sydney, and I don't think I can stomach $1000 per ticket ... even an old romantic as myself.
But plenty will be paying that, and would gladly pay more for the opportunity.
I hate to break it to you but you are being taxed by spending it. NZ 15%, AUS 10%, Europe around 20%. You should read this if you feel over taxed.
https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates
Care needs to be taken in jumping to conclusions on this data.
The level of credit card spending is not necessarily entirely due to increased spending by Kiwis overseas . . . . the shift from cash to credit cards is likely to have a significant influence in credit card use especially when comparing to a time span such as the past decade or even pre-Covid.
Previously when I travelled overseas I would usually take $NZ1000 in foreign currency and use ATMs to draw out more while away.
Prior to departure it is now very difficult to get any foreign cash from NZ banks with most branches not carrying any foreign cash at all including $A.
On the last week-long trip I took to Australia, on arrival I took out $A300 in cash for incidentals from an ATM . . . returned to NZ with $A220. Credit cards use was universal (apart from cassino).
Even used minimal cash on last trip to Rarotonga despite them using $NZ.
Enjoy your trip. The wife and I are off overseas in a month for 6 weeks in SE Asia. Far more cost efficient to go for longer in cheaper countries, live like a king and queen and get some heat in while experiencing something new. Beats a concert in AKL by the time you add flights, transport, accomodation, food and drink, may as well be a $1500-2k affair. Conversely, only $500 for the return leg form Cambodia, and they wonder why kiwis go overseas.
Clean Green NZ.
About 35 years ago I picked up a German hitchhiker and when he mentioned the clean green thing I went into a medium length rant about centuries of environmental rape and pillage.
He was mouth open shocked - had heard nothing but marketing spiel prior to that.
Nothing changes until its forced to.
Try this out - take the 5 year chart of US loans
https://tradingeconomics.com/united-states/loans-to-private-sector
Compare it to the Tesla share price over the same period
Compare it to the bitcoin price over the same period
Compare it to the S & P 500 over the same period
Compare it to the NZX over the same period
Notice anything? What would you say the lag was - 6 months? Guess what's going to happen to the Tesla share price, the bitcoin price and the S & P next. Maybe even the NZX.
Am I wrong?
The spend figures have increased but are still much less than they would have been if things had been normal over the last 3.5 years. When I wasn't able to travel for almost 3 years, I didn't spend/waste the money I had saved for it on anything else...I just left it in the bank...but I am spending it now. And I will put it on the credit card as that's basically the only way you can spend money overseas on flights, hotels and rental cars...and pay it all off when due. And I know many others that are doing the same
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