However, longer term spending is expected to soften, brought on by a slowing in population growth and a weakening in housing demand, according to Westpac senior economist Satish Ranchhod .
"After rapid increases in previous years, household spending growth shifted down a gear over 2018," Mr Ranchhod wrote in a recent report.
Household spending growth peaked in late 2016 at 6.7% and in 2018 slowed to an estimated 4.5%. Mr Ranchhod predicted 5% per year growth through 2019 and 2020.
However, he predicted a period of "softer spending" after 2020 due to weakening demand in the housing market and slower population growth.
"This [2018] slowdown has come against a backdrop of a softening housing market and a fall in consumer confidence, which together saw many households putting away their wallets," he said.
Mr Ranchhod’s report is timely, given the NZX reporting season for its listed companies is due to get under way next month, which should include some commentary on the Christmas and New Year trading results.
The results from the likes of The Warehouse, Kathmandu, Briscoes and Hallenstein Glasson should all reflect a snapshot on household and retail spending trends.
Mr Ranchhod expected spending growth would pick up a little during the first half of this year.
"Increases in disposable incomes and falls in petrol prices are adding to households’ purchasing power," he said.
Also bolstering spending appetites are the present low interest rates and a firming in the housing market, he said.
He noted that at the end of last year the Reserve Bank signalled it was willing to tolerate a little more of a pick-up in inflation to shore up economic growth.
Just this week, inflation came in slightly lower than the central bank’s expectations: the annual rate at 1.9%; just shy of the bank’s mid-point of its 1%-3% target.
Mr Ranchhod expected the interest-driving official cash rate to remain at the record low 1.75% until November 2020, while other economists are picking mid to late-2020.
There was a strengthening outlook for household incomes which was also helping to support spending, he said.
"With the economy in good shape, employment has been rising ... in the next few years, we expect that unemployment will remain low, at rates close to 4%," Mr Ranchhod said.
At the same time, wage growth had started to pick up and was set to rise even further over the next few years, reinforced by large planned minimum wage increases and gains from increased collective bargaining.
"Together, these conditions will see wage growth rising from rates of around 1.8% in recent years to around 2.7% per annum in 2020-21 — the fastest pace in more than a decade," Mr Ranchhod said.
Gains in households’ disposable incomes and spending would also be supported by the large increases in Government spending now being rolled out, which includes about $1.5billion per year of spending on the Government’s Families Package and accommodation support payments, he said.
