ASB is forecasting higher consumer prices and rising interest rates will add an average of $150 per week of costs to household budgets this year.
Also, it says, some will be paying a lot more.
Covid-19 and the added effect of the Russian war on Ukraine has put pressure on the cost of living, particularly as food and fuel prices rise.
ASB senior economist Mark Smith said weakening household balance sheets and higher living costs seemed set to "exert downward pressure" on household spending this year.
That would likely temper the extent of official cash rate (OCR) hikes needed, he said.
Households had done much of the heavy lifting recently as respectable income growth, low interest rates, government support and sizeable gains in asset values all played their part.
"The tables look to be turning in 2022, with some of these tailwinds receding and new headwinds appearing," Mr Smith said.
The effects would be highly uneven and, as borrowing costs seemed set to move higher still, heavily indebted households could be hardest hit.
Income growth seemed unlikely to keep pace and many households faced difficult choices in the year ahead, Mr Smith said.
Consumer spending was unlikely to be as robust or as resilient as it was last year.
Discretionary spending could be significantly cut back with more "economising" on essential spending.
ASB expected an OCR endpoint of 2.75% this cycle.
"The outlook is still inherently uncertain, and a lot can happen over 2022," Mr Smith said.
ANZ downgraded its outlook for GDP growth this year from 2.4% to 2.1%.
ANZ senior economist Miles Workman said the "cold hard reality" was high inflation would hurt households and businesses, and so, too, would rising interest rates.
The need to lift rates as the economy slowed would make for a tougher economic climate and "risks of a hard landing are very high", he said.
If inflation was not contained fast enough with monetary tightening, the Reserve Bank would likely need to act even more aggressively later on, Mr Workman said.
