Real household disposable income

IBISWorld forecasts real household disposable income to rise by 0.1% during 2025-26 to total $220.6 billion. According to RBNZ, total quarterly household disposable income fell marginally over the first quarter of 2025-26. However, quarterly disposable income in the June 2025 quarter was 5.1% higher than the same quarter in 2024. Throughout the remainder of the year, disposable income is expected to trend slightly upwards, as real GDP is projected to grow. However, the unemployment rate has increased by 0.1 percentage points in both of the first two quarters of 2025-26, reaching 5.3% in the September quarter. A continuation of this trend in the second half of the year will undoubtedly limit any significant growth in aggregate household disposable income.

Real household disposable income has fluctuated over the past five years due to COVID-19 pandemic-related disruptions and its after-effects on the economy. The New Zealand Government (Te Kawanatanga o Aotearoa) implemented several measures to reduce the number of job redundancies made during the COVID-19 pandemic, including the Wage Subsidy Scheme that assisted in covering the wages of employees working for struggling businesses that sought to retain staff. In addition, the substantial cash rate cuts over the two years through 2020-21 reduced interest payments on mortgages, which is one of the largest deductions when calculating disposable income. These government policies offset the impact of lower-than-average real GDP growth, allowing real household disposable income to expand by more than $23.0 billion over the two-year period.

Economic uncertainty following the pandemic and high inflationary pressures led to a decline in disposable incomes over the two years through 2022-23. As the RBNZ sought to combat inflation with hikes to the cash rate throughout the second half of 2021-22 and 2022-23, disposable incomes suffered, as mortgage repayments trended upwards, offsetting the positive shock from the previous two years that had seen real household disposable income deviate from its long-run growth path.

In 2023-24, the cash rate remained stable at 5.5% for more than 3 quarters of the year, marking the end of cash rate hikes. While this kept mortgage repayments high, real GDP growth throughout the year supported disposable income expansions. Consistent cuts to the cash rate, dating from August 2024 through November 2025, have done little to support substantial disposable income growth throughout 2024-25 and 2025-26. While aggregate disposable income has trended upwards over this period, growth has trailed that of the size of the workforce, pushing down per capita disposable income over the two-year period. Overall, IBISWorld forecasts real household disposable income to rise at a compound annual rate of 0.4% over the five years through 2025-26.