Insights 
VT 
In June 2025, the ANZ-Roy Morgan Consumer Confidence survey in New Zealand reported a 6-point increase in consumer confidence, reaching 98.8. Previously, the figure stood at 92.9 in May.
Inflation expectations rose by 0.3 points, now at 4.9%, marking the highest level since April 2023. Food price inflation contributes considerably to this rise, currently standing at 4.4%.
Consumer Confidence Rebounds
This noticeable rise in confidence, the largest monthly change since early 2022, suggests household sentiment may be staging a modest recovery. Confidence, as reported, still remains well beneath the long-term average of 111.9. Yet, the increase is not negligible and hints at some willingness among consumers to engage more with economic activity in the short term.
However, the concurrent uptick in inflation expectations should not be overlooked. A 0.3 percentage point climb, taking inflation expectations to 4.9%, marks the highest reading in over two years. Much of this can be traced back to elevated food prices, with annual food inflation running at 4.4%. The lingering stickiness in supermarket costs reflects broader supply and demand mismatches, with households possibly adjusting spending behaviour in anticipation of higher future prices.
From our perspective, as inflation pressures persist and outlooks firm upwards, this alters the risk-reward calculus for derivatives based on rate expectations. The jump in inflation sentiment puts added pressure on the Reserve Bank to maintain or possibly even tighten policy settings if forward projections continue on this trajectory. While the confidence boost could support broader activity, any perception that demand is lifting may embolden pricing power, particularly in retail and service sectors.
That said, participants should monitor short-dated interest rate products for signs of movement, as shifting expectations around central bank responses begin to reprice. Overnight index swaps might start to reflect higher forward rates if sentiment data continues to harden against a backdrop of slow disinflation.
Monitoring Inflation Signals
Further, we’ve seen that food serves as a bellwether for broader price pressures in past inflation cycles in this market. With supermarket categories remaining volatile, the headline figure could remain elevated longer than originally anticipated. Pricing positions in inflation-indexed instruments may need to adjust should this upward slope in the data persist over early Q3.
Given the tendency for consumer sentiment to lead retail activity by one to two quarters, price signals from both the currency and front-end rate curve must be interpreted cautiously. When households anticipate rising costs and simultaneously report improved sentiment, there is a possibility that discretionary spending could expand temporarily before weakening again, particularly if underlying wage growth fails to keep pace.
Instruments tied to wage-sensitive sectors—think hospitality and domestic travel—may show greater variance as the consumer faces cost-of-living pressures alongside seasonal spending decisions. We would continue to look towards futures volume in consumer-sensitive sectors as a leading indicator for directional bias. Additionally, the shift upward in expectations suggests the terminal rate assumption is not yet fully baked into present pricing, meaning there could be room for further upside moves in yield if other data prints align.
Lastly, Fairfax’s team has previously highlighted that sentiment rebounds of this scale have often led to very short-lived rallies in past cycles. Taking that into account, one might consider whether long positions anticipating a broader rebound may be facing tighter windows for outperformance.
For now, we are seeing an environment where the cost of goods remains elevated, household resilience is not uniform, and inflation expectations are quietly climbing once again. If that continues into July and August, we might begin rethinking positioning towards the front end of the curve.
