A word from Bill Kaye-Blake, New Zealand Institute of Economic Research principal economist, based in Bannockburn


Keeping up with consumer changes

With several Covid restrictions relaxed this weekend, we are in a new phase of the pandemic.

We are shifting from a rules-based situation to a market-based one.

I’m not sure that everyone is ready for the change.

In The Hitchhikers Guide to the Galaxy, the main characters escape Earth on a spaceship powered by the “Infinite Improbability Drive”.

The escape is highly unlikely, but the Drive makes it happen anyway.

When they return to normal space and time, the computer running the Drive announces “We have normality.”

Anything you still can’t cope with is therefore your own problem.

There’s been a lot of talk about getting back to normal post-Covid.

It’s a new normal, though, and in a market-based system, anything you can’t cope with is your own problem.

I’m most interested in the changes in consumer behaviour.

The period of rules and restrictions gave some consumers clear guidance and some comfort about their health and wellbeing.

It actually made some spending decisions easier.

Now, individuals are having to make more judgements for themselves about the risks they are willing to accept.

In other countries where Covid restrictions were relaxed earlier, some consumers decided to make changes.

They weren’t willing to spend as much on services like restaurants, travel, and personal care services.

As a result, spending in some sectors is still below 2019 levels.

Millions of consumers are opting for more stuff at home and online, rather than in-person activities with a higher infection risk.

But that’s what consumers do.

They look at the amount of money they have to spend and decide what would make them happiest.

Covid – the disease, not the Government’s policies – has changed their calculations.

As with all the other calculations that consumers make, they are entitled to their opinions.

And to their choices.

We are hearing calls from some business groups that consumers need to do this or that – they need to return to city centres, they need to go out to restaurants, they need to get back to the office.

That’s not a market-based understanding of the situation.

Without the Government’s Covid rules, the onus is now on businesses to win consumers dollars.

That’s the same as it was before Covid.

That’s also what success in business is built on.

If consumers are making different decisions because the situation has changed, it’s no good complaining about them.

Cooing sweetly to attract them back might be a better approach.