Category: Business

Source: Radio New Zealand

Consumers’ appetite to spend is growing but many are still struggling to meet their loan repayment obligations.

Data from credit reporting firm Centrix shows consumer credit demand is up 8.3 percent compared to a year ago, driven in large part by mortgage holders shopping around for a better deal and refinancing their debt.

Loan arrears overall are lower than a year ago, but personal loan arrears have hit a 10-year high at 10.2 percent, up 6 percent on last year.

“Consumers with a personal loan that aren’t homeowners are experiencing more difficulty in paying those loans back and that’s probably because homeowners have had some relief through interest rate reductions,” said Monika Lacey, chief operating officer for Centrix.

“People that don’t own a home just aren’t getting that relief flowing through, and their food and insurance costs, for example, have remained at a higher inflated level, whereas homeowners are getting a little bit of relief on the interest rate side.”

The challenges loan holders are battling are also reflected in financial hardship numbers, with personal loan hardships up 45 percent year on year.

Mortgage holders lock in a better deal

Demand for new mortgage lending in the January quarter was up 34 percent on this time last year, with refinancing a major driver. Close to half of all new mortgage lending in December was for refinancing.

“We have seen switching between banks and there is definitely some competition, so consumers are doing the right thing and shopping around and trying to get the best deal.”

Almost three quarters of switching is happening between the four largest banks compared to 56 percent a year ago.

Signs of recovery but liquidations still high

Meanwhile, businesses appear to be struggling to get out of the mire with demand for credit falling and liquidations still at high levels.

The Centrix data shows business credit demand is down 1 percent on a year ago, indicating a lack of optimism among businesses.

Company liquidations rose to 2952 in the year to January, up 16 percent on last year, with 70 percent of those liquidations stem from Inland Revenue action on tax debt.

“There’s a massive clean-up going on and it’s not unexpected as it’s well known in the market,” Lacey said.

“I think the tail is long, but it shouldn’t get any worse than what it is.

“I think it’s also really important to point out that although the liquidations are higher than they’ve been for a while, when you look at the relevance by industry, it’s still really small.”

Lacey said sector-wise, construction is the leading contributor to liquidations followed by hospitality.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

The country’s biggest e-waste recycling company is expanding its footprint.

Echo Technology is acquiring BMS, a specialist in secure data storage disposal and the refurbishment and resale of end‑of‑life IT equipment.

The acquisition price was not disclosed.

BMS, founded by Stephen Westcott‑Jones, focuses on IT asset disposition, including breaking down data storage drives and refurbishing and remarketing used computers and devices.

Echo chief executive Patrick Moynahan said the partnership aimed to create New Zealand’s leading full‑service IT and e‑waste lifecycle provider.

“We’re committed to building long‑term capability for sustainable technology lifecycle services and e‑waste processing in Aotearoa New Zealand, and this acquisition is a substantial step towards that ambition,” he said.

“Together, Echo and BMS repurpose more than 150,000 IT assets for resale and process over four million kilograms of electronic waste each year.”

Westcott‑Jones would become a shareholder in Echo and join the company’s board.

“The transaction will allow us to build on the strong foundations of BMS and take our customer offering to the next level by integrating with Echo,” he said.

Altered Capital – a local venture capital and private‑equity investment firm, and an existing investor in Echo – brought the two companies together and would remain invested in the combined business.

Altered made a strategic investment in Echo in 2025.

The companies would be integrated over the next 18 months but continue to operate separately in the meantime, with existing customer arrangements unchanged.

Moynahan said Echo would initially focus on improving household e‑waste recycling by working with councils and running neighbourhood collection events, before expanding further into corporate and government e‑waste recovery and refurbishment.

He said the merged company also plans to open a new recycling plant in Christchurch, complementing existing facilities in Auckland and Wellington.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

The national grid operator says it will probably have to use a streamlined public works act a lot more in future to get land and access to expand the electricity transmission system.

A select committee is hearing submissions on the Public Works Amendment Bill that aims to streamline land acquisition powers and compensation.

Transpower’s Matt Fanning told MPs the last time they did it was for three properties in 2014 and it could take at least two years, sometimes more, if landowners appealed.

But it was now facing having to deliver an “unprecedented” amount of infrastructure both now and for the next 30 years with demand forecast to grow more than 60 percent by 2050.

“We are likely to need to use the PWA a lot more with that increasing work programme and that build and upgrade programme that we’ve got,” said Fanning.

“So we really need the Public Works Act to be fit for purpose and to enable us to deliver the much needed electricity transmission infrastructure at pace.”

The state-owned enterprise’s written submission said it backed the bill because it could cut a year off the standard timeline of two to five years to get property rights for projects.

‘Last resort’

Transpower later told RNZ it would be a “last resort” to use the Public Works Act to get an easement to build infrastructure including to connect new generation to the grid.

“We expect the significant majority of that land access to be negotiated on a commercial basis with landowners,” it said in a statement.

This was its usual process.

The bill would align it with what the New Zealand Transport Agency and KiwiRail already could do to acquire land, it said.

“Our preference is to negotiate land access with the landowner – and acquiring land access through the PWA is the last resort.

“It’s really important to us that we build and maintain effective long-term relationships with the people who host New Zealand’s grid assets on their land – we will be working together for generations.

“This gives Transpower added incentives to work constructively and for mutual benefit with landowners.”

Transpower said its track record showed it was typically considered good to work with.

About 30,000 New Zealanders had its assets on their land and 91 percent were satisfied or very satisfied with that in its last survey in 2024.

“We note that any decision to compulsorily acquire land access will remain with the minister – the legislative change under consideration would streamline the early stages of the process.”

It also wanted easier access to land for surveys and investigation.

Several submitters backed the bill’s intent to deliver infrastructure more efficiently but said it got the balance wrong.

Law Association property lawyer Phil Shannon said: “We took the overall view that the balance has been shifted too far by the amendment, too far towards speed and executive power and away from independent oversight of the courts and procedural fairness.”

The bill changes what the Environment Court would consider if a landowner appealed against an acquisition order.

The Public Works Act has had no significant reform since the 1980s, and before that the 1920s.

Shannon said the association believed it needed rewriting, not just amending.

The bill would update compensation payments and extend who was eligible such as where there were multiple owners, and introduce an incentive payment of 10 percent of land value up to a max of $100,000 for a quick agreement to sell.

Last August, a sibling bill was passed: The Public Works (Critical Infrastructure) Amendment Act 2025 created a fast-tracked acquisition pathway for designated critical projects, most of them roads, setting up bonus payments for land owners who sold quickly.

The bill before the committee now is more broad-brush; it is also among others that seek to fast-track infrastructure rebuilds after disasters, including the Planning Bill and Natural Environment Bill and Emergency Management Bill that have also been before select committees recently.

It would cut negotiation requirements and limit submissions by landowners, among other measures, after a disaster.

Water New Zealand stressed the bill had to match up with the other bills.

It said it should allow six years, not two, to respond to a disaster because fixing things took time.

It also sought a change so that climate change could be factored in by local authorities looking at acquisition.

A note on the bill said it “supports the government’s infrastructure delivery priorities, as set out in the government’s economic strategy ‘Going for Growth'”.

Along with several other submitters, Transpower wanted changes to the bill to introduce extra protections for Māori land.

Anaru Begbie of Raukawa Charitable Trust in south Waikato said the bill contained no express reference to Te Tiriti and should have, and should offer explicit protection for their land to avoid the unilateral decision-making of the Crown in the past.

“Treaty settlement redress land should not be subject to compulsory acquisition under this bill,” Begbie told the committee.

“Voluntary agreement should always be possible. Compulsory takings should not.”

Contractors who build infrastructure told MPs they backed the bill but needed to take care about conflict with local communities.

Fraser May of Civil Contractors NZ said: “If we streamline the process so much that the public has not had a good conversation with the client around why the project is going ahead, so the need for the project and what the project will involve for their land, then it can often be the contractor on the front line dealing with the angry community.”

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

On the first afternoon of road works being in effect on Queens Drive and High Street in Lower Hutt traffic is heavy, as businesses say they are worried how the nine month-long closure is going to hit their bottom line.

The intersection between Queens Drive and High Street is closed from March through to December as part of the SH2 Melling Transport Improvements, part of the Te Wai Takamori o Te Awa Kairangi project, formally known as RiverLink.

The RiverLink works have already drawn the ire of local residents who have reported roadworks to date have caused gridlocks and long delays.

There have been reports that the traffic sometimes backs up the off-ramps and causes delays on the motorway.

Some say their commute times have tripled, hitting set after set of road works.

But others say the problems are worth bearing for the improvements the work will bring.

Have you been affected? Get in touch with: krystal.gibbens@rnz.co.nz

Project Director Matt Hunt said the work underway in Lower Hutt for the SH2 Melling Transport Improvements was significant and would have an ongoing effect on residents, businesses, and traffic.

“NZTA/Waka Kotahi is committed to minimising the impact of construction as much as possible. But, given the size and scope of the works, an impact on the community and traffic is unavoidable and some disruption is inevitable. This is normal when road layouts change, and we expect things to take time to settle.”

Concern for business bottom line

Owner of Lingams Barber and Beauty Ravineel Lingam was said in the short term he was worried it would hurt his business as he was concerned it would put people off coming to his shop.

But long term he expected to see the benefits of the project.

Helen, who works nears the road closure, said she could already see a gridlock forming by 1pm on Monday afternoon, and expected it would get worse during peak hour traffic.

In a post on social media Councillor Brady Dyer told commuters to use a mapping app while driving around the city.

“I’ve been using it religiously since Riverlink kicked off earlier this year and it’s been a lifesaver. It knows what’s closed, reroutes you automatically, and I’ve discovered parts of the city I didn’t even know existed.”

Some on social media expressed concerns that the continual road works meant there was no reprieve from congested and gridlocked streets across the city and lengthy commutes.

Others said they were resigned to the roadworks as essential infrastructure.

Agencies acknowledge delays frustrating

Hunt said keeping State Highway 2 flowing as efficiently as possible was a priority.

“We are closely monitoring real-time traffic flows and have adjusted traffic light phasing on the highway to keep vehicles moving.

“We do appreciate that our work near Melling is affecting travel times, as is the work being done by the Greater Wellington Regional Council, and the Hutt City Council, with the works they are managing.

“We acknowledge the disruption is frustrating and inconvenient for the public. But the work underway will result in new and better infrastructure which will bring significant benefits via a much improved and safer transport link between SH2 and Lower Hutt.”

Greater Wellington director of delivery Jack Mace said it and its Te Awa Kairangi partners were working together to make the programme of work as smooth as possible.

“This includes coordinated traffic management, sequencing works to avoid unnecessary overlap, ensuring clear detours and signage, and adjusting public transport routes to keep people moving. The partnership regularly reviews traffic conditions and community feedback to identify opportunities for improvement.”

Mace said they were aware the works were affecting travel in the area.

“We have heard from residents who are feeling the impact of the works, particularly around Melling and the CBD where traffic management and road closures are enabling the development of major Te Awa Kairangi future‑focused infrastructure, including the new bridge, upgrading the Melling interchange, relocating the train station and strengthening stopbanks,” he said.

“At the same time, we are also hearing from people who understand the scale of the programme and the value it delivers – improved flood protection, stronger connections to SH2, better public transport links, and a safer, more resilient Hutt Valley for decades to come. This long‑term vision is the driver behind the programme as a whole.”

NZTA advises alternative routes and modes of transport

NZTA said drivers could expect travel delays and should allow more time for their journeys.

People travelling at peak times were advised to use a mapping app to find the most efficient route for their travel.

“We would also encourage drivers to consider alternative routes – such as exiting at Petone or the Dowse Interchange when travelling into the Lower Hutt city centre or suburbs near the centre. Where possible and appropriate, people can also consider using active modes (such as walking and cycling), for journeys around the project area.”

People travelling into Wellington were also recommended to take the train to avoid delays on the roads.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

Supporters of compulsory third-party vehicle insurance argue that it will prevent innocent drivers from facing hefty repair bills they can’t afford.

However, recent comments from the transport minister suggest that such a change wouldn’t be happening anytime soon.

Chris Bishop told interest.co.nz that the mandatory third-party vehicle insurance wasn’t considered by the government as part of changes to the driver licensing system.

He also said the gains were not necessarily as high as everyone else thought, given the huge number of New Zealanders already had vehicle insurance.

Automobile Association road safety spokesperson Dylan Thomsen said making third-party insurance compulsory was complicated.

He told Nine to Noon it needed very careful consideration as it could add extra costs to both parties.

“When you have something like this, it has the potential to push premiums up for everybody to try and get that coverage,” Thomsen said.

“The last survey that was done in New Zealand looking at this, and it was quite some time ago, we had about 92 percent of drivers having insurance.

“To try and get to 100 percent, probably impossible because even the countries that have compulsory insurance haven’t achieved that.”

Thomsen said an important consideration was the cost of enforcing third-party insurance.

Some of the European countries were getting close to around 98 percent, but there was a catch, he said.

“They have spent a lot in terms of enforcement. They have to have a lot invested in databases that can link up,” Thomsen said.

“Most of the ones that have got that high have camera networks looking at license plates quite extensively. “

Thomsen said just like car registrations or warrant of fitness, while both mandatory, you will never get to 100 percent.

He acknowledged how frustrating it could be to get compensation after a crash with an uninsured driver.

But he said the key question was whether a compulsory system would actually provide more benefits than the costs.

“We don’t think the case has been made for that yet. We would like to see more updated information because most people already have insurance,” Thomsen said.

“We know warrant of fitness, car registrations, those are both mandatory and compulsory and we know not everybody has those. So, we’re never going to be able to get to 100%.

“How much better could it be? I think more information is needed.”

Thomsen also stressed that New Zealand did have a form of compulsory insurance through ACC, which covered the costs of injuries.

He said while Australia had compulsory third-party insurance, it was only for injuries, which was the same as ACC here.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

The New Zealand share market has opened sharply lower following the latest conflict in the Middle East.

The benchmark NZX50 opened down 1 percent, before extending its losses to be down 1.3 percent mid-morning.

Market heavyweights Auckland Airport, Fisher & Paykel Healthcare, and Infratil led the market down.

The New Zealand dollar, along with the Australian dollar, was also weaker as investors looked to reduce their global risk exposure.

The Kiwi fell 0.8 percent to be 59.5 cents against the United States dollar, while the Australian dollar fell more than 1 percent against the US dollar in early trade.

Investors tend to sell riskier assets during times of geopolitical volatility, with money diverted to safe haven investments like bonds.

Oil prices are also expected to rise when international trading resumes.

In an early morning note, BNZ senior interest rate strategist Stuart Ritson said financial markets began the week “facing heightened uncertainty”.

“The scale of the attacks, and Iran’s response, has exceeded expectations, pointing to further demand for safe-haven assets and upward pressure on oil prices,” he said.

“With President Trump calling for regime change and signalling the risk of a protracted conflict, the range of potential outcomes has widened, and will likely weigh on risk-sensitive assets.”

Oil prices had already moved higher prior to the attacks, Ritson said.

Brent crude – the global benchmark for oil – closed more than 2 percent higher at US$72.50 per barrel ahead of the attacks, and prices were expected to rise sharply.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

Dairies and convenience stores need to pull nangs from the shelves, the retailers’ association says.

Police have been warning that problems around the huffing of nitrous oxide products – known as ‘nangs’ – have escalated to people “playing chicken” and seeing whether they can drive without blacking out after inhaling the gas.

They are reminding retailers it is illegal to sell nangs for recreational use.

But a Checkpoint investigation has revealed it is easy to purchase nangs in large quantities from dairies, vape stores and convenience stores with virtually no checks.

Retail NZ chief executive Carolyn Young says she would only expect them to be sold by wholesalers, to supply hospitality customers for whipping cream.

“If it’s a convenience store or a small corner store, that’s actually not your marketplace, that’s not where they’re going to be bought for legitimate use,” she said.

“It needs to be for commercial use only, and if you’re selling it to an individual, especially if you’re selling multiple sales to one individual, you need to be stopping and questioning what they’re asking to buy it for, and whether or not you should be selling that… should we be stocking this product in our store at all?”

Young said retail crime was a concern, especially for retailers who refuse to sell nangs to anyone they think is buying it to get high.

She suggested retailers could say they do not have any stock – or make sure their stock is hidden.

“Certainly taking off the shelves is the first starting point to make sure that you’re safe and your store is safe from being attacked by, potentially young people that are really focusing on getting high.”

Retail NZ had sent guidance to members outlining their responsibilities, Young said.

Police said they were taking a “graduated response” to their growing concerns around the supply of nangs, by focusing on “engagement, education and encouragement”.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

A young farmer is looking forward to supercharging his savings towards a first home, now that KiwiSaver withdrawal rules are changing.

The government is tweaking KiwiSaver laws so workers with ‘live in’ job residences – such farmers, rural teachers, country cops, and defence personnel – can use their accounts to buy a first home.

Workers in service tenancies have effectively been locked out of first home withdrawal because their jobs require them to live in employer-provided housing.

“[That’s] not fair, so we’re making a technical change to the KiwiSaver Act to ensure workers in service tenancies aren’t denied the opportunity to put a foot on the property ladder,” Finance Minister Nicola Willis said.

“The change will allow service tenancy workers to use their KiwiSaver for a first home purchase without having to live in it.”

The coalition is also changing the law to allow first-time farm buyers to put their KiwiSaver balances towards the purchase of a farm through a commercial entity they majority own, where it will be their principal place of residence.

Change will help young farmer achieve his ‘dream’ of home ownership

Liam Herbert, a 25-year-old farmer on a sheep and beef station in Wairarapa, said the change would allow him to buy his first home while pursuing his career by living on farm.

“When you live on farm and you want to grow your career, putting money away to buy a townhouse that you have to go and live in will then impact your career so you’re not going to get where you want to get to as fast as you can.

“I was quite reluctant to put big amounts of money in [my KiwiSaver] just because I didn’t want to live in town, 65-years-old is a long way away, and that was not in my five to 10 year plan.”

Herbert said his approach would change though once the law was tweaked.

“I’ll have a go back through and probably put up my percentage going into my KiwiSaver and have a talk to my employers, they choose to match, then that would be fantastic.

“I’ll just try and actually put some money in there because I can see where this is going to end up going and where I want to go. By the time I’m 35 or 40-years-old there should be a nice lump in there to actually help me with my dream.”

Legislation giving effect to the changes – fought for by National MP for Rangitīkei Suze Redmayne – will be introduced to Parliament in the middle of the year.

Redmayne, who is also a sheep farmer, said the idea came from her stock manager, who had saved enough to pay for a deposit, but he was not allowed to use it because he lived and worked on the farm.

“I know young people in town who are putting eight or ten percent into their KiwiSaver, because they can see that goal on the horizon, whereas young farmers attempt to either not put anything at all, or to just put the three percent minimum, because 65 is a lifetime away,” she said.

“So I think it’s a … great motivator, and a great incentive.”

Financial Services Council chief executive Kirk Hope has raised concerns the changes weaken withdrawal rules – risking trust and participation in long terms savings behaviour.

“Anytime you widen the scope for withdrawals it really undermines the scheme. The scheme is a retirements savings scheme so each time you add additional reasons for people to withdraw, or ability to withdraw, that undermines the integrity of the scheme.”

It is not clear how many people might stand to benefit from the changes – Willis estimating it could be hundreds if not thousands.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

Investors can brace for volatility over the coming days as markets digest the impact and implications of attacks on Iran, as well as potentially higher fuel prices.

“We’re expecting when markets open on Monday there is going to be a bit of volatility,” Infometrics chief executive Brad Olsen said.

“Usually you see stocks drop so I wouldn’t be surprised if people were looking at some of the investments they mighty have – their KiwiSaver balances… you might see a bit of red ink coming through there.”

He said investors would be wondering what could happen next. “The world is more frightening than it was a couple of days ago. You’re going to see a shift towards less risky assets, that run for safety around gold, probably the Japanese yen, maybe the US dollar.”

Defence stocks could lift.

“The US has just used for the first time one-way effective suicide drones, that’s a piece of kit they hadn’t used before.”

On the domestic market, he said there was not likely to be much impact on individual stocks on the NZ market. “It’s more that you might see a pullback in general on the NZX50.”

Dean Anderson, founder of Kernel, said the key question for markets was what happened next. “We are in the very early stages of this conflict and as is often the case, speculation and incomplete information are driving much of the narrative. Not surprisingly, investors should expect heightened volatility as global markets work through the noise and asses the direction of travel. I expect we will see gold jump.”

Rupert Carlyon, founder of Koura said he was concerned markets would react “strongly”.

“It also doesn’t help that markets are already fearful and volatile. Investors have been nervous for the past 3-6 months due to AI, interest rates and inflation – now they have something real and tangible, thy may react strongly.”

Fuel prices

Olsen said another consideration was fuel prices.

“There’s a pretty strong view that oil prices will spike and show a bit more volatility – although we’ve said that every time there’s been conflict, and it didn’t really happen last time.”

But he said this time could be different for a few reasons. “You’ve seen the head of Iran killed alongside a number of other political and military leaders. It’s very unclear what further retaliation by Iran might look like. Might they strike oil-based facilities? Quite possibly. No one knows what the rule book is now.

“You’ve seen parts of Bahrain, Kuwait struck as well. Normally those actors are not part of it, they haven’t been in the past… those quite well-off countries that are often talking about stability, they’ve driven a lot of their economies through oil and general energy funds. They’re not as safe as they might have originally thought. The fear factor will be running rampant a bit more in the markets heading through tomorrow.”

Insurance rates for travel through the Strait of Hormuz were elevated. “No one really wants to go through and risk their cargo ship or oil tanker being blown up. Given that 20 percent of the world’s energy goes through there, there’s definitely a risk at that point.”

Olsen said some market traders were predicting oil prices could hit US$100 a barrel.

“The two big unknowns at the moment are that one, this isn’t done. The US has made it clear in comments form the US president that this is a week-long bombing mission that will continue.

“With the Iranian supreme leader dead and no clear understanding of command and control in Iran, who’s calling the shots and what they might be wanting to do, everyone’s quite unsure of whether there is further escalation and retaliation.”

Mike Taylor, founder of Pie Funds, said oil prices were his main concern.

“The new conflict raises three potential transmission channels: Energy supply disruption, shipping and insurance risk in the Gulf and Strait of Hormuz, and a broader risk-off sentiment through oil and inflation expectations.”

He said historically markets would either behave as they did in the 2003 Iraq conflict when prices spiked briefly but supply and shipping continued, and markets recovered quickly – or the 1990 gulf crisis when oil prices rose persistently and shipping was disrupted. That created more market disruption.

“At present we are too early to know which template will dominate.”

He said he would also be watching credit spread behaviour and whether there was any further escalation in the conflict.

What about inflation?

Olsen pointed to the recent Reserve Bank statement which noted geopolitical risk as a factor in tradeable inflation.

“You’ve already got inflation outside the target band. Expectations were that inflationary pressures would continue to soften. If you see a spike and generally higher pressure on oil prices continuing because of this ongoing conflict, that not only raises the cost to households to drive around but it means the cost of transporting everything becomes more expensive which could put further pressure on foods. We’re just a little cautious on the inflationary risk that there might be if oil prices did spike and hold higher. At the moment all of this is a huge if.”

Anderson said the Strait of Hormuz was a critical route particularly for India and China. “Any meaningful disruption to supply could send oil prices higher an din turn more inflation. That said, there are contingency mechanisms and alternative supply responses that could help cushion the impact. Their effectiveness all depends on the duration and scale of the conflict.”

What should investors do?

Olsen said day traders might see an impact on their investments but other people would need to take a longer view.

People should generally be invested in a fund that fits their risk profile, so if they need their money soon, they should not be in a fund that moves a huge amount with market movements.

“Put it this way, I won’t be looking at my KiwiSaver this week,” Olsen said.

Anderson said it was too early to be drawing conclusions. “It’s best to remain informed and for investors to avoid making decisions based on early speculation and noise. Regardless of the political outcome, even a contained conflict is likely to mean an extended period of strain for the region and its people.”

Carlyon said there were reasons for KiwiSaver investors to be excited. “A market downturn makes a great buying opportunity.”

Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make, spend and invest money.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

New Zealand’s economy is expected to continue to slowly recover this year.

But unlike previous recoveries, this time, it’s not likely to be dragged up by rising house prices. Most forecasts are for prices to rise less than 5 percent this year – and some forecasters expect half that.

Michael Gordon, a senior economist at Westpac, has issued a new report looking at whether the economy can have a sustained recovery without help from rising house prices making people feel wealthier.

He said he had encountered scepticism about whether it was possible. But he said, in part, it was already happening.

“Retail spending has consistently risen over the last five quarters, at a time when house prices were effectively flat. But it’s not certain that this can be maintained in the face of what are some still-subdued house price expectations for the year ahead.

“The recent economic literature points to a solution. There is growing support for the idea that what we observe as a ‘housing wealth effect’ is actually more of an income expectations effect, driving both spending and house prices higher.”

He said it had been clear in the past that when house prices were rising, people tended to be more willing to spend because they felt their house was “doing the saving for them”.

“We’ve noted in the past that there has historically been a strong relationship between housing wealth and household spending in New Zealand, and arguably stronger here than in other developed economies. But the relationship doesn’t hold all of the time, and especially not in more recent years, as Covid and the subsequent policy responses have led to significant volatility in both house prices and consumption.”

He said even in the absence of house prices lifting in many parts of the country, lower interest rates were having a difference in the economy. Retail sales volumes rose 0.9 percent in December, more than had been expected.

He said there was growing evidence that when people expected their incomes to rise in future they tended to both spend more money and to push house prices higher.

“The magnitude of the effect on house prices will depend on how responsive the supply side is – historically New Zealand’s housing supply has been fairly unresponsive, but there are signs that this is improving.

“All of this is not to say that housing wealth effects don’t exist. But their impact may be in amplifying the economic cycle, rather than being an essential driver of it. We feel that our household spending forecasts have been suitably tempered to match our view on house prices – spending growth of 3 percent to 4 percent over the year ahead is quite achievable in the early stages of a recovery, when the economy still has substantial spare capacity to be used up.”

Simplicity chief economist Shamubeel Eaqub said there had been regions that had experienced economic growth without house price growth.

“It’s true that we are very reliant on that channel to supercharge everything … the residential property mortgage market is such a big source of capital into any kind of investments that we make. If house prices are not increasing, we just have less capital to invest. And that’s including in businesses.

“That long tail of small businesses quite often relies on borrowing against the mortgage to be able to grow their businesses. That can be one of the constraints. It absolutely doesn’t go away but does it mean we can’t have any growth without it? I don’t think so. Does it mean we might have less growth or a less rapid recovery to a more dynamic state? Very likely.”

He said there had been economic growth before house prices boomed, and some of it was very strong.

“In fact, quite a lot of the economic growth we might have had post 2000 you might argue wasn’t actually very good quality… when I look at history and I look at our regions, there are periods of history where we’ve had economic growth without house prices running away from incomes. We’ve had economic growth in our provinces that haven’t always experienced high house prices.”

He said much of the downturn had been driven by the drop in disposable income available to households as the price of essentials rose.

But there is also a whole bunch of pent up demand to do things, whether it’s to do work on your homes, to replace things, replace the car, invest in your business, whatever. People have had plans that have been postponed. Recessions tend to be less about things being killed and more about things being postponed.

“The maintenance still has to be done. The expansion will still happen if you think the customers are there. And it’s that chicken and egg. What comes first? Certainly, I think right now what we’re seeing is there’s quite a lot of growth in the provinces… we’ve had pretty good news for sheep and beef farmers as well. When was the last time that happened?

“Wool prices have been pretty good this season so far. Dairy prices plus the payout from selling off our brands businesses. There’s a fair bit of money that’s going to be floating around. I think that might act as a bit of a catalyst. And of course, that reduction in interest rates.

“The big thing that’s going to be the catalyst here, I think, is whether or not banks are out lending. That’s probably the biggest unknown… not just for the price but the quantity of credit. It’s essential debt that supercharges the cycle.”

He said even though it felt like a grinding recession, some people were doing fine.

“It’s not like everybody is experiencing this equally. I think there is a risk in thinking that’s the case. There will be some people who have been waiting to make investments. They have the resources, they have the capital. They have the plans. They might decide now is a good time to make those investments.”

Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make, spend and invest money.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand