Until the Pips Squeak

Article #479

Squeezing the lemon

During the December 1918 election campaign, Sir Eric Geddes promised to squeeze Germany until you could hear the pips squeak [1]. Germany never paid anything like the bill. Squeezing is easy to promise. The juice is another matter.

More than half a century later Denis Healey borrowed the image. In Lincoln in February 1974, as Labour's shadow chancellor, he promised to squeeze property speculators until the pips squeaked. The press turned that into squeezing the rich, and the line has stood for the rich in general ever since [2].

Labour had committed itself to a wealth tax. Healey spent five years as Chancellor trying to design one. Looking back in 1989, he admitted he could not draft one that would raise enough revenue to be worth the administrative cost and the political hassle [3].

In the meantime Britain ran out of money. On 28 September 1976 Healey was at Heathrow, bound for the IMF annual meetings, when sterling slid. He turned back to the Treasury and announced that Britain would seek a record $3.9 billion loan. The Letter of Intent, signed on 15 December, committed the government to deep cuts in public spending [4][5].

The squeezer had become the squeezed. Within three years of promising to squeeze the speculators, the Chancellor was negotiating terms with Britain's creditors. It is worth remembering as New Zealand heads to the polls on 7 November.

What is on the table

The Green Party proposes a 2.5% annual tax on net assets above $10 million, covering property, shares and bonds, with the family home exempt. Alongside it sits a 33% capital acquisitions tax on inheritances and gifts worth more than $1 million, paid by the person receiving, with family homes and family farms exempt [6].

The revenue would fund a $10,000 tax-free threshold and a 45% top rate above $160,000, which the Greens say would cut tax for 96% of New Zealanders [6].

They are not alone. Te Pāti Māori want a targeted wealth tax on the wealthiest 3%, at 1.5% on net assets above $2 million, 2% above $5 million and 2.5% above $10 million [7]. Opportunity proposes an annual land tax of 1.75% on urban land and 0.5% on rural land [8]. Same instinct, different coat. Across the left, the reach is for a levy on what you hold rather than what you receive.

And here is the irony. Opportunity is the kingmaker in the latest 1News Verian poll, on 8%, so its plan is not idle talk [9]. Yet Gareth Morgan, who founded the party now called Opportunity, argued on 10 October that “Wealth taxes kill entrepreneurship” and called the tax plans of Labour, the Greens and now Opportunity regressive for New Zealand [10]. The man who once campaigned to rid the country of cats now seems keen to see off his own creation.

Who could deliver it

Before anyone panics, a reality check. National, ACT and NZ First oppose wealth, inheritance and comprehensive capital gains taxes [11]. Labour has ruled out a wealth or inheritance tax. Its own centrepiece is a 28% tax on gains from the sale of investment and commercial property, excluding the family home, applying only to gains made after 1 July 2027 [12].

Under MMP, the Green package could only arrive as the price of a coalition, and then only in whatever form the negotiation produces. Election night tells you the direction. The coalition talks tell you the substance.

A valuation is not cash

There is a hard truth under all of this. A wealth tax is levied on a valuation. It is paid in cash.

Take an owner with $20 million of net assets, most of it a business built over two generations. Under the Green rules the first $10 million is free. The second $10 million attracts 2.5%. That is $250,000 a year, every year, due whether the business had a record year or a bad one. The business does not pay it. The owner does, from income already taxed, from borrowing, or from selling a slice of the thing that employs people.

A lower threshold bites harder. Take a family company worth $14 million, with the family home left out. The Greens tax the $4 million above their line, which is $100,000 a year. On Te Pāti Māori's published tiers, treating each band as a marginal rate, the same company faces about $245,000 a year. Their published summary leaves open whether the family home counts towards the $2 million base.

Then someone has to value it. Listed shares are easy. So, mostly, are an orchard or a commercial building in Hastings, because a valuer can work from recent sales. A private trading company is not. Nor is a minority shareholding in a family business or a partnership interest. Every annual valuation is an argument with Inland Revenue waiting to happen.

As the old line goes, you may call a cat a fish, but it can’t swim. You may call a valuation wealth, but it can’t pay the bill.

The Greens’ own costings assume 28.5% of the super-rich tax is never collected, lost to avoidance and minimisation, on advice from the Parliamentary Library informed by Treasury [13]. When the people designing a tax concede that more than a quarter leaks away before it starts, the rest of the brochure is a wish.

The proposed inheritance tax has the same flaw in a different coat. Because the person receiving pays, a son or daughter who inherits a $3 million share of a family business could face a bill in the hundreds of thousands of dollars. The asset does not come with that cash attached.

The scoreboard

The OECD found 12 member countries had a net wealth tax in 1990 and only four by 2017. Repeals were usually justified on efficiency and administrative grounds, and the taxes often failed to meet their redistributive goals [14].

Norway is the case study everyone reaches for. In 2022 a rise took its top combined rate to 1.1%. That year more than 30 billionaires and multimillionaires left, according to Dagens Næringsliv [15]. Capital has legs. Its owners have passports.

The Netherlands has just learned the same lesson the quick way. In February the lower house passed a law taxing the annual rise in value of shares, bonds and crypto at 36%, whether or not anything was sold. A petition gathered more than 61,000 signatures and coalition senators preferred a tax on sale. The cabinet has now proposed taxing shares and bonds only when they are sold, from 1 January 2028 [16]. Tax the cash, not the valuation.

Source: Regen-Fin

The grain of truth

The counter-case deserves a fair hearing.

New Zealand has no general capital gains tax and no inheritance tax [11]. A salary earner pays tax on every dollar from the first. A long-term property or share investor can see large gains taxed lightly or not at all. That is a genuine gap, and these parties are at least trying to fill it with a number rather than a slogan. The OECD itself accepts that where capital is lightly taxed, or inheritances are not taxed, a net wealth tax may play a substitution role [14].

The administration case is not all one way either. Research in Fiscal Studies puts the central cost of running a well-designed UK wealth tax at about 0.1% of taxable wealth for taxpayers and 0.05% for the tax authority [3]. That counts the cost of collecting the tax, not the cost to the owner of finding the cash.

But a wealth tax is the hardest tool for that job. A capital gains tax is levied when cash changes hands. Even Labour's narrower version bites only on sale. A wealth tax is levied when it does not. It taxes the paper, year after year, and leaves the owner to find the money.

Whose interest is being served

For families, the practical question is not who you vote for. It is whether your structure works under more than one government.

Who holds what. How it would be valued, and by whom. Where the cash would come from in a lean year. Whether the succession plan still works if a 33% tax falls on the next generation. Whether a trust settled decades ago still serves the people it was meant to.

Do not restructure in a panic for a policy that may never pass. But do know your position, your structures and your succession plan before election night hands the file to a coalition room. Those are planning questions, and they are better answered calmly before a policy lands than in a rush after it.

Healey learned the lesson over five years. The pips squeaked, but it was the Treasury that ran out of juice. Grow the pie first, then argue about the slice.

Position for your goals, not for a caucus vote. When the noise gets loud, seek advice and wise counsel.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References 

1. Langworth, R. (2014). Squeeze Germany until the pips squeak. Churchill Project, richardlangworth.com. On Sir Eric Geddes, First Lord of the Admiralty, and the 1918 election. The Cambridge speech of December 1918 is recorded at phrases.org.uk.

2. Healey, D. Speech at Lincoln, 18 February 1974, reported in The Times, 19 February 1974 (as quoted in Wikiquote: Denis Healey). Often misreported as “tax the rich until the pips squeak”. See also LabourList (October 2015), 10 of the best Denis Healey quotes.

3. Burgherr, D. (2021). The costs of administering a wealth tax. Fiscal Studies, 42(3-4), 677-697 (quoting Denis Healey, 1989). https://doi.org/10.1111/1475-5890.12276

4. Pickford, S. (9 December 2016). Britain’s big bailout, December 15, 1976. The World Today, Chatham House.

5. OMFIF (28 September 2016). When Britain went bust. https://www.omfif.org/2016/09/when-britain-went-bust/

6. 1News (21 June 2026). Greens propose wealth, inheritance taxes to fund income tax changes. https://www.1news.co.nz/2026/06/21/greens-propose-wealth-and-inheritance-taxes-to-fund-income-tax-changes/

7. 1News (26 August 2026). Te Pāti Māori launches new tax policy, says most would pay less. https://www.1news.co.nz/2026/08/26/te-pati-maori-launches-new-tax-policy-says-most-would-pay-less/ and Deloitte New Zealand (September 2026). Election tax policies, part three.

8. Opportunity Party (May 2026). Tax Reset policy. https://cdn.opportunity.org.nz/documents/policy/Opportunity%20Policy%20-%20Tax%20Reset.pdf, and 1News (30 June 2026). Explainer: What are the Opportunity Party’s policies? https://www.1news.co.nz/2026/06/30/explainer-what-are-the-opportunity-partys-policies/

9. 1News (13 October 2026). Poll: Hipkins and Luxon now neck and neck, Opportunity on track for 10 MPs. https://www.1news.co.nz/2026/10/13/poll-hipkins-and-luxon-now-neck-and-neck-opportunity-on-track-for-10-mps/

10. Morgan, G. (10 October 2026). Opportunity’s tax plan joins Labour, Greens as regressive for NZ. Newsroom. https://newsroom.co.nz/2026/10/10/gareth-morgan-opportunitys-tax-plan-joins-labour-greens-as-regressive-for-nz/

11. KPMG New Zealand (August 2026). Election 2026 party tax policies tracker (updated to 6 August 2026), and Grant Thornton New Zealand (2026). Tax policy at the crossroads: growth, simplicity and redistribution in Election 2026.

12. Deloitte New Zealand (August 2026). Election tax policies, part two (Tax Alert), and interest.co.nz (June 2026). Labour finance spokesperson Barbara Edmonds says the only tax policy Labour will campaign on is its capital gains tax.

13. interest.co.nz (2026). Natalia Albert says finally the Green Party has mostly got its tax policy right (28.5% of the super-rich tax assumed uncollected, on Parliamentary Library advice informed by Treasury). https://www.interest.co.nz/public-policy/139129/natalia-albert-says-finally-green-party-has-mostly-got-its-tax-policy-right

14. OECD (2018). The Role and Design of Net Wealth Taxes in the OECD. OECD Tax Policy Studies No. 26. OECD Publishing, Paris.

15. IFC Review (April 2023). Europe’s super-rich abandoning Norway at record rate as wealth tax rises slightly (citing Dagens Næringsliv).

16. IMI Daily (16 September 2026). Netherlands retreats from 36% unrealized gains tax, will propose sale-based model instead; and DutchNews.nl (30 September 2026). The box 3 tax changes: what they are and what they mean for you.

The Prison of the Middle Class

Article #477

A lazy shorthand dominates every cost-of-living conversation here: the haves and the have-nots. Two boxes, a line down the middle, a moral position attached to each. It survives because it is easy, not because it is true. 

Mark Carney put it plainly: if you are not at the table, you are on the menu [1]. The households carrying the weight of this are the least represented in the argument about it. 

Some have-nots have far more than others. Some haves are one interest rate reset from the wrong side of the ledger. The surface tells you little. The four-wheel drive is a liability with a registration plate. The holiday home is a security instrument with a view. Wealth, for many New Zealanders, is illusory: a number on a valuation notice that funds nothing but demands payment every month. 

The people trapped by that illusion are not the poorest New Zealanders. They are the battlers; around 1,200,000 households on Pita Alexander's count, roughly 58 percent of the country's 2,072,000 households [2]. 

The arithmetic of the squeeze 

Take a Hastings household on two incomes, two cars and a mortgage. Run the last twelve months across it. Petrol up 27.5 percent. Tertiary education up 22.6 percent. Electricity up 12.0 percent. A GP visit up 10.3 percent [3]. 

Then add the line no minister has to sign. The average proposed council rates rise for 2026/27 is 6.9 percent, against annual inflation of 4.1 percent [4]. Petrol was the largest single contributor to that 4.1 percent [3]. Rates were the quiet one, up 34.4 percent across the last three-year council term while general inflation ran at 13.7 percent [5]. 

At $1.25 per kilometre on a full running-cost rate, those two cars eat $19,500 a year [2]. Before the mortgage. Unemployment has reached 5.6 percent, the highest since 2015, with underutilisation at 13.8 percent [6]. Both adults still work, both cars move, and the 3 percent pay rise was gone before it arrived. On those two Hastings incomes the surplus this year is a few hundred dollars, if the hot water cylinder holds. That is not a lifestyle. It is the hire that does not happen. 

Source: Stats NZ

Click to view Consumers price index: June 2026 quarter

Source: Stats NZ

Click to view Labour market statistics: June 2026 quarter

None of this is attitude. When Rotorua business owners told the Prime Minister they could not pass their costs on, he called the framing negative and said the country had a parent-child mentality. He apologised days later. The apology was the right instinct; the original answer treated arithmetic as mindset [7]. 

The evidence is in the withdrawals 

Ignore the rhetoric; look at what people do with their savings. KiwiSaver hardship applications doubled in two years, passing 58,000 in 2025, and are running higher again in 2026. Inland Revenue paid out $471.2 million on hardship grounds in the June 2025 year [8] [9]. These are not people gaming a system. They are breaking open the last jar in the house. 

Source: Inland Revenue

ANZ's Truckometer says the same in another language: light traffic sits below a year ago, because fewer of us drive to work [10]. Sixty thousand applications in a year is structural failure, one family at a time. 

Source: NZTA, Stats NZ, Macrobond and ANZ Research

What actually lifts a country 

Our best resource sits under our feet. We have an extraordinary climate and exceptional soils, and through every hard period, it is what we grow and sell abroad that sees us right. On the East Coast that comes with a payroll. Take the orchard contractor running four utes through the apple season. His fuel is up more than a quarter, his rates too. What his growers can pay him has not moved. In a normal February he would take on an extra picker. This year he runs the crew short and works the weekends himself. That wage is never offered, never spent in a Hastings shop, never taxed. Regulation that adds a form, a fee or a delay to that operation is not neutral. It comes out of the same ledger. 

A healthy, aspirational middle class is not a nice-to-have in a growth economy. It is the engine. Aspiration requires surplus. Strip the surplus away and you do not get a poorer middle class, you get a stationary one: households that stop taking risks, stop hiring, and optimise for survival. That is a prison, and it has no obvious bars. 

Run the Hastings household forward six years. KiwiSaver contributions drop to the minimum, to keep the mortgage current, and never go back up. Buying a rental remains a conversation. The contractor never hires the extra picker, and the business his daughter was meant to take over is still his. No single year looks like failure, but together they make a household that stopped moving. 

History is blunt on this point. Rome ran on its smallholding farmers. They owned a few acres, paid their way, and filled the legions. Then the wars grew longer. Men were away for years, debts mounted, and the great estates bought the land behind them. Rome kept its wealth. It lost its middle. The century that followed was not a happy one. 

No nation announces the moment its middle class stops moving upward. It finds, a generation later, that something load bearing has gone. 

Look abroad and the pattern holds. Two decades ago, Poland’s income per head was a third of Britain's. It is now about 87 percent of it on a purchasing power basis and projected to draw level around 2030 [11]. Britain did not choose that; it simply let the squeeze run. We are not Britain yet, but the mechanism that took it there is the one running here now. 

Where this is heading 

Very little suggests relief. Both major parties are working at the fringes. 

The Reserve Bank lifted the official cash rate to 2.75 percent on 2 September, a second consecutive rise, and has said it may need to go further this year [12]. For a household already one reset from the wrong side of the ledger, that is not a forecast. It is a repayment. A rates cap begins its transition on 1 January 2027, after the election [13]. Pita Alexander puts the Crown $10 to $12 billion short of fiscal income and reckons that group needs about $4,000 a year more, $2,800 after tax, to restore a buffer [2]. Neither is on offer. 

The battlers are not asking to be rescued. They are asking for the arithmetic to work again. 

The arithmetic from Wellington is not yours to change. The arithmetic at your kitchen table is. Know those numbers as precisely as you would demand of a council to know its own, and get a clear-eyed view of a position a valuation notice will flatter, and a mortgage statement will not. Take good counsel on it. 

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References 

[1] Prime Minister of Canada. (2026, January 20). "Principled and pragmatic: Canada's path" Prime Minister Carney addresses the World Economic Forum Annual Meeting. https://www.pm.gc.ca/en/news/speeches/2026/01/20/principled-and-pragmatic-canadas-path-prime-minister-carney-addresses  

[2] Alexander, P. "The Cost of Living is a Core Problem in New Zealand". Pita's Perspective, 6 August 2026. 

[3] Stats NZ. Consumers price index: June 2026 quarter. 21 July 2026. https://www.stats.govt.nz/information-releases/consumers-price-index-june-2026-quarter/.  

[4] New Zealand Taxpayers' Union. Rates Dashboard 2026. 9 July 2026. https://www.taxpayers.org.nz/rates2026. 

[5] New Zealand Taxpayers' Union. “2025 Rates Dashboard Exposes Out of Control Rates Burden”. 14 July 2025. https://www.taxpayers.org.nz/2025_rates_dashboard_exposes_rates_burden. 

[6] Stats NZ. Labour Market Statistics: June 2026 quarter. 5 August 2026. 

[7] Moir, Jo. “Prime Minister Christopher Luxon's ‘parent-child mentality’ description of NZ businesses ‘valid’ in some cases: Seymour”. RNZ, 2 August 2026. https://www.rnz.co.nz/news/politics/858368/prime-minister-christopher-luxon-s-parent-child-mentality-description-of-nz-businesses-valid-in-some-cases-seymour. RNZ. “Watch: PM Christopher Luxon apologises for ‘parent-child mentality’ comments”. 3 August 2026. https://www.rnz.co.nz/news/politics/874803/watch-pm-christopher-luxon-apologises-for-parent-child-mentality-comments  

[8] Inland Revenue. Statistics on KiwiSaver funds withdrawn, by amount. Updated 24 August 2026. https://www.ird.govt.nz/about-us/tax-statistics/kiwisaver/withdrawals/amount. 

[9] Edmunds, Susan. “Exhaust other options first, withdrawing KiwiSavers told”. RNZ, 25 June 2026. https://www.rnz.co.nz/news/business/620439/exhaust-other-options-first-withdrawing-kiwisavers-told. 

[10] ANZ Research. ANZ Truckometer: August 2026 data. 10 September 2026. https://www.anz.co.nz/content/dam/anzconz/documents/economics-and-market-research/2026/ANZ-Truckometer-20260910.pdf. 

[11] International Monetary Fund. World Economic Outlook Database, April 2026: GDP per capita, current prices, purchasing power parity. https://www.imf.org/external/datamapper/PPPPC@WEO. 

[12] Reserve Bank of New Zealand. Monetary Policy Statement September 2026. 2 September 2026. https://www.rbnz.govt.nz/monetary-policy/monetary-policy-statement/monetary-policy-statement-filtered-listing-page/2026/sep-0209/monetary-policy-statement-september-2026. 

[13] New Zealand Government. “Government to cap rates”. 25 August 2026. https://www.beehive.govt.nz/release/government-cap-rates. New Zealand Government. “Rates Capping Bill passes first reading”. 1 September 2026. https://www.beehive.govt.nz/release/rates-capping-bill-passes-first-reading. 

What a Chilean coin knows about breaking up the supermarkets

Article #476

A friend and colleague in Chile was knocked off his bike by a delivery motorcycle, rupturing a hamstring. Four months off the bike. I wanted to post him honey from our hives, but quarantine rules will not let honey near a border, so he got possum and merino socks instead. Back came an intriguing coin.

One coin, two sides. Seven economists, the “Chicago Boys”, are featured, with one face honouring them as the architects of Chilean economic development. On the reverse sits Chile’s coat of arms and its national motto: Por la razón o la fuerza. By reason or by force. The coin tells the story of a country that tried both.

Nick with Rodrigo and the Chilean coin he kindly gifted him

From 1971 the Allende government nationalised copper, with Congress voting for it. It took the banks, and by late that year the state controlled seventeen of them holding around 90% of the country’s credit. Factories were requisitioned into public ownership. Wages rose and prices were held down. [1]

Then the shelves emptied. A black market grew. By January 1973 the government was rationing dozens of essentials, bread among them, and neighbourhood supply and price committees decided who got what. By December 1973, consumer prices were 508% higher than a year earlier. [2]

Now look at our ballot.

The Greens would force Foodstuffs and Woolworths to sell 120 stores and two distribution centres into public ownership as KiwiMart, at a cost of $2.8 billion. New Zealand First would buy the BNZ back from NAB and merge it with Kiwibank, at $7.5 billion upwards, with compulsory acquisition held in reserve. Labour would not take ownership but would set the price by banning excessive pricing on essentials. National, which normally resists this sort of thing, would split Pak’nSave from New World and Four Square if the Commerce Commission agreed that the separation would leave shoppers better off. [3]

Four parties, four instruments, one instinct. Peters calls it “taking back our country” rather than nationalisation, recalling the warning attributed to Emerson: “The louder he talked of his honour, the faster we counted our spoons.”

The grievance is real. The 2022 market study found the duopoly controlled about 90% of main grocery shopping, with excess profits the Commission then put at more than a million dollars a day. Four Australian-owned banks hold about 84% of lending. Nobody doing the weekly shop needs convincing that something is wrong. [4]

Source: Annual Grocery Report 2025/2026 - Commission analysis of sales revenue provided by industry participants and Statistics New Zealand data. RGR = Regulated Grocery Retailer

National’s proposal is the only one that changes market structure rather than ownership. It leaves every store in private hands and defers to the Commerce Commission. Willis is right that incremental reform has not delivered. ACT is against it. Foodstuffs points out that more than 500 owner-operated stores sit inside the two co-operatives. [5]

But all four reach for the till when the harder question is why nobody can build a shop.

Here is what that question looks like on the ground, twenty minutes from our Hastings office. In 2012, Foodstuffs North Island bought a site across the road from Pak’nSave Tamatea in Napier. It sold the site in 2015 with a covenant barring its use as a supermarket, one of a set running for up to 99 years. Woolworths had two stores in central Napier and none in the south of the city. The High Court found the covenant had been lodged to stop Woolworths, or anyone else, from developing a supermarket there. Justice Radich called the conduct deliberate and serious and, in August 2024, fined Foodstuffs $3.25 million, the largest penalty yet under section 28 of the Commerce Act. [6]

That is a Napier site that could have carried a third banner but did not. No act of nationalisation would have put one there. A rule did the damage, and a rule undid it. Grocery land covenants were banned in 2022 and are now unenforceable, but the Commission pursued the case anyway. [8]

Milton Friedman drew a distinction worth keeping in mind here. Being pro-free enterprise is not the same as being pro-business. Business corporations in general, he wrote, are not defenders of free enterprise but one of the chief sources of danger to it. Almost every owner wants open competition for everybody else and a little protection for himself. [7]

A covenant on a title is a moat dug by a company. A consent that takes years is a moat dug by a council. Both keep the third banner out, and the shopper pays for both. Defending property rights is not the same as defending the incumbent.

Yet four years on, there is still no third full-line chain in this country. Costco entered as a warehouse club, with its second site set to go up in Drury’s fast-tracked town centre. The Government now has a bill before the House creating a consenting express lane for new supermarkets. That is the admission. The binding constraint is not who holds the title. It is how long it takes to get a shop out of the ground. [8]

What changed Chile was not who held the shares but the conditions for competition: stable money, open entry, enforceable contracts and taxes that businesses could live with. From 1987 to 2015, the proportion of Chileans living below the national poverty line fell sharply, while income per person rose substantially. [9]

Scotsman Adam Smith made the same case centuries earlier: little else was needed to carry a state from the lowest barbarism to the highest degree of opulence but peace, easy taxes and a tolerable administration of justice. [10]

Source: Commerce Commission New Zealand

Herfindahl-Hirschman Index (HHI) takes the market shares of each firm in a market.

New Zealand’s grocery industry HHI for 2025 was 3,585 which indicates limited competitive pressure. Concentration in Auckland also remains high, with the HHI increasing to 2,635 in 2025, from 2,561 in 2024.

Click to view Annual Grocery Report

Smith’s other observation was our propensity to truck, barter and exchange. Nobody directed the socks or the coin, no price was named, and both of us came out ahead. The only authority involved was the biosecurity rule that stopped the honey, exactly the sort of plain, predictable rule Smith meant.

The honest part is what the coin leaves off. Chile’s reforms were imposed by a dictatorship, which stripped them of legitimacy. Growth continued after democracy returned in 1990: force set the policy, but reason made it stick. [9]

There is a cost in all of this that appears in none of the parties’ costings, and it lands on people who did not vote for any of it.

Every valuation rests on what a business will earn and the rate at which those earnings are discounted. Political risk goes into that rate. Lift it and the value falls, with no change in the till.

Neither Foodstuffs nor Woolworths New Zealand is listed here, and BNZ belongs to NAB, so no New Zealand portfolio moved directly on those announcements. The precedent is what moves. If a government can force an owner to sell a profitable business at a price set by the Crown, or legislate its structure apart, every regulated business in this country carries a little more risk than it did a month ago. Contact, Meridian, Genesis and Mercury are on that list, and New Zealand First has named them for a split of its own. So are the ports, airports and lines companies.

KiwiSaver held $138.8 billion at March 2026. Those companies sit inside it. The people who own them are not speculators. They are teachers, shearers and people in their sixties who have been contributing since 2007. [11]

Property rights are not an ideological flourish. They underpin every valuation of the shares held in your portfolio and KiwiSaver.

Fix the rules and competition follows. Buy the shops and the government owns the queue.

The Chileans put both options on their coat of arms and have tried each one: by reason or by force.

The vote will decide which of those we reach for. How you respond is still your choice and worth good counsel.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References

1. Espinosa, R. (2021). Salvador Allende’s development policy: lessons after 50 years. Economic Affairs; De Vylder, S. (1974). Allende’s Chile. Cambridge University Press.

2. Edwards, S. (2023). The Debauchery of Currency and Inflation: Chile, 1970–1973. NBER Working Paper 31890; Datosmacro.com. (1973). IPC de Chile 1973, reporting December 1973 CPI inflation of 508.0% year-on-year.

3. RNZ and 1News, 16 September 2026, National to pursue Pak’nSave and New World break up; NZ Herald, 3 September 2026, Greens promise to nationalise 120 supermarkets; RNZ and interest.co.nz, 17 May 2026, NZ First proposal to buy back BNZ and merge with Kiwibank; NBR, 16 September 2026, Labour price gouging policy.

4. Commerce Commission (2022). Market study into the retail grocery sector: Final Report, 8 March 2022; Reserve Bank of New Zealand banking sector statistics, 2026.

5. RNZ and 1News, 16 September 2026, National to pursue Pak’nSave and New World break up. The independent analysis cited by Nicola Willis modelled grocery prices 3.5% lower after one year and 5% lower after six, with $12.6 billion of consumer benefit over twenty years. Foodstuffs and ACT responses reported the same day.

6. Commerce Commission v Foodstuffs North Island Ltd, High Court, Wellington, August 2024; Commerce Commission media release, 8 August 2024; Simpson Grierson, Competition and Consumer Law Update, August 2024.

7. Friedman, M. (1999). The Business Community’s Suicidal Impulse. Cato Policy Report, Vol. XXI No. 2, for the quoted sentence; the wider argument runs through Friedman, M. and Friedman, R. (1980). Free to Choose. Harcourt Brace Jovanovich.

8. Commerce (Grocery Sector Covenants) Amendment Act 2022; Commerce Commission v Foodstuffs North Island, $3.25 million penalty, 2024; RNZ and Beehive, 12 November 2025, second Costco store at Drury and the supermarket consenting express lane bill.

9. World Bank. Poverty headcount ratio at national poverty lines (% of population) – Chile, 1987–2015; World Bank. GDP per capita (constant 2015 US$) – Chile, 1987–2015; Edwards, S. (2023). The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism. Princeton University Press.

10. Stewart, D. (1793). Account of the Life and Writings of Adam Smith LL.D., quoting a paper by Smith of 1755; Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations, Book I, Chapter 2.

11. Plan For Life research, KiwiSaver funds under management at March 2026.

Cheap Money has a Maturity Date

Article #474

In January 1672, Charles II stopped paying his creditors. 

The Stop of the Exchequer was announced as a temporary suspension. A delay, not a default. The distinction mattered a great deal to the Crown and not at all to the people who were owed the money. A borrower who cannot pay on the day they promised has defaulted, whatever the announcement calls it. 

The goldsmith bankers of Lombard Street, who had lent the Crown the money, were ruined. English government credit took a generation to recover. What eventually replaced it was something better than a king's promise: a funded national debt, the Bank of England in 1694, and a Parliament standing behind the borrowing rather than a monarch who could walk away from it. 

Over the century that followed, Britain outlasted Louis XIV and then Napoleon, both of whom governed larger and wealthier countries. Britain did not win because it was richer. It won because it could borrow more cheaply, for longer, and go on borrowing when its rivals could not. Creditworthiness turned out to be a weapon. 

The price of borrowing is not set by announcement. It is set at auction, by whoever turns up with capital and a choice about where to put it. Central banks can turn up too, and for a decade they did. But the auction reasserts itself the moment the official bid is withdrawn.

The OCR is not the whole story 

On 2 September the Reserve Bank lifted the Official Cash Rate to 2.75%, with annual inflation at 4.1% in the June quarter, driven largely by fuel prices flowing from the Middle East conflict [1]. 

The OCR sets the short end. It does not set the rate on a five-year term deposit, a two-year fixed mortgage, or a ten-year bond. Those price off wholesale rates, and wholesale rates are set in a global auction New Zealand does not run and cannot influence. 

A great many borrowers are turning up to that auction at once. 

Germany is funding a substantial military expansion by borrowing, with no corresponding retreat from its welfare state. Britain plans to expand its own. The bill for both goes to the same auction. The pattern repeats across the West, while the technology companies raise enormous sums to build artificial intelligence data centres. 

Nor is this only a Western habit, and China is the clearest case of a number that is not what it is announced to be. Beijing's headline deficit for 2026 is 4% of GDP. Once the CNY 4.4 trillion of local government special purpose bonds and the CNY 1.3 trillion of ultra-long special treasury bonds sitting outside that headline are counted, the consolidated deficit reaches a record 9.1% of GDP [2]. National debt is set to rise by close to CNY 14 trillion this year alone. 

The rate matters more than the level. Mark Williams, chief Asia economist at Capital Economics, calculates that China's total debt outside the financial sector has doubled as a share of GDP since 2010 and now tops 300%, putting its indebtedness, in his words, in a league of its own. The comparison most readers expect runs the other way. Broad American debt, public and private, has fallen as a share of GDP since 2010, to around 265% [3]. Nearly 40% of China's is owed by the public sector, local government financing vehicles included [3]. 

The numbers are not small. OECD central governments issued USD 17 trillion of bonds in 2025 and are projected to issue USD 18 trillion this year. Corporates added USD 6.8 trillion. All of it lands in a market where central banks, having spent a decade as the buyer of last resort, have stopped buying [4]. Local government sits in the same queue, one step removed, borrowing through agencies that price off the sovereign. 

Source: Global Debt Report 2026 | Click to view the full report

More bonds offered, not proportionately more buyers at the same price, so the yield must rise to attract the capital. German ten-year yields are at their highest since 2011, Japanese yields have crossed 3%, and British gilts are at their highest since the financial crisis [5]. 

The honest counter-argument 

It would be tidy to say that governments and technology companies are crowding everybody else out, and leave it there. It would also be a little too tidy. 

Corporate borrowing did reach a record in 2025, USD 13.7 trillion raised across bond and syndicated loan markets, passing the 2021 peak. Nine large technology companies accounted for USD 122 billion of it, around 45% of all bond issuance by technology firms worldwide and more than three times the annual average since 2000. Yet the OECD's own assessment is that this came to no more than 15% of investment grade issuance by non-financial firms in the United States, and was absorbed without market-wide friction [6]. Capital markets are deep, and the pool is not fixed in the way the word crowding suggests. 

There is also a competing explanation for the move in yields that has nothing to do with supply at all. The oil price shock has reignited inflation expectations, and investors demanding more compensation for inflation will lift yields whether or not another bond is ever issued. 

Both explanations are probably doing some of the work. That is usually how markets behave, and anyone offering a single clean cause is selling something. What is not in dispute is the direction of travel, or that a borrower refinancing in 2029 will pay whatever the market asks in 2029, regardless of which explanation was correct. 

There is a second detail in the OECD data worth sitting with. Issuers have been shortening their maturities. In 2025 the ratio of bonds issued at thirty years and beyond, compared with those issued at one to five years, was the lowest since at least 2008 [4]. Short borrowing is cheaper today. It also means the debt comes back around sooner, and more often. That is a decision to pay less now, in exchange for finding out later. 

Cheap money has a maturity date 

A higher yield is not felt today. It is felt at maturity. 

Nearly 80% of what OECD governments borrow this year is not new spending at all. It is refinancing debt that already exists [4]. Borrowers who locked in cheap fixed rates a few years ago keep them right up to the day the debt rolls off and must be refinanced at whatever the auction is charging then. It will bite hardest where the debt is largest and the maturities shortest. Heavily indebted institutions are not repriced gradually. They are repriced in instalments, on a timetable set years ago by people who are frequently no longer there. 

Source: Global Debt Report 2026 | Click to view the full report

New Zealand is not exempt. In March, Fitch revised New Zealand's outlook to negative while affirming the AA+ rating, forecasting general government debt at 56% of GDP by June 2027 and citing delayed fiscal consolidation [7]. Six days later the Local Government Funding Agency received the same revision, automatically, because as a government-related entity its rating is equalised with the Crown's [8]. LGFA provides most council borrowing in this country, Hastings included. 

Everyone drinks from the same pond.

Sovereigns, councils, banks, businesses, then the household. Different straws at different depths, the same water. Nobody in Taihape voted on the German defence budget. It is in the swap rate all the same, and the swap rate is in the mortgage at renewal. 

Milton Friedman's advice was to keep your eye on one thing only, how much government is spending, because that is the true tax. Thatcher put it less gently, that we have been ruled by men who live by the illusion that you can spend money you have not earned without eventually falling into the hands of your creditors. Whatever one makes of the politics, the arithmetic has not been repealed. The auction is where the bill arrives, and it arrives with interest. 

What this means for the investor 

For anyone with savings, this cuts both ways. 

After a decade of being told the coupon was a rounding error, it is worth having again. Income that had effectively disappeared from conservative portfolios has come back, and for retirees drawing on capital that is a meaningful improvement rather than a technical one. 

But a yield is not a gift. It is compensation, and the whole question is compensation for what. Credit quality, term, currency, and who stands behind the issuer. A bond paying more than the one beside it is priced that way for a reason, and the reason is rarely generosity. When someone offers a return well above the market for what they describe as much the same risk, one of those two claims is wrong, and it is not usually the return. 

Nor is the answer to reach for duration simply because longer bonds pay more today. Term is a risk, not a free lunch, and the investor who buys a long maturity to capture an extra sliver of yield has taken a view on the next decade of inflation whether they meant to or not. 

Bonds belong in a well-engineered portfolio. Not every bond belongs in yours. All bonds are equal, as Orwell might have put it, but some are more equal than others. 

Charles II discovered that credit, once lost, is not bought back. It is earned back, slowly, and usually by someone else's generation. The investor who reaches for yield without asking what it is paying for learns a smaller version of the same lesson. That question is easier to answer when the person answering it is bound by duty to put your interests before their own.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References 

1. Reserve Bank of New Zealand (2 September 2026). OCR increased by 25 basis points to 2.75%. https://www.rbnz.govt.nz/news-and-events/news/2026/09/ocr-increased-by-25-basis-points-to-2-75 

2. China Power Project, Center for Strategic and International Studies (2026). Making Sense of China's Government Budget. https://chinapower.csis.org/making-sense-of-chinas-government-budget/ 

3. Fortune (11 May 2026). Forget US debt, China's total borrowing is in a league of its own. https://fortune.com/2026/05/11/us-debt-china-total-borrowing-public-private-gdp-ratio-lgfv/ 

4. OECD (2026). Global Debt Report 2026: The investor base for government and corporate bond markets. https://www.oecd.org/en/publications/global-debt-report-2026_e9d80efd-en/full-report/the-investor-base-for-government-and-corporate-bond-markets_e68b90b3.html 

5. CNBC (3 September 2026). Global bond yields rising: Treasuries, JGB, Bunds. https://www.cnbc.com/2026/09/03/global-bond-yields-rising-treasuries-jgb-bunds.html 

6. OECD (2026). Global Debt Report 2026: Corporate debt market outlook in a transforming world. https://www.oecd.org/en/publications/global-debt-report-2026_e9d80efd-en/full-report/corporate-debt-market-outlook-in-a-transforming-world_cf86a220.html 

7. Fitch Ratings (20 March 2026). Fitch revises outlook on New Zealand to negative; affirms at AA+. https://www.fitchratings.com/research/sovereigns/fitch-revises-outlook-on-new-zealand-to-negative-affirms-at-aa-20-03-2026 

8. New Zealand Local Government Funding Agency (26 March 2026). Credit Rating Outlook Revised to Negative by Fitch Ratings. NZX announcement. https://announcements.nzx.com/announcement/469979 

---

Don't Buy All You Can Borrow

Article #471

Your parents lied to you.

Not about Santa Claus, or carrots improving your eyesight, or the dog going to live on a farm. About something far more expensive, and something you probably did with a pen in your hand and a banker smiling across a desk.

“Buy the best house you can afford,” they said, somewhere between the roast lamb and the pavlova. “Property always goes up.” They smiled knowingly, the way parents do when they think they have just handed you the map to the treasure.

They handed you a map, alright. To a different kind of buried thing entirely.

There is a peculiarly New Zealand religion around property, and we are its most devoted congregation. We flip through TradeMe listings the way other cultures read scripture, and attend open homes on Saturdays like it is church. We have been raised to believe that the house is the thing. The bigger the better. Stretch for it. The bank will say yes.

And the bank will say yes. That is precisely the problem. Banks are not your parents and they are not your friends. They exist to extract a return from the spread between what they pay for money and what they charge you for it, and are content to lend you every last dollar you can theoretically service. The bank's interest is not your interest. Literally.

Property Always Goes Up

Except when it does not. Cotality data released this month shows that in the second quarter of 2026, 13.1% of New Zealand homes resold at a loss, the highest since 2012, at a median $60,000 below purchase price and $159 million across the quarter. Investors fared worst at 13.5%, against 12.2% for owner-occupiers.[1] In fairness, 86.9% still resold at a gross profit, so this is a slide rather than a rout, and it has come without the mortgagee sales of the global financial crisis.

Source: Cotality | Explore Insights and Report HERE

But the number that matters most for this argument is the hold period. Profitable resales had been owned for a median of 10.4 years, a record high. Loss-making resales, 4.3 years.[1]

That is the whole case in two figures. Time rescues a property purchase, and borrowing to the absolute ceiling is what takes time away from you, because when the rate cycle turns or the premium arrives or the job changes, you sell when you must rather than when you choose. The buffer is not a luxury. The buffer is the hold period.

The counter-case deserves an honest hearing. Property has, over long periods, rewarded those who bought as much as they could as early as they could, while inflation eroded their debt. That is true, and it is also survivorship talking. The three conditions that made maximum leverage work, being falling interest rates, cheap and available insurance, and council rates rising near inflation, have now reversed at once.

The Rate Rollercoaster

Between November 2021 and May 2023 the Reserve Bank lifted the OCR from a record low 0.25% to 5.50%, and by January 2024 the average one-year fixed rate had climbed to 7.5% from 2.58%.[2] Households borrowed to the maximum of their serviceability were suddenly underwater. Rates came down through 2025 as the Bank cut nine times to 2.25%.[3] On 8 July 2026 it raised the OCR for the first time in three years.[4] The cycle is shorter than anyone expected.

Source: www.rbnz.govt.nz/statistics - New residential mortgage standard interest rates

Then Comes the Insurance Bill

House insurance averaged $2,815 in the final quarter of 2025, a 37% jump in three years, and Consumer NZ puts the rise at three times general inflation since 2011.[5,6,7]

Explore the full Consumer Insurance Report HERE

But price is no longer the whole story. Availability is, and that is a different order of problem. A premium is a negotiation. A refusal is a wall. You cannot get a mortgage without insurance, so a house that cannot be insured cannot really be sold. The valuation does not fall because the building changed. It falls because the finance did.

In January 2026 AA Insurance told the Buller District Mayor it would stop issuing new home, business and landlord policies across the postcode covering Westport, Carters Beach and Cape Foulwind.[8] Existing customers could renew. New buyers could not get cover at all. Within weeks it paused new policies in Woodend, citing seismic exposure rather than flood, then declined new business across Blenheim, Renwick and Seddon.[9] Legal commentators call this the beginning of a new kind of insurance retreat.[10] AA Insurance was simply the one that announced it. Others declined quietly.

Closer to Home

In April 2026 it emerged that Tower Insurance was refusing to cover some homes in Parklands Residential Estate, a modern council-owned development near Park Island in Napier. Buyers entering estate addresses into Tower's website were told cover could not be offered, the insurer citing a high risk of flooding from sea surge.[11]

These are new homes, with ground levels the council says were set above significant storm surge scenarios. And yet a major insurer would not touch them. Napier City Council is meanwhile spending $37.4 million on stormwater to protect Te Awa and Maraenui.[12] Public money, directed at a problem an insurer had already priced into its underwriting.

Cyclone Gabrielle caused $2.17 billion in insurance losses across this region, and the review that followed found new housing in areas of known flood risk suggested past lessons had not been learned.[13,14] Nobody mentioned any of this at the open home. Before you sign, enter the address into an insurer's website, read the LIM, and look at the flood hazard maps. That is the due diligence our open-home culture trains us to skip in favour of admiring the benchtops.

And Then There Are Rates

Not mortgage rates. Council rates, which are moving the same way. Stats NZ has local authority rates and payments up 8.8% in the year to March 2026, against headline inflation of 3.1%, and rates were the single largest contributor to that inflation figure.[15] Where water charges are shifting to a separate delivery entity under Local Water Done Well, the number on the rates notice is no longer the number leaving your account.

One More Thing: The Election

Every party to the left of centre now favours taxing property in some form. The differences are of instrument and degree, not direction.

Labour is campaigning on a 28% capital gains tax covering residential investment and commercial property, applying only to gains made after 1 July 2027, with the family home, farms, shares and KiwiSaver exempt. It would replace the bright-line test.[16,18]

The Greens go further, proposing a 2.5% annual super-rich tax on net assets above $10 million per individual, and a Capital Acquisitions Tax charging 33% on inheritances and gifts received above a lifetime threshold of $1 million, with family homes and family farms carved out and the tax paid by the recipient rather than the estate.[17] Opportunity, formerly TOP, proposes a land value tax of 1.75% urban and 0.5% rural.[19]

Te Pāti Māori has not published its 2026 tax policy, so its numbers for this election are not known. The direction is. The party campaigned in 2023 on a wealth tax rising to 8% on net wealth above $10 million, a 2% annual levy on property appreciation and taxes on undeveloped and vacant land, and KPMG counts it among those pressing for structural reform this time round.[16,20] Treat the 2023 figures as history rather than policy until the manifesto lands.

National, ACT and NZ First are not the mirror image of this. Neither proposes new property taxes, and their emphasis is on lower-tax settings and targeted reforms to boost investment.[16] That is closer to holding the current line than reversing it, and the current line is already favourable, with the bright-line test back to two years since July 2024 and full interest deductibility restored from April 2025. Their position is continuity, not a counter-offer.

KPMG notes that a capital gains tax is now the common denominator across the likely alternative government, although Chris Hipkins has ruled out Labour backing a wealth or inheritance tax.[16] None of it is law, and coalition negotiation will decide what any of it looks like. Voters decide on 7 November. But on one side of the House the direction of travel points squarely at property, and on the other it does not move at all.

What the Buffer Actually Buys

Take two buyers on the same street and the same income. One borrows $900,000 against a $1.05 million house. The other borrows $700,000 against an $850,000 house ten minutes further out. At 5.5% over thirty years, the gap in repayments is roughly $1,100 a month.

Nothing separates them while conditions hold. The difference appears when something moves. A one percentage point rise on $900,000 costs about $9,000 a year, against $7,000 on $700,000. A 37% jump in the premium lands on a household that has $1,100 a month of room, or on one that has none. A redundancy is a difficult year for one and a forced sale for the other.

That $200,000 was never really about the house. It was about buying the ability to wait, and the resale data says waiting is the whole game.

The Boring Alternative

Buy less than you can borrow. Keep a buffer. Sleep at night.

The house ten minutes further from the school zone that costs $200,000 less is not a failure. It is a margin of safety, and more to the point it is time. It is the difference between selling at 4.3 years because you have to and holding for 10.4 years because you can. It is the room to fix the roof without going back to the bank, and to stop doing anxious arithmetic at 2am. If you think professional advice is expensive, try using an amateur.

Property can be a wonderful long-term asset. But the best house you can afford is not the best house for you. It is just the biggest risk you were allowed to take.

The bank will tell you what you can borrow, not what you should. For that, seek impartial advice and wise counsel.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References

1. Cotality - Share of NZ Homes Selling for a Profit Falls to Lowest Level Since 2012. cotality.com/nz, 17 August 2026. https://www.cotality.com/nz/insights/articles/share-of-nz-homes-selling-for-a-profit-falls-to-lowest-level-since-2012

2. Mortgage Express NZ - Is Now the Right Time to Lock in Your Home Loan Rate? mortgage-express.co.nz

3. Canstar NZ - In Which Direction Are Mortgage Interest Rates Headed? canstar.co.nz, June 2026

4. Reserve Bank of New Zealand - Official Cash Rate raised 25 basis points to 2.50%, 8 July 2026. rbnz.govt.nz

5. Quashed - Why Is My House Insurance So Expensive? 2026 NZ Premium Hike Guide. quashed.co.nz

6. Reserve Bank of New Zealand - Insurance Availability and Risk-Based Pricing, Financial Stability Report, May 2024. rbnz.govt.nz

7. Consumer NZ - What's Going On With Home Insurance? consumer.org.nz, February 2026

8. RNZ - Insurer Temporarily Halts New Policies in Westport Due to Flood Risk. rnz.co.nz, 28 January 2026

9. NZ Herald - Major Insurer Declines New Home Insurance Policies for Blenheim. nzherald.co.nz, 3 February 2026

10. Minter Ellison - Insurers Dial Back Flood Risk Exposure: Where Will This Lead? minterellison.co.nz, May 2026

11. 1News - Insurer Flags Sea Surge Risk for Some Napier Estate Properties. 1news.co.nz, April 2026

12. Napier City Council - $37.4M Stormwater Investment Unlocks 400 Homes and Flood Protection for Napier. napier.govt.nz, December 2025

13. Insurance Business NZ - Hawke's Bay Homeowners Face Insurance Woes, Rising Security Risks. insurancebusinessmag.com, November 2024

14. Insurance Business NZ - Hawke's Bay Flood Review Highlights Need for Improved Risk Management. insurancebusinessmag.com, July 2024

15. Stats NZ - Annual Inflation at 3.1 Percent in March 2026: Local Authority Rates and Payments Up 8.8 Percent. stats.govt.nz, April 2026

16. KPMG New Zealand - Summary of 2026 Election Tax Policies. kpmg.com/nz, August 2026

17. 1News - Greens Propose Wealth, Inheritance Taxes to Fund Income Tax Changes. 1news.co.nz, 21 June 2026

18. Buddle Findlay - Labour's Capital Gains Tax: Time to Think Ahead. buddlefindlay.com, 2026

19. The Post - Opportunity Party Reveals Policies on Land Tax, Universal Basic Income and KiwiSaver Reform. thepost.co.nz, May 2026

20. RNZ - Te Pāti Māori Proposes Suite of Changes in New Tax Policies. rnz.co.nz, 27 July 2023. No 2026 tax policy published as at 20 August 2026

---

The Mozart Problem and the Bill New Zealand Keeps Refusing to Read

Article #470

Everything costs more, yet by every measurable standard, we are producing less. Welcome to Baumol's cost disease, with a Wellington twist. 

Picture a string quartet performing Mozart in 1790. Four musicians, half an hour, a finished piece of music. Now picture the same quartet performing the same piece in 2026. Four musicians, half an hour, the same music. 

The output is identical. The cost is not. 

This is Baumol's cost disease - economist William Baumol's 1966 observation that some sectors cannot get more productive no matter how clever you are [1]. You cannot ask the violinists to play twice as fast. Yet they must still be paid enough not to quit and retrain as software engineers. And engineers' wages keep rising because their productivity does. So performing the piece costs more every decade, while the performance itself never changes. 

Baumol's insight was never an argument against paying the violinist. It was a warning about where the money comes from. Rising wages in less productive sectors are affordable only because a productive sector somewhere is generating the surplus to fund them. Pull out the productive sector and the whole arrangement stops being generosity and starts being arithmetic. 

Which brings us to the Wellington twist. We have the disease. We do not have the cure. 

The number that is not moving 

On 1 April, the adult minimum wage rose again, to $23.95 an hour, up 45 cents, a 'moderate' two percent lift the government was quick to call balanced [2]. On the same day, main benefits rose 3.11 percent, indexed to the CPI. New Zealand Superannuation lifted 2.9 percent, indexed to wages. The default KiwiSaver contribution ticked up to 3.5 percent. The living wage moved to $29.90 an hour. The government indexed its obligations, sent out the press releases, and moved on. 

Businesses do not get to index theirs. They just get the obligation, and the bill that comes with it. 

View fullsize

Source: ourworldindata.org/grapher/labor-productivity-per-hour  

Here is the part nobody in Wellington wants to say out loud. Stats NZ's own figures show multifactor productivity fell 0.9 percent in the year to March 2025 [3]. Labour productivity nudged up 0.8 percent, but only because firms shed workers faster than output dropped [3]. We did not get more productive. We got smaller, slightly less inefficiently. 

Our labour productivity gap with the top half of the OECD has widened from 34 percent in 1996 to roughly 40 percent today [4]. We sit alongside Mexico, Greece and Portugal [5]. Construction is the starkest case of all: the sector is producing at roughly the same rate it managed in 1985 [6]. Four decades of technology, and the shed goes up at the same speed. 

Baumol's violinist was paid out of a surplus the rest of the economy threw off. Ours is paid out of an economy that has stopped producing one. Every April the floor climbs. The output that is meant to fund it goes sideways at best. The gap does not close. It compounds.

Source: NZCBIA Report No 2024-01

California told us how this ends 

In April 2024, California lifted the minimum wage for large fast-food chains from USD 16 to USD 20 an hour: a 25 percent jump and one of the biggest single-sector hikes in American history [7]. The most rigorous peer-reviewed study to date found the sector shed around 18,000 jobs in the first year, roughly a 3.2 percent fall relative to the rest of the country [7]. 

But the more telling story is what came next. Two years on, researchers tracking the same restaurants found the damage had changed shape. Workers kept their jobs but lost hours, lost overtime, and increasingly lost out to a kiosk [8]. One franchise group saw shift work fall by more than 20 percent. Another chain cut labour hours across its outlets by nearly 12 percent [8]. 

The wage floor did not lift those workers so much as quietly saw off the bottom rung of the ladder they were standing on. 

This is not an argument that people should be paid less. It is an observation about what happens when the price of labour is set by decree rather than by what that labour can produce, and about who gets hurt when the two drift apart. It is never the people who set the number. 

What Baumol never saw coming 

For sixty years, cost disease was incurable precisely because you could not automate the quartet. The violinist was safe. So was the waiter, the till operator, the aged-care worker. Their inefficiency was their job security. 

AI is the first technology that credibly threatens that assumption, and it arrives at the exact moment the wage floor is climbing [9]. The jobs most exposed to a rising minimum (entry-level, routine, repeatable) are precisely the jobs AI is coming for first [9]. In California, the same franchises facing the higher wage bill were the ones rolling out ordering kiosks, app ordering and AI drive-throughs fastest.8 Raise the cost of the role and hand the employer a cheaper substitute in the same quarter, and you do not need an economics degree to see which way that goes. 

The 17-year-old looking for a first job is now competing not just with a higher wage bill, but with a piece of software that never calls in sick, never takes a smoko break, and never asks for a raise. 

Slicing versus baking 

Which brings us to November. 

Here is what the election will be about, and what it should be about, and they are not the same thing. 

Every party will campaign on how to slice the pie. Who pays more tax and who pays less. Who gets the transfer, the credit, the exemption. Where the floor should sit and how fast it should rise. It is a rich, noisy, deeply satisfying argument, and it will absorb the entire campaign. 

Almost nobody will campaign on baking a bigger pie. 

Yet the pie is the whole argument. A minimum wage is affordable when output is rising, because there is more to go round and the violinist gets paid out of the surplus. When output is flat, the same policy is not generosity. It is a redistribution of a pie that is not growing, and someone at the margin - usually the least skilled, the youngest, the last hired - pays for it without ever being told they are paying [10]. 

We even had a Productivity Commission. Set up in 2010 at ACT's insistence to ask precisely this question, it drifted - by the end it was inquiring into immigration settings and just transitions, and ACT itself abolished it in 2024, and nobody much mourned [11 The one body built to ask how we bake a bigger pie had spent its final years arguing about slices. That is the country in miniature. 

So here is the question worth putting to whoever knocks on your door between now and 7 November: not what will you lift, but what will you grow? What, specifically, will be more productive in three years than it is today, and how will you know? 

If the reply is a slogan, you have your answer. 

What this means for you 

If you own a business: stress-test your margins against a wage line that rises every April whether or not your revenue does. Automation is no longer an efficiency play. It is defensive. 

If you invest: sectors leaning hardest on minimum-wage labour - hospitality, retail, aged care - carry a structural cost risk that never shows up in a glossy prospectus. Price it in. 

If you are a parent: the entry-level job your kids would once have used to get a foot in the door is the one most at risk. Have a Plan B for how they build experience when the first rung keeps getting sawn off. 

The government can index its obligations every April and move on. Businesses cannot. 

They will tell you a rising tide lifts all boats. They never mention the ones still tied to the wharf. And every April, the tide comes in a little higher. The trouble is, the businesses are anchored, and the school-leavers cannot swim yet.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References 

1. Baumol, W. J., and Bowen, W. G., Performing Arts: The Economic Dilemma: A Study of Problems Common to Theater, Opera, Music, and Dance, Twentieth Century Fund, 1966. 

2. Beehive.govt.nz, Minimum Wage Increase Balances Business and Worker Needs, 12 December 2025; Employment New Zealand, Minimum Wage Is Increasing on 1 April 2026, 9 March 2026. 

3. Stats NZ, Productivity Statistics: 1978–2025, 23 April 2026. 

4. BERL, Relooking at Our Productivity Gap, 2024. 

5. MBIE and MFAT, New Zealand's Productivity in a Changing World: Long-Term Insights Briefing, 17 December 2025. 

6. Newsroom, Construction Sector Productivity Stuck in '80s, 9 August 2024; Beehive.govt.nz, Construction Sector Productivity the Same as 1985, 9 August 2024. 

7. Clemens, J., Edwards, O., and Meer, J., “Did California's Fast Food Minimum Wage Reduce Employment?”, NBER Working Paper No. 34033, July 2025. 

8. Owen, S., Ripley-Rodriguez, E., Jenkins, M., Walsh, S., and Tang, K., Let Them Eat Big Macs, Crunch Wraps, and Whoppers: A Working Paper Describing the Statewide Impact of California's $20 Fast Food Minimum Wage, University of California, Santa Cruz Institute for Social Transformation, November 2025. 

9. IDC / Deel, AI at Work: The Role of AI in the Global Workforce, November 2025. 

10. Stats NZ, Unemployment Rate at 5.3 Percent in the September 2025 Quarter, 5 November 2025. 

11. New Zealand Government, New Zealand Productivity Commission Act Repeal Act 2024, New Zealand Legislation, 2024. 

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Wholesale Investor Rules: Calling a Cat a Fish

Article #468

Abraham Lincoln liked to ask how many legs a dog has if you count the tail as one. Four, he said: calling the tail a leg doesn’t make it a leg. New Zealand’s wholesale investor rules have spent a decade calling tails legs. Last week a Christchurch courtroom finally counted.

On Friday 24 July the High Court placed six companies in Bernard Whimp’s Chance Voight group into liquidation. Associate Judge Dale Lester found a pattern of obfuscation, incompetence and evasion, an entirely unsustainable model, and a scheme that could only pay existing investors by finding new ones. Founded in 2021, the group had raised more than $54 million from perhaps 230 people to pour into property-based wholesale debt promising returns of 10 to 13 per cent a year. By September 2025 it sat on a negative net asset position of $11.8 million. The evidence, the judge said, was overwhelming.

One detail is almost too good. Whimp asked the court to delay the hearing until he could unlock money from his late father’s estate, which, he said, would in turn fund a $110 million land development. The judge was unmoved, calling the request a microcosm of how the whole group had been run. Quite. You cannot conjure a solvent business from a deceased estate any more than you can pull a rabbit from an empty hat, though plenty have tried. Meanwhile a related Whimp entity had drawn some $9.2 million in “management fees”, around 24 per cent of all money invested, even as the group booked a $5.5 million trading loss in a single half-year. Fees, in other words, for failure.

Here is what should trouble every reader. Chance Voight’s investors were, in the main, aged 65 and over, and the first liquidators’ report found many had only a limited grasp of the risks. Yet each had been certified a “wholesale” investor: sophisticated enough, in law, to need no protection at all.

You can call a cat a fish, but you can’t teach it to swim.

The mechanism is simple. The Financial Markets Conduct Act lets companies raise money without disclosure, licensing or supervision, provided the investors are wholesale. Under the “eligible investor” rule, anyone can claim that badge so long as a financial adviser, chartered accountant or lawyer signs to agree. Tick the box, and every retail protection evaporates. And this was no discreet, professional affair: the court noted Chance Voight was marketed in regional and local newspapers, on Facebook and at in-person promotional events, the mass channels of the retail world, not the closed room of the true professional.

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A long process for a too-low bar 

The regulator has been uneasy for years. When the FMA took a test case to force issuers to verify the investors sent their way, it lost: Justice Fitzgerald found the permissive regime was a feature of the law, not a bug. But she put her finger on the fault. The problem, she observed, was not so much the content of the certificates as that certificates with patently defective grounds, or none at all, were being confirmed regardless. It is the confirmation process that is falling down; and if it cannot protect investors, the balance struck in the legislation may need resetting, a matter, she said, for Parliament and not the court.

That was the judiciary handing the problem to the politicians. This month, at last, they picked it up. Commerce Minister Cameron Brewer has released an MBIE consultation, part two of the plan to lift our capital markets, that concedes what advisers have muttered for years: our settings are an international outlier, “unique” and “relatively permissive,” with “some evidence” that inexperienced investors are getting into wholesale offers. Its options read like a reply to Fitzgerald: a more objective eligibility test, a cap on how much an eligible investor can put at risk, a requirement that applicants take independent financial advice, restrictions on wholesale advertising, and, squarely, real onus on the professional confirmer, with an infringement offence for inadequate certifications.

Click above to read more on Wholesale Investors from the Financial Markets Authority

What still needs attention 

Those are the right levers, and they should be pulled. None of this is an argument for tearing the regime down. Genuine sophisticated investors exist, and raising capital from them without the full disclosure burden is a legitimate and valuable part of a working market. MBIE rightly notes that certificates lasting only two years already make life needlessly costly for real professionals. The point is narrower. The bar has been set too low, left to rot, and waved through by people with every incentive not to look too closely. Consider that none of the thresholds, $5 million in net assets, a million-dollar investment history, a $750,000 minimum subscription, has been adjusted for inflation since the Act took effect in 2013. Thirteen years of asset-price growth, house prices above all, has done the widening for Parliament: the same numbers now capture people they were never meant to reach. The bar did not get more generous; the country simply ran up more nominal dollars against a line that never moved. Last year the FMA referred 22 accountants and eight lawyers to their professional bodies over the misuse of these very certificates.

Two gaps deserve more than the paper gives them.

The first is the advice layer. A retail adviser must put the client’s interests first and prove a recommendation is suitable: goals, cash flow and appetite for risk, all understood and documented, the file running to fifty pages. A wholesale-only adviser owes a bare statutory duty to give priority to the client’s interests, but needs no FMA licence, follows no Code of Professional Conduct, and never has to establish that the advice was suitable. The relationship can be purely transactional: take the $5 million, place it in a syndicate, move on. If you think professional advice is expensive, try the amateur variety.

The second is the Crown’s own hand. Of the roughly 70 managed funds on Invest NZ’s “acceptable” list for Active Investor Plus migrants, against nearly $1.5 billion of committed capital, all but a handful are wholesale, and few are household names. Invest NZ’s own disclaimer states that inclusion is not an endorsement or recommendation by it or the Government. We invite wealthy newcomers to make this country home, steer them onto a state-curated list, then wash our hands of what follows. All care, no responsibility. A wealthy migrant, a surgeon, a farmer, someone who simply inherited well, may know nothing of geared, illiquid property debt, yet is stamped “wholesale” on a net-asset figure alone. Funds on a Crown list should answer to retail-grade disclosure, not hide behind the wholesale tag.

Underneath it all sits a regulator half in the dark. The IMF warned back in 2017 that there was insufficient data to assess the risks in our wholesale sector; nine years on, the FMA has admitted it still has very little sense of the size, structure or practices of that market. You cannot police what you have never measured.

Two centuries ago the little port of Kōrorareka, on the same Bay of Islands coast that cradled New Zealand’s first capital, was infamous as the Hell Hole of the Pacific, a settlement beyond the reach of any law. We renamed it Russell, gentrified it, and told ourselves the lawlessness was history. But a regime that lets an operator gather tens of millions from retirees on a one-page certificate nobody properly checks, through advisers who owe them little and a regulator the courts say owes them nothing, has not left the frontier behind. One judge has wound the companies up. Another has told Parliament what to fix. Submissions close on 25 August. Make sure the reform closes the loophole, rather than merely repaints the saloon.*

* Stewart Group does not provide advice to investors under the wholesale investor rules. We took that decision years ago, in the view that all investors deserve full disclosure and a fiduciary relationship. 

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Further Reading: For those interested in the wholesale investor discussion, this guide provides a practical overview of the key differences between retail and wholesale investors, including eligibility criteria, investor protections and regulatory requirements.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

REFERENCES

1. “Court slams Whimp entities into liquidation; Kerr bankrupted in the UK.” David Chaplin, Investment News NZ, 26 July 2026.

2. “‘Unsustainable’ Chance Voight companies put into liquidation.” NBR, 24 July 2026 — judgment of Associate Judge Dale Lester; Teneo’s John Fisk, Lara Bennett and Malcolm Hollis appointed liquidators; comments of FMA enforcement head Margot Gatland.

3. David Chaplin, “Wholesale investment: there’s a hole in the market.” BusinessDesk, 21 July 2026.

4. “Government looking at wholesale investor loophole.” Good Returns, 17 July 2026; “Government seeks feedback on loophole exposing unsavvy investors to risky deals.” NZ Herald, July 2026.

5. Ministry of Business, Innovation and Employment, capital markets reform discussion paper (part two), July 2026. Submissions close 25 August 2026.

6. First interim liquidators’ report on the Chance Voight group (PwC), 2026 — investor age profile and limited risk understanding; “management fees” of $9.2m, some 24% of funds invested; $5.5m half-year trading loss; negative net assets of $11.8m at 30 September 2025.

7. Financial Markets Authority, [2025] NZHC 2723 — judgment of Fitzgerald J (18 September 2025) on the confirmation process and the balance struck in the legislation.

8. Financial Markets Authority — referral of 22 accountants and eight lawyers to their professional bodies over misuse of eligible investor certificates.

9. International Monetary Fund, Financial Sector Assessment Programme, New Zealand, 2017; FMA review of custody arrangements, 2026.

10. Invest New Zealand / Immigration New Zealand, Active Investor Plus visa: list of acceptable managed investment schemes and non-endorsement disclaimer.

11. Financial Markets Conduct Act 2013, Part 3 and Schedule 1.

12. “Kōrorareka — the Hell Hole of the Pacific.” Te Ara / NZ History, Ministry for Culture and Heritage.

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Private Assets: You're Not Joining the Club, You're Funding It

Article # 463

Private. Special. Exclusive. Three words that do a lot of heavy lifting in finance. They frame private equity and private credit as access and privilege. Yet beneath the velvet-rope marketing sits a familiar set of trade-offs: high fees, illiquidity, and a lack of transparency. For decades that rope kept ordinary investors out. It was quietly removed, and nobody sent a memo.

Historically, these markets belonged to pension funds, endowments and family offices with eight figures to commit and twelve years to wait. Ordinary investors didn't get a seat at the table. They are now being offered one, through KiwiSaver growth funds, UK Long-Term Asset Funds dropped inside tax-advantaged ISAs, and the family trust portfolios they signed off on last year [1]. The FMA confirmed in April that most KiwiSaver providers expect to materially lift their private asset allocations over the next three years, aligning with global investment trends [2]. The industry calls it democratisation. Governments call it unlocking growth.

This week the trend turned local and concrete. Simplicity committed $30 million to a new Kiwi deep tech and health sciences venture fund, becoming a cornerstone investor [3]. The fund holds a small number of early-stage companies, including pre-revenue biotech automating cancer-cell therapy manufacturing. It is not fully funded on day one; it is a capital-call vehicle, drawn down over the life of the fund. The parent is US-headquartered, and the capital base includes migrant investors using it as a pathway to residency. None of that is hidden, and backing clever Kiwi innovation is a perfectly defensible thing to do. But it is a useful reminder of what this asset class is once you look inside the wrapper: a long-dated, illiquid, concentrated bet that you cannot easily value or exit.

About that 40-year outperformance

In January, Tony Robbins told millions of viewers on The Diary of a CEO that private equity has outperformed every stock market globally for 40 years, and that ordinary investors have been locked out [4]. He is right on the data. The data, however, deserves a closer look before you remortgage the bach.

First, it has been cherry-picked by survivorship. The funds that blew up quietly drop out of the long-run series, so what you are shown is the record of the survivors, a bit like judging parachutes by interviewing the people who landed. Second, much of the return is leverage, not skill; borrow heavily against a stable business and you amplify the good years, and the bad. Third, and least discussed, is the illiquidity premium. You are tying your money up for a decade or more in a speculative bet on a handful of companies you cannot sell when you want to. You would expect to be paid more for taking on more risk and less liquidity. That extra return is not evidence of genius; it is the rent on your patience. Strip out dead funds, borrowed money and locked-up capital, and the heroic outperformance narrows sharply, and that is before fees [5].

What Robbins is less keen to dwell on is that he co-owns CAZ Investments, which buys stakes in private equity management companies, and that he personally holds stakes in 95 PE firms; the firms themselves, not the funds [6]. He collects the "2 and 20" on each: two percent of assets every year, plus twenty percent of profits above a hurdle [4]. Draw your own conclusions about the shape of those incentives.

The cycle, and the cautionary tale

On the credit side, JPMorgan chief Jamie Dimon used his April shareholder letter to flag what the more enthusiastic salespeople tend to leave in the bag: the credit cycle still exists [7]. Lending standards loosened during the boom. Covenant-lite deals became common in private credit too [8]. When the cycle turns, losses will not stay gated.

In August 2024, the Government placed Du Val Group, an Auckland property developer, into statutory management. This is only the third time that lever has ever been pulled, following Equiticorp in 1989 and Allan Hubbard's vehicles in 2010 [9].

The Du Val Mortgage Fund had been marketed as wholesale-only at around 10% per annum, pitched as comparing favourably to bank term deposits. That label is not a marketing flourish but a regulatory category: an offer made only to wholesale investors is excluded from the disclosure regime built to protect ordinary investors, so there is no product disclosure statement and no entry on the public Disclose register [9]. Roughly 120 to 150 investors are now owed close to $306 million [9]. When investors tried to sue the FMA for failing to protect them, the High Court ruled in Lindeman Investments v FMA that the regulator owes no duty of care to individual wholesale investors [10]. The safety net does not stretch that far, and by design: the wholesale regime switches off most of the retail protections long before any loss is incurred.

Every newborn, a private asset owner

Fisher Funds has committed more than $1 billion of KiwiSaver money to private equity, the largest publicly announced commitment to date [11]. Most other major providers also carry exposure, and per the FMA report most plan to lift those allocations over the next three years [2]. On Sunday, Christopher Luxon announced that, if re-elected, KiwiSaver would become compulsory from 2028, every newborn would be auto-enrolled with a $1,500 Baby Boost defaulted into a high-growth fund, and the combined contribution rate would reach 12% by 2032 [12]. Every newborn New Zealander would begin their financial life with a private asset exposure they did not choose, in a vehicle they cannot exit until at least 2090.

Structure is not the same as transparency

None of this makes private assets an inherently bad asset class. The issue is the layering, the marketing, and the question of who benefits from the door opening now. Where the exposure is plainly structured, a named partnership backing identifiable businesses with disclosed allocations, the picture is more straightforward than where it runs through layered offshore fund-of-funds with opaque manager economics. But structure on paper is not the same as transparency in practice. Diligent managers have tried to look through some of the better-regarded local vehicles and come up short on what is actually held and how it is valued. If the people whose job is to see inside cannot, the ordinary member certainly cannot. We do not invest our own clients in this asset class, for precisely these reasons. It would be premature to suggest New Zealand has quietly cracked private assets when the same transparency, valuation and liquidity questions remain.

Here is what matters most, and what the marketing almost never spells out: understand whether your commitment is fully funded on day one or subject to future capital calls. Some private equity is paid up front, with no further obligation, clean and simple. Much of it is not. A commitment of thirty cents on the dollar today can trigger calls for the remaining seventy cents in the years ahead. Your disclosed allocation now will not reflect your actual exposure tomorrow; as the calls arrive, your percentage holding and your real risk are multiplied. A trustee who signs off on what looks like a modest five percent allocation can find the true commitment is several times that once the fund draws down. I have watched exactly this happen to a community trust, where a decision made by earlier trustees carried obligations that only became visible years later.

For trustees, this is not simply an investment preference; it is a governance question.

Under the Trusts Act 2019, trustees of family and charitable trusts inherit a look-through duty [13]. Few today can name the private asset exposures they are responsible for, let alone the unfunded commitments sitting behind them. Asking the question is the first part of discharging the duty.

Four questions for any provider, adviser, or co-trustee:

1. What are the all-in fees across every layer?

2. How are the underlying assets valued: how often, and by whom?

3. Is the commitment fully funded, or subject to future capital calls?

4. In whose interest is the allocation being recommended?

The answers should be plain and confident. If they aren't, that itself is a flag you shouldn't ignore.

Robbins is right that private equity has outperformed historically. Dimon is right that the credit cycle still exists. What is less often spoken about is who benefits from unlocking the door now, and why.

Private. Special. Exclusive. Useful words for the fee machine; less useful for the person handing over their money. You are not joining the club; you are funding it.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• We do not hold or advise on any private credit or private equity investments.

---

REFERENCES

1. Financial Conduct Authority (UK). Long-Term Asset Fund regime, FCA Handbook COLL 15. HM Treasury (2025). Inclusion of LTAFs in stocks and shares ISAs. gov.uk.

2. Financial Markets Authority (2026, 15 April). Private assets in managed funds: Investment landscape and valuation practices. Accompanying media release: “FMA anticipates KiwiSaver providers will increase investment in private assets.” Source: FMA.

3. Simplicity (2026, 24 June). “Simplicity backs ambitious Kiwi innovators with $30m investment.” Details: $30m cornerstone commitment to Bridgewest Venture Fund I (Deep Tech and Health Sciences Fund). Provider disclosure context: Booster, Milford, Generate, Pathfinder, ANZ Investments and others carry private asset allocations across growth and high-growth options.

4. The Diary of a CEO with Steven Bartlett (2026, 15 January). “Tony Robbins: No One Is Ready For What’s Coming.” Details: transcript references Robbins’ stakes in 95 private equity firms, the firms, not the funds, receiving the “2 and 20” on each.

5. Bain & Company (2025). Global Private Equity Report 2025. Details: fee conventions of 1–1.5% management plus 10–20% carry above a preferred return. Supporting context: MSCI, Chicago Booth Review and NBER research on buyout outperformance of roughly 3–5% per year over public market equivalents, with debate over the role of leverage, survivorship bias and the illiquidity premium.

6. CAZ Investments. Firm overview and GP-stakes strategy. Robbins, T., Zook, C. and Mallouk, P. (2024). The Holy Grail of Investing. Simon & Schuster.

7. JPMorgan Chase & Co. (2026). Annual Letter to Shareholders 2025. Author: Jamie Dimon. Released April 2026. Source: JPMorgan Chase & Co.

8. Reserve Bank of New Zealand (2026, May). Financial Stability Report. Details: private credit market concerns. Source: Reserve Bank of New Zealand.

9. Financial Markets Authority (2024, 21 August). “Du Val Group: statutory management ordered.” Source: FMA. Supporting coverage: BusinessDesk (2025, 4 August), “A year since raids, FMA yet to prosecute over Du Val collapse.”

10. Lindeman Investments Limited v Financial Markets Authority [2025] NZHC. Judgment date: 11 July 2025. Summary source: Cooney Lees Morgan, “The FMA safety net has limits when it comes to wholesale investor groups.”

11. NZ Herald, The Prosperity Project (2025, 4 August). “The rise of KiwiSaver investing in private equity and what it means for you.” Details: Fisher Funds committing more than $1 billion of KiwiSaver funds to private equity.

12. New Zealand National Party (2026, 21 June). “National To Further Boost Kiwis’ Financial Security.” Details: press release, annual conference, Lower Hutt. Coverage: NZ Herald, RNZ, 1News, Newsroom and Scoop (21–22 June 2026). Estimated fiscal cost: $1.1 billion over four years.

13. New Zealand Parliament (2019). Trusts Act 2019, ss 30–31.

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No Taxation Without Representation: The CCO Accountability Gap

Article #460

Last weekend we marked King's Birthday - the official birthday of a man none of us voted for, none of us can remove, and most of us will never meet. The monarchy survives on charm, inertia, and a constitutional bargain held for centuries: the King reigns on the condition he does not rule.

The same cannot be said of our Council-Controlled Organisations. In three weeks' time, that contrast becomes expensive.

Last October, New Zealanders voted in 42 simultaneous referendums on Māori wards. 24 councils voted to remove them and 18 to keep them. Nationally, more than 542,000 voters supported retaining Māori wards against around 468,000 who opposed them. Whatever your view, the principle was clear: how local democratic representation is structured is important enough for voters to decide directly.

Now apply the same lens to CCOs. These organisations sit at the intersection of three conditions that create a serious accountability vacuum:

1. They run monopolies or near-monopolies - no competitor can offer cheaper water, public transport, or port services.

2. Their boards are appointed, not elected. Voters do not choose the directors, and the councillors who appoint them do not manage them day-to-day.

3. Directors are almost impossible to remove when ratepayers are unhappy. CCOs continue unchanged no matter who wins council elections. The democratic feedback loop never closes.

No market discipline. No democratic discipline. Ratepayers pay regardless.

Fuel price hikes annoy us because they flow into the cost of everything. But fuel still operates in a competitive market: you can switch brands, go electric, take the bus, or drive less. Water has no such substitute. You cannot switch providers, install a cheaper pipe, or easily opt out. If fuel prices trouble you, water should give you nightmares - because the entity setting the price answers to no one you can vote out.

If "no taxation without representation" means anything in 2026, any body with the power to compel payment must answer to those who pay. That principle is the foundation of legitimate government.

On 1 July, IAWAI - Flowing Waters Ltd takes over water and wastewater services across Hamilton City and Waikato District. Owned 50:50 by the two councils and in partnership with Waikato-Tainui, its board is appointed by a nine-member Forum: three Hamilton representatives, three Waikato District representatives, and three Waikato-Tainui representatives - all with equal voting rights. Ratepayers will be legally required to buy from an entity whose governance includes voices no voter ever elected.

The Auditor-General warned in 2022 of "a serious diminution in accountability to the public for a critical service". The structural problem remains.

This week, Local Government Minister Simon Watts announced an amendment to the Local Government Act 2002 to restrict voting at council committee meetings to elected councillors only. "Councillors are directly accountable to voters for their decisions," he said. "That's not democratic, so we're fixing it." A welcome principle - but the reform applies only to council committees. The new water CCOs going live in three weeks sit outside the Local Government Act, governed instead under Local Water Done Well. The Forums that select their boards - the very arrangements that breach Watts' own principle - will keep their voting rights intact.

If it is not democratic at council level, it cannot be democratic at the water entity level either.

This is not just a water issue. The same governance model applies to Auckland Transport, port companies, and other major CCOs.

In Wellington, Tiaki Wai - also launching on 1 July - has confirmed a $645,000 CEO salary (more than the Prime Minister) and doubled director fees to $60,000, while households face average bills of $2,418 this year, potentially rising to $6,831 by 2036. Mayor Andrew Little called the salaries "generous". The Commerce Commission is now scrutinising pricing - proof that the only meaningful check is regulatory, not democratic.

The model is heading to Hawke's Bay. From 1 July 2027, water services for Hastings, Napier, and Central Hawke's Bay will transfer to a new joint CCO.

Two practical reforms would close the gap.

First, CCO directors should be either directly elected by ratepayers or appointed exclusively from sitting councillors. Either option creates a direct line of sight from voter to board. The former is more democratic; the latter is cheaper and integrates CCO governance into existing council accountability.

Second, directorships should be term-limited to the electoral cycle. A change in council should automatically refresh CCO boards. At present, voters can throw out a council only to discover the bodies actually running their water, transport, and ports remain untouched.

Critics will object that elected or councillor-appointed directors would be parochial and unqualified. Perhaps. But the current system produces unaccountable parochialism dressed up as professional governance. The ability to vote them out is worth more than the illusion of expertise from people who answer to no one.

We tolerate an unelected sovereign because he sets no rates, signs no major contracts, and cannot raise the price of your shower. He is a constitutional ornament. Our CCO directors are not.

New Zealanders take representation seriously – so why is there exception for organisations that can send us bills we cannot refuse?

No taxation without representation. It is not a slogan. It is the bargain.

Watts has now agreed with the principle - for councils. In three weeks, water entities operating on the very arrangements he has just rejected go live in Wellington and the Waikato. Hawke's Bay follows a year later. Either the democratic principle applies everywhere, or it applies nowhere.

The King, at least, had the decency to stay out of it.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

SOURCES

• Maori ward referendums (Oct 2025): RNZ; final national tally per Wikipedia (Keep 542,134 / Remove 467,923 / margin 74,211).

• IAWAI - Flowing Waters Ltd (Hamilton/Waikato water CCO, operational 1 July 2026): Hamilton City Council governance page.

• Local Water Done Well overview: Bell Gully briefing.

• Auditor-General, "Submission on the Water Services Entities Bill" (8 August 2022): oag.parliament.nz.

• Local Government Act amendment announcement (Hon Simon Watts, 2 June 2026): Stuff; press release reproduced at Mirage News, "Council Voting Limited To Elected Officials".

• Tiaki Wai pay and pricing (April-May 2026): NZ Taxpayers' Union release; NZ Herald, "New Wellington water entity Tiaki Wai defends salary spend for top officials" (13 April 2026); NZ Herald, "Tiaki Wai opens books, warns of higher costs to households" (24 March 2026); RNZ, "Mounting confusion over new water bills looming for Wellington region residents" (22 May 2026).

• Hawke's Bay joint water CCO (operational 1 July 2027): Napier City Council news release.

Budget 2026: A better story, if you believe the assumptions

Article #459

For decades I have written about the Budget from the outside. This year, I was fortunate enough to be there in person – in the lockup, with the Treasury’s forecasts and supplementary documents in front of me before the Minister rose to speak. There is value in having the source material itself, rather than seeing headlines that come after. What follows is my read.

The Budget Economic and Fiscal Update released on 28 May tells a more reassuring story than the Half Year Update did back in December.¹ Deficits narrow earlier. The cyclically adjusted OBEGALx, the operating-balance measure favoured by Finance Minister Nicola Willis as it strips ACC’s volatile revenue and expenses out of the historical OBEGAL, returns to surplus in 2028/29; a full year sooner than previously forecast.² Tax revenue holds up better than feared. And on the Treasury’s fiscal-balance measure, which tracks the actual cash impact of government on the economy, policy keeps supporting demand through 2026/27 before tightening from 2027/28 onwards.³

On the surface it is a better-than-expected set of numbers. As always, the trouble is what sits underneath them.

The forecasts assume real GDP growth lifts from 1.2% this year to a peak of 3.2% by 2028. This would be a sharp acceleration after three years of contraction or near-zero growth.⁴ They assume unemployment peaks at 5.5% and then drifts back down to 4.3%, and that net migration recovers towards its long-run average having run at barely a quarter of that recently. Each assumption is plausible on its own. The sticking point is that the recovery needs most of them to arrive together, and roughly on schedule.

Inflation is the assumption that should give readers the most pause. In these forecasts, it takes a less-than-linear, lurching path: CPI surges to 4.0% this year, driven in part by higher fuel prices flowing from offshore conflict, before the forecast has it dropping abruptly to 1.6% in 2027, then settling around 2%.⁵ That near-halving in twelve months is a heroic call. It looks more heroic still when you separate out domestic, non-tradeable inflation, the prices generated here at home, in services, rates and rents – which Stats NZ measured at 3.5% in the year to March, with electricity up 12.5% and council rates up 8.8%.⁵

Ask any local who has just opened a new rates letter, renewed an insurance policy, or braced for yet another ramp-up in winter power prices. The cost-of-living squeeze people are actually feeling is not the tidy headline figure the forecast leans on. And a great deal does rest on that figure, because inflation feeds wage expectations, interest costs and the tax take all at once. If domestic prices prove stickier than assumed, the path back to surplus gets harder.

The forecasts also assume the Government will deliver on ambitious savings tracks at Health New Zealand, Kāinga Ora and the Ministry of Social Development – all organisations that have run material operating deficits.⁶ Every line of the recovery requires for something to land more or less perfectly. The Treasury’s own statement of specific fiscal risks runs to dozens of substantial items; a catalogue of expensive surprises waiting to happen.⁶

Meanwhile, the wave of cost coming our way is neither theoretical nor distant. It is here now.

Defence capability needs roughly $6 billion in new funding over the next two Budgets just to deliver the existing plan. The Health Infrastructure Plan identifies more than $20 billion over the next decade. The school property pipeline signals a significant uplift. Treaty relativity payments and pay equity settlements remain live cross-portfolio risks.⁶

Nowhere is the pressure clearer New Zealand Superannuation. NZ Super payments are forecast to climb from $24.7 billion in 2025/26 to $31.2 billion by 2029/30, an average increase of about $1.6 billion every year. This is the single largest driver of core Crown expense growth, with roughly half of that uplift simply more people turning 65.⁹ Against that backdrop, the decision to recommence contributions to the Super Fund is genuinely welcome – but light on detail for what is, on any honest reading, the largest looming fiscal pressure of the next two decades.

That’s the sobering side. There is a more encouraging side too, and parts of it land particularly well for our Hawke’s Bay region.

The tax package is sensibly targeted rather than flashy. Lifting the Foreign Investment Fund de minimis threshold from $50,000 to $100,000 of shareholdings is a solid, practical move. Combined with allowing the revenue account method for unlisted shares held by any New Zealand resident, it removes a barrier to migration for skilled people and cuts compliance costs for ordinary investors – who should never have been tangled in rules built for complex international structures.⁷ The accompanying changes to charities and not-for-profit settings, including a $100,000 annual cap on individuals’ rebate claims, tidy up a system that had drifted from its purpose.⁷

But, not everything in the package is so easily defended. One such outlier is the Emerging Managers’ Programme, a scheme backing first-time and emerging fund managers who invest in startup companies, with the aim of helping those funds build capacity, scale and a track record.⁸ No, you’re not reading that wrong: the Crown is effectively backing unproven managers who are backing unproven companies, stacking emerging-manager risk on top of early-stage venture risk. The mind boggles slightly.

There is somewhat of a rationale behind it – New Zealand’s venture ecosystem is thin, exits like Xero and Rocket Lab show what is possible, and the next generation of managers has to come from somewhere. But it sits oddly in a Budget otherwise sold on discipline and rebuilding buffers, and it will be worth watching closely how the guardrails are drawn.

Closer to home, the Budget delivers tangible benefits to Hawke’s Bay. Cash-strapped, debt-laden councils such as Hastings stand to benefit from changes giving them a share of consents value, a scaling mechanism that better matches revenue to the growth that creates the work. Funds have been earmarked for design and enabling works at Hawke’s Bay Hospital, alongside the wider Regional Hospital Redevelopment Programme.⁶ There’s also a $400 million reserve fund for state highway resilience projects aimed at keeping critical routes open during severe weather – something Hawke’s Bay residents understand the importance of more than most. Cyclone Gabrielle is not yet three and a half years behind us, and the Treasury itself rates comparable events as reasonably possible, at least once every four years, within the forecast period.⁶

The bottom line? This is a Budget Update that asks New Zealanders to take a fair amount on faith: that growth returns on cue, that inflation halves to target while domestic prices still bite, that savings targets are met, and that the events outside the Government’s control stay kind to us. The genuine wins for investors, charities, regional councils, hospital patients and motorists on vulnerable routes, deserve acknowledgement.

The risks deserve to be taken just as seriously.

The Treasury has done its job. It has shown us the figures and, in the supplementary information, told us plainly what could go wrong. The question is whether the rest of us are reading both halves of the document, so there aren’t surprises down the road if certain elements don’t stick the landing.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

REFERENCES

[1] The Treasury (2026). Half Year Economic and Fiscal Update 2025. Wellington: New Zealand Government, 16 December 2025.

[2] The Treasury (2026). Budget Economic and Fiscal Update 2026: Supplementary Information: Underlying Fiscal Performance (Cyclically-adjusted and Structural Balance Indicators), B.3, pp. 47–49. Wellington: New Zealand Government, 28 May 2026.

[3] The Treasury (2026). Budget Economic and Fiscal Update 2026: Supplementary Information: Fiscal Stance (Fiscal Balance and Total Fiscal Impulse Indicators), B.3, pp. 42–46.

[4] The Treasury (2026). Budget Economic and Fiscal Update 2026. Wellington: New Zealand Government, 28 May 2026; see also ‘Budget 2026: 10 things you need to know’, NZ Herald, 28 May 2026.

[5] The Treasury (2026). Budget Economic and Fiscal Update 2026: Supplementary Information: Detailed Economic Forecast Information, Table 2 (CPI) and Table 6 (Labour Market Indicators), B.3, pp. 33, 37; non-tradeable inflation of 3.5% from Stats NZ (2026), Consumers Price Index: March 2026 quarter, 21 April 2026.

[6] The Treasury (2026). Budget Economic and Fiscal Update 2026: Supplementary Information: Unchanged Specific Fiscal Risks and Contingent Liabilities, B.3, pp. 6–30.

[7] The Treasury (2026). Budget Economic and Fiscal Update 2026 — Supplementary Information: Tax Policy Changes, B.3, pp. 39–40; and Inland Revenue / The Treasury (2026), 2026 Tax Expenditure Statement, 28 May 2026.

[8] The Treasury (2026). Summary of Initiatives in Budget 2026, B.19, p. 9: Emerging Managers’ Programme. Wellington: New Zealand Government, 28 May 2026.

[9] The Treasury (2026). Budget Economic and Fiscal Update 2026, Fiscal Outlook — drivers of New Zealand Superannuation expense growth. Wellington: New Zealand Government, 28 May 2026.

Death and Taxes

Article #458

This Thursday, Nicola Willis will deliver Budget 2026. The headlines will be familiar: tight control of spending, focus on health, education, defence and law and order, a return to surplus.[1] To her credit, the Finance Minister has shown discipline.

On Tuesday, in her pre-Budget speech to Business North Harbour, she announced 8,700 public service job cuts over the next three years, $2.4 billion in savings, the merger of agencies, and AI as “a basic expectation” across government systems.[2] The public service had grown from roughly 48,000 in 2017 to over 63,000 by the end of 2024, a 33 percent expansion in six years against largely flat productivity growth. Trimming it back toward 1 percent of population is overdue.

The harder question is timing. The coalition has been in office for two and a half years. The electoral mandate was fresh in late 2023. Decisions of this magnitude, with this kind of political cost, are easier early in a term and almost impossible to deliver in election year without the optics looking opportunistic. The reforms should have been made then.

That delay matters because the bond market is a fickle lover when a country is carrying heavy debt and producing little productivity growth. Fitch has placed New Zealand’s AA+ rating on negative outlook, citing rising challenges in reducing debt after years of delayed fiscal consolidation; debt to GDP is projected to reach 56 percent by 2027.[3] The 10-year government bond yield is sitting near 4.7 percent. Every basis point on that yield translates into real money in interest costs. Markets are watching, and they are no longer giving New Zealand the benefit of the doubt.

This is the fiscal context in which the campaign begins.

Budget Day on the 28th is not really the main event. It is the starting gun for the election campaign that ends on 7 November. And the backdrop against which that campaign will be fought is grim.

The NZX 50 touched fresh lows this week. The Gross Index, which includes reinvested dividends, has delivered a total return of around 3 percent over the past five years.[4] That is less than 1 percent per year in nominal terms. Strip out dividends, and the price-only index is in negative territory. Once you factor in cumulative inflation of around 20 percent, New Zealand investors have gone backwards by close to 17 percent in real purchasing power. No other major Western bourse can claim that distinction. The S&P 500 has roughly doubled. The ASX 200 is up around a third. The FTSE, long the laggard of major markets, has still delivered around 30 percent. Even the Nikkei, dormant for two decades, has delivered roughly 70 percent.

This matters because when the stock market is not creating wealth, politicians look for ways to redistribute existing wealth. That is the genuine political logic of the moment, and it is amplified by the mechanics of MMP. Labour cannot govern alone. To form a government, it will need the Greens and almost certainly Te Pāti Māori. Whatever Labour campaigns on, the coalition partners will demand more.

Labour has confirmed it will campaign on a capital gains tax targeted at residential and commercial property, with revenue ringfenced for free GP visits.[5] The Greens have gone further, proposing a 2.5 percent annual wealth tax on net assets above $2 million, and a 33 percent inheritance tax on lifetime gifts and estates above a $1 million threshold.[6] Te Pāti Māori has signalled wealth taxes as a coalition bottom line.[7] Fitch has reportedly been briefed on tax measures beyond what Labour has publicly disclosed.[8]

The Greens’ inheritance tax proposal is the one to pay closest attention to. It is, in everything but name, the return of estate duty. And it is worth remembering, on the eve of a Budget that opens an election year, why New Zealand abandoned that tax in 1992.

Estate duty was sold as a tool of equity. In practice, it became a destroyer of family legacies. By the early 1970s, rates had climbed as high as 40 percent, with thresholds catching far more than just the wealthy.[9] For families whose wealth was tied up in illiquid assets, the death of a patriarch or matriarch triggered financial catastrophe.

The Hawke’s Bay orcharding sector provides stark examples. Local orchardists who had spent decades developing pipfruit operations found their estates assessed at development values rather than agricultural income values. Families faced duty bills exceeding several years of profit. The choice was bleak: sell blocks to developers, or take on crippling loans.[10] Many spent thirty years or more servicing that debt, an entire generation lost to a single tax assessment. A block of land that had taken a grandfather forty years to develop into productive orchard could be lost to an unexpected death and an Inland Revenue assessment within eighteen months.

The Waikato dairy sector tells the same story. Multi-generational farms were forced to sell down herds and land to meet duty bills. The remaining operations often lacked the scale needed to remain viable, and some families saw their children leave farming altogether.[11] It was not incompetence that ended these legacies. It was a tax code that demanded immediate liquidity from operations that simply do not generate it.

Rural service businesses, the stock and station agents, transport firms, processing contractors, faced the same pressure. Many took on outside investors to meet duty bills, and those investors eventually engineered buyouts. The consolidation of New Zealand’s agricultural service sector during the 1980s owed much to estate duty’s destabilising effect.[12]

Defenders argued at the time, and will argue again, that proper planning could avoid these outcomes. Two things are worth saying about that. First, the planning itself was a deadweight cost. Families spent thousands on lawyers and accountants navigating frequently changing rules rather than reinvesting in their enterprises.[13] Second, deaths do not arrive on schedule.

What does prudence look like in practice? It looks like reviewing trust structures that may have been set up two decades ago under different rules. It looks like understanding which assets sit where, who owns what, and what the liquidity profile of an estate actually is on any given day. It looks like considering whether life insurance has a role to play in funding potential tax liabilities. It looks like beginning the conversations between generations that families instinctively defer.

The lesson from estate duty is not that all tax is bad. It is that taxes on illiquid family assets transfer productive wealth from those who built it to whoever has the ready cash to buy at distress prices. That is not redistribution. It is destruction. And it is being proposed at a moment when fewer families have the financial cushion to weather it, against a stock market that has produced no real wealth for half a decade.

Thursday’s Budget will not settle this debate. It opens it. Families with farm, orchard, or business assets ought to be reviewing their structures now, seeking wise counsel from advisers who understand both the tax architecture and the fiduciary weight of decisions made under pressure. None of this argues for selling out of New Zealand equities at the lows: capitulation at the bottom is the parallel mistake, the same wealth destruction by another route. The answer is diversification and counsel, not retreat. The families who recovered from estate duty were almost always those who took advice early. The ones who lost everything were those who waited until the tax was already in force.

History rhymes. It does not, thankfully, repeat. But only if we are paying attention.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

REFERENCES

[1] The Treasury, Budget 2026, 28 May 2026, treasury.govt.nz/publications/budgets/budget-2026

[2] NZ Herald, Nicola Willis’ public service cuts to save $2.4b, 8700 jobs to go, 19 May 2026; 1News, Thousands of public service jobs to go, major Govt shake-up announced, 19 May 2026

[3] Fitch Ratings, New Zealand AA+ outlook revised to negative, March 2026; Trading Economics, New Zealand 10-Year Government Bond Yield

[4] S&P/NZX 50 Gross Index, 5-year return data to 20 May 2026, NZX and Yahoo Finance

[5] NZ Herald, Labour’s capital gains tax: Chris Hipkins celebrates ‘progressive’ policy, 28 October 2025

[6] Become Wealth, Wealth Tax NZ: What It Means and Who Would Pay, April 2026; Green Party Alternative Budget 2025

[7] RNZ, Te Pāti Māori proposes suite of changes in new tax policies

[8] Scoop News, Fitch Report Exposes Labour’s Secret Tax Agenda, 29 April 2026

[9] Inland Revenue Department, Annual Report 1975 (Wellington: Government Printer, 1976), 23-25

[10] P.J. Skellerup, “Estate Duty and the New Zealand Horticultural Sector,” NZ Journal of Agricultural Economics 3, no. 2 (1979): 45-52

[11] Ministry of Agriculture and Fisheries, Agricultural Statistics 1980 (Wellington: Government Printer, 1981), 67-89

[12] R.M. Sandrey and S.R. Reynolds, “Structural Change in New Zealand Agriculture 1972-1987,” Review of Marketing and Agricultural Economics 58, no. 1 (1990): 15-28

[13] NZ Law Society, Submission on Estate and Gift Duties Amendment Bill (Wellington: NZLS, 1983), 8-12

Air New Zealand: The Worst of Both Worlds

Article #452

Fifty percent government-owned, operating like a budget carrier, charging premium prices, Air New Zealand occupies the most uncomfortable position in aviation. It’s neither fish nor fowl: not quite private, not quite public, delivering neither the efficiency of true competition nor the service standards of genuine public ownership.¹

Welcome to the warm embrace of collectivism. It’s getting warmer, and not in a good way.

The Flightless National Carrier

The symbolism writes itself. Air New Zealand, like the kiwi, has become a flightless bird, grounded by contradictions, unable to soar because it refuses to commit. Government ownership was supposed to protect the national interest. Instead, it has created an airline that enjoys privileges without facing consequences: government contracts, preferential treatment, implicit bailout guarantees, all without the full discipline of the market or the scrutiny of complete public accountability.¹

When things go wrong, taxpayers are on the hook. When things go right, shareholders collect the dividends.

New Zealanders know this intimately: the airline received NZ$2.3 billion in Crown support during COVID-19.² The structural trap was set long before the current crisis.

The World is on Fire. Air NZ has a Newsletter.

On 8 April 2026, CEO Nikhil Ravishankar sent customers a carefully worded email. “Kia ora Nick,” it began warmly. He wanted to update customers on jet fuel prices. Fuel had surged from around US$85–90 a barrel to above US$200, effectively doubling Air New Zealand’s daily fuel bill from NZ$4 million to NZ$8.5 million. Schedule cuts for May and June were confirmed. More were promised to be “deliberate and carefully considered.”³

Warm. Reassuring. Human, even, which is ironic, given what you encounter when you actually try to contact the airline.

This crisis is not Air New Zealand’s alone. Iran’s effective closure of the Strait of Hormuz, through which over 20% of global seaborne jet fuel normally flows, has sent shockwaves through the entire industry.⁴ More than 14,000 flights globally have been cancelled since late February 2026.⁵

Ryanair’s Michael O’Leary has predicted summer cancellations of 5–10% across Europe.⁶ United Airlines’ CEO Scott Kirby has warned his carrier’s fuel bill could double to US$20 billion.⁷ Lufthansa’s CEO has assigned teams to contingency planning.⁸ SAS has cancelled over 1,000 flights in April alone.⁹ Energy analysts at Kpler warn that even if the Strait reopened tomorrow, prices would not fall quickly: production has been taken offline, and the market hangover could last well into 2027.¹⁰

The difference between Air New Zealand and those carriers is structural. Most are pure private enterprises; they face consequences. Air New Zealand faces a shareholder with a printing press.

The Numbers are Brutal

Forsyth Barr’s March 2026 report is stark: Air New Zealand could book a net loss of $226 million in FY2026, and $148 million in FY2027 if fuel costs remain elevated.¹¹ Macquarie analysts warn that capacity cuts will fall primarily on domestic and Tasman routes.¹² The share price has reflected the outlook, trading near its 52-week low at $0.48, down sharply from $0.64.¹³

The airline has already trimmed near-term capacity by 5%, with more reductions almost certain.

Watch for the Capital Raise

Here is what the CEO’s warm email does not say: if losses of this magnitude materialise over two financial years, Air New Zealand will need to raise capital. When it does, the New Zealand government, as 50.1% shareholder, faces an unavoidable choice. Participate, and write another substantial cheque from the public purse to protect its stake. Or decline, dilute, and begin the slow retreat from an ownership position it has held for decades.

Either outcome implicates taxpayers. Either outcome exposes the central absurdity of the current arrangement. Budget 2026… hold your breath.

Chatbots and Contempt

Try contacting Air New Zealand’s customer service, and you will discover the true face of modern collectivist enterprise: woeful service, declining standards, and a corporate structure that treats human interaction as an inconvenience to be automated away.

You are more likely to engage with a chatbot than a human, and the human, when you eventually find one, operates like a chatbot anyway—scripted, bounded, unable to resolve anything of substance. The airline’s answer to its service failures is not better people or better training, but better systems for apologising for the absence of both.

The Hospital Pass

That’s what recommending Air New Zealand has become, and nowhere is the gap between price and product more vivid than in business class, where Air New Zealand’s structural contradictions are most expensive to observe firsthand.

The airline’s new Business Premier cabin, rolling out across its Boeing 787 fleet through 2026, retains a herringbone configuration. Passengers sit angled toward the aisle rather than toward the window, the opposite of the reverse herringbone suites now standard on Qatar Airways, Singapore Airlines and Cathay Pacific.¹⁴ Standard Business Premier seats come equipped with a sliding privacy screen. Not a door: a screen.

A door costs extra. Specifically, NZ$820 (approximately US$487) extra on long-haul.¹⁵ There are four of them on the entire retrofitted aircraft.¹⁶ Aviation analysts reviewing the product have described the standard offering as “fairly underwhelming” compared to what the competition offers.¹⁷

You’d book Qantas if you could, but with Emirates disrupted by Iranian airspace closures, rerouting flights away from Gulf hubs, alternatives from New Zealand are thinner than they have been in years.¹⁸

Choose

New Zealand deserves better than this muddled middle ground. Our national carrier should be either a source of genuine pride (fully public, properly accountable, serving citizens) or a true competitor, privately owned and driven to excel.

Full public ownership means genuine accountability: real service obligations, routes chosen for public benefit, consequences for failure. Full privatisation means real competition, no bailouts, market discipline for a product that currently charges a premium for the privilege of facing a stranger across a narrow aisle.

What we have instead is the comfortable middle ground that serves nobody.

Make a choice. Commit to something. Because right now, our national carrier charges like Singapore Airlines, seats you in a layout from 2005, asks NZ$820 extra for a door, deploys a chatbot when you complain, and may shortly be asking the government for more money.

That’s not the warm embrace of collectivism. That’s the slow squeeze.

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

The Centurion’s Warning: Superannuation at 65—comforting politics, hard maths

Article #450

Nine years ago, I wrote about Roman Centurions. The New Zealand Economics Forum last month proved I wasn’t being dramatic enough.

When I wrote my very first Canny View in September 2017, I told the story of Roman Emperor Augustus and his military pension scheme, the Aerarium militare. Augustus faced a problem that will sound familiar: Romans were living longer, the pension fund was catastrophically underfunded, and someone had to pay for it.

His solutions were creative, if not entirely honest. Keep raising taxes. Extend the military service requirements, again and again. And when the pension rolls got too heavy? Launch another campaign! Rome always found another frontier war conveniently thinned the numbers — the Germans, the Dacians, the Parthians. It was just fiscal procrastination dressed up as military glory.

I wrote then: what is happening today is no different to those Roman times. At the end of the day, someone has to pay for it.¹

The Road to Rome’s Problems

The Aerarium militare is one of history’s most instructive fiscal cautionary tales. Augustus established it in 6 AD, seeding it with 170 million sesterces of his own money — a sum so large he had to make it a personal gift to avoid a Senate revolt over new taxes. When that proved insufficient, he pushed through a 5% inheritance tax and a 1% sales tax on goods sold at auction to keep the fund solvent. When Tiberius later tried to abolish the sales tax, his generals warned him that there was no other way to pay veterans. So, the tax stayed.

Each time the fund came under pressure, the response was the same: extend the service requirement. Augustus raised it from 16 years to 20, then up to 25. Soldiers who had signed up expecting to retire at 16 years found the goalposts moved, repeatedly, for fiscal reasons. Sound familiar?

Some historians trace a significant part of Rome’s eventual decline to the Senate later cutting pension payments altogether. With less incentive to serve, Roman citizens stopped enlisting. The ranks filled with barbarian mercenaries. Cohesion and discipline collapsed. The pension problem eventually helped unravel the army that held the Empire together.

New Zealand introduced its own old-age pension in 1898 — one of the first countries in the world to do so, under Richard Seddon’s Liberal government. It would be received at age 65, when male life expectancy was just 56. Like the Aerarium, it was never designed to be paid to most people. It was a safety net for the few who beat the odds. The pension that most New Zealanders now expect to receive for 20-plus years of retirement was conceived for people who, statistically, were unlikely to reach it at all.

Shifting Demographics Add Up to a Problem

Back in 2017, when I wrote that first article, over 15% of New Zealand’s population was aged 65 or older. Today, we’re past 16% and heading towards 20–21% within the next decade.⁵ We’ve gone from around 750,000 receiving NZ Super then, to over 912,000 today.⁶ Crucially, the working-age population supporting them is shrinking proportionally.

It’s not a sudden crisis of compassion, but rather a mathematical problem. The ratio of workers to retirees is deteriorating. Empires fall not from external threats but from internal fiscal contradictions — and we are living that reality now.

What’s Changed Since 2017?

In 2017, Bill English had just opened the door to raising the retirement age to 67 from 2037. Jacinda Ardern promptly pledged to repeal it and declared she’d resign before raising the retirement age. Labour won, the policy was scrapped, and the age stayed at 65. It hasn’t shifted since.

Movement comes only at the margins. Residence requirements for NZ Super are increasing from 10 to 20 years, phased through to 2042.⁷ Superannuation will consume 18.6% of tax revenue by 2029, up from 16.6% in 2023.³ But the fundamental policy lever — the eligibility age — remains politically untouchable. Augustus would understand completely.

What Treasury Said in Hamilton

At February’s New Zealand Economics Forum in Hamilton, Treasury Secretary Iain Rennie warned that ageing is already materially lifting expenditure and will continue to do so throughout the next decade, outpacing revenue growth. Without policy changes, New Zealand’s debt trajectory will become unsustainable.²

The number of people receiving superannuation will grow from 928,000 today to over 1,084,000 by 2029/30. That’s roughly the entire population of Tauranga added to the pension rolls in just under five years, costing a cool $7.7 billion more per year – equivalent to 22% of all projected tax revenue growth over that period.² Rennie was clear this isn’t a problem for future governments alone: “They are part of the chill headwinds confronting the government now.”²

Treasury’s longer-term projections show that without policy changes, government debt could reach unsustainable levels by the 2060s. This would be driven primarily by superannuation and healthcare costs for our ageing population.⁴ Every year of inaction makes the eventual adjustments more severe. That’s Treasury’s own modelling, not an opinion.

The Age Question Nobody Wants to Answer

At the same forum, a panel of economists and former politicians concluded that New Zealand can’t afford superannuation at 65… or even 67. Some suggested eligibility may need to rise as high as 72 or 73 to be viable long-term.²

Back to our Roman friends: Augustus didn’t want to cut centurion pensions either, as it was politically impossible. Instead, he extended service requirements, raised taxes, and launched another Parthian campaign. Each short-term fix made the structural problem worse. Eventually, the promises became mathematically impossible to honour, and the system failed.

We are not Augustus. We have better data, better institutions, and better options. What we seem to lack is the political will to use them.

What Actually Needs to Happen

Raising the age alone won’t fix this. The Forum panel agreed on that much.²

The deeper issue is savings and productivity. There is no credible path to lifting New Zealand’s productivity without matching Australia’s savings rate.² That means taking KiwiSaver seriously: Not as a nice-to-have, but as the foundation of our retirement system.

With 3.4 million New Zealanders enrolled — 90% of the workforce — KiwiSaver has been a genuine success. But 1.6 million members were making no contributions as of March 2025, either out of the workforce or on contribution holidays.⁴ It’s a structural gap we keep patching rather than fixing.

Compulsory contributions, properly locked in until retirement, would be a meaningful start. Paired with a gradual, signalled increase in eligibility age — giving people decades to plan — and we begin to look less like Augustus clutching at straws, and more like a country with a plan.

If you’re under 50, don’t rely solely on NZ Super. Your KiwiSaver balance isn’t a supplement anymore. It’s becoming the primary pillar of your retirement income – treat it accordingly.

The 450th Edition Lesson

In my first article, I concluded that failing to act would be irresponsible and place an extremely unfair burden on younger generations.¹ Nine years later, that’s exactly what we’ve done.

New Zealand is in a stronger position than most comparable countries. But public debt is at its highest point in 30 years, and the cost curve is steepening. The window for gradual, manageable change is narrowing.

The Romans had options. They could have reformed early, adjusted gradually, and built a sustainable system. Instead, they extended, delayed, promised — until the promises became impossible to honour and the system helped collapse the army that held everything together.

We still have choices; they didn’t. But as Treasury made clear last month, that won’t be true forever. And conversation without action is just more Parthian campaigning.

The Centurions learnt too late that empires don’t honour promises they can’t afford. We can avoid that mistake. But only if we start now.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References

¹ Stewart, N. (2017, September 16). Like Romans, fall on our sword and raise retirement age. Stewart Group. https://www.stewartgroup.co.nz/we-love-to-write/2017/9/16/like-romans-fall-on-our-sword-and-raise-retirement-age

² New Zealand Economics Forum 2026 (February 2026). Treasury presentations on fiscal sustainability and superannuation costs.

³ New Zealand Treasury. (2025). Budget Economic and Fiscal Update 2025. https://www.treasury.govt.nz/publications/efu/budget-economic-and-fiscal-update-2025

⁴ New Zealand Treasury. (2025). He Tirohanga Mokopuna 2025 – Long-term Fiscal Statement. https://www.treasury.govt.nz/publications/ltfp/he-tirohanga-mokopuna-2025

⁵ Stats NZ. (2024). Population estimates and projections. https://www.stats.govt.nz

⁶ Ministry of Social Development. (2025). New Zealand Superannuation recipient data.

⁷ Work and Income. (2024). Change to residence criteria for NZ Super and Veteran’s Pension. https://workandincome.govt.nz/eligibility/seniors/nz-super-and-veterans-pension-residency-changes-2024.html

$3 at the Pump — Crisis, Panic, or a Lesson We Refused to Learn?

Article #449

The average price of unleaded 91 jumped 14 NZD cents over a single weekend — and suddenly, commentators are reaching for the kind of language we last heard during COVID. Back then, we fought over toilet paper. Today, the panic commodity is petrol.

Let us first take a breath and assess.

The cause: Iran’s effective closure of the Strait of Hormuz (which handles about a quarter of the world’s seaborne oil trade). This of course follows retaliatory strikes after a US and Israeli attack on Iran in late February. [1]

The effect: Global oil prices have surged past US $100 per barrel, with Brent and WTI hitting around US$110 to US$114 at the height of the crisis. That pain is not contained to the petrol forecourt. It is flowing into every corner of our economy simultaneously, because energy is embedded in the cost of producing virtually everything. [1]

The most visible casualty so far is Air New Zealand, another unfortunately familiar occurrence. Our majority state-owned carrier has cancelled approximately 1,100 flights through early May, impacting around 44,000 passengers. In USD, jet fuel spiked from around $85 per barrel before the conflict to between $150 and $200, with the refinery crack spread (the margin between crude oil and refined jet fuel) blowing out from $22 to as high as $115 per barrel. That’s a structural blow to an airline already recording losses, and it has suspended its full-year earnings guidance entirely because the numbers no longer make sense. [2–5]

Finance Minister Nicola Willis has cited New Zealand's 50 days of fuel supply as a form of reassurance, but the public must read the fine print carefully. That figure includes fuel still sitting on tankers at sea, in transit from the very region in crisis. The fuel physically on New Zealand soil is closer to 28–33 days, depending on the product. [6]

More concerning still, that onshore storage is heavily concentrated around the former Marsden Point site in the north. That means regional centres and the entire South Island operate effectively on just-in-time supply and sit at the end of an extra coastal-shipping leg that adds its own layer of vulnerability. If supply were completely cut off today, New Zealand could sustain itself for roughly a month. [6,7]

That is not 50 days — and it should reframe the conversation entirely.

Muldoon-era carless days, last deployed between July 1979 and May 1980, are being discussed as a last resort. The mere fact we’re having this conversation in 2026 should give everyone pause. [8]

This is where a Canny View requires plain speaking.

Energy is not a lifestyle choice. It is the oxygen of economic activity. Every business—whether moving freight, running a dairy farm, manufacturing product, or providing professional services—consumes energy somewhere in its cost structure. When that cost surges sharply and suddenly, the business faces exactly three options:

1. Pass the increase to the customer.

2. Absorb it through productivity gains and efficiency.

3. Close their doors.

There is no fourth option. This is precisely why energy price shocks are so broadly inflationary. They don’t strike one sector. They strike all sectors at once.

For shareholders and business owners, the message is clear. A viable business must pay its bills, pay its staff, and generate sufficient return to keep capital engaged. When a major uncontrollable cost input (like energy) doubles overnight, that margin compresses fast.

The businesses weathering this shock best are those that made deliberate investments in energy resilience during the quieter years. Fleet operators who transitioned to hybrid or electric vehicles, alongside conventional petrol and diesel workhorses, are finding their total fuel bill meaningfully lower today. Those with suitable rooftops or landholdings who installed solar are generating their own daytime electricity, reducing grid dependency when traditional energy costs are most volatile.

Neither investment requires ideological conviction, only the basic financial discipline of stress-testing a cost structure and acting before the stress arrives.

Resilience is built in calm weather, not in a storm.

Now to the harder conversation — one that goes well beyond oil.

New Zealand's coal reserves exceed 15 billion tonnes, spread across Waikato, Taranaki, the West Coast, Otago and Southland. Our West Coast bituminous coal is internationally prized for its exceptionally low sulphur, low ash, and low phosphorus content — a premium quality product valued by the global steel industry. Yet Genesis Energy's Huntly Power Station sources most of its coal from Indonesia, with imports surging 311% in 2024 as domestic gas supply fell faster than expected. [9–11]

We export quality. We import what we need to keep the lights on. It’s a paradox, not a viable strategy.

The same logic applies offshore. Geological surveys estimate a 90% probability that New Zealand holds undiscovered oil reserves of at least 1.9 billion barrels, with a 50%  probability that the figure reaches 6.5 billion barrels. We are not a Saudi Arabia. But we are far from a barren rock. [12]

Which brings us to the captain's calls demanding accountability — plural, because there were more than one.

In 2018, then-Prime Minister Jacinda Ardern unilaterally banned all new offshore oil and gas exploration permits—no parliamentary vote, no Select Committee process, no national conversation. One announcement. Then, under the same Ardern government, New Zealand's only oil refinery at Marsden Point was closed and permanently decommissioned in 2022. The owner has since confirmed there is no prospect of restarting it; it would take billions of dollars and years of work to rebuild what took decades to establish. Associate Energy Minister Shane Jones described the closure as having fatally wounded New Zealand's fuel security. It’s difficult to argue otherwise this week. [13,14]

An uncomfortable but instructive parallel comes to mind. During Stalin's forced collectivisation in Ukraine in the early 1930s, a nation sitting atop some of the world's most productive agricultural land experienced a devastating famine while grain continued to be exported across its borders. The resources existed, and the policy choices negated them.

New Zealand is not Ukraine, and this is not the Holodomor, but the underlying dynamic—voluntarily denying access to domestic resources while importing vulnerability from abroad—is a pattern worth acknowledging.

A nation surrounded by grain, starving. A nation surrounded by hydrocarbons, panicking at the pump.

Muldoon would be baffled. His Think Big programme in the early 1980s was explicitly designed to convert New Zealand's own natural gas into synthetic fuels, fertiliser and methanol, and reduce oil import dependency following the 1973 energy shock. Think Big was expensive and its outcomes were mixed. But the underlying instinct — that a small, geographically isolated nation at the bottom of the world needs to take energy sovereignty seriously — wasn’t wrong. [15]

Domestic production does not fully insulate a small open economy from global prices. But it reduces the foreign exchange drain of pure import dependency, supports local employment, generates royalties and tax revenue for the Crown, and critically – reduces exposure to the shipping disruptions and geopolitical shocks we are living through right now. In times of crisis, a country with some domestic production and refining capacity is materially more resilient than one with neither.

The toilet paper panic of 2020 passed, and we learned almost nothing from it. Let us use this one differently: we need to have the serious, unsentimental conversation about energy sovereignty that we should have started long before Ardern's captain's call made it more urgent than it ever needed to be. We’ve missed the boat on energy resilience, and the storm has arrived; all we can do now is fortify ourselves to better weather the next one.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References

1. NZ Herald, Petrol prices expected to hit at least $3 a litre in some places, March 2026

2. Flight Global, Fuel price volatility prompts Air New Zealand to suspend earnings guidance, March 2026

3. Global Banking & Finance Review, Air New Zealand cut flights, fuel price surge wreaks havoc, March 2026

4. AeroTime, Air NZ to cut 1,100 flights amid soaring fuel prices, March 2026

5. NZX Announcement, Air New Zealand suspends FY2026 guidance, March 2026

6. RNZ, How much fuel does NZ have — and what happens if we run out?, March 2026

7. Infonews, NZ Fuel Situation — South Island Vulnerabilities, March 2026

8. NZ Herald, Carless days are no solution to an oil shock (Liam Dann), March 2026

9. Wikipedia, Coal in New Zealand, citing USGS and MBIE data

10. USGS Fact Sheet 2004-3089, New Zealand Coal Resources

11. Ministry of Business, Innovation & Employment, Energy in New Zealand 2025 — Coal

12. New Zealand Parliament, The Next Oil Shock?, citing Institute of Geological and Nuclear Sciences 2009

13. NZ Herald, First look: Inside Northland's Marsden Point oil refinery post-shutdown, November 2024

14. NZ Herald, Inquiry into reopening New Zealand's only oil refinery, March 2024

15. Wikipedia, Think Big, New Zealand Third National Government economic strategy

Hōne Heke: New Zealand's First Tax Rebel

Article # 448

It’s been 181 years since Hōne Heke and Te Ruki Kawiti's warriors stormed Maiki Hill above Kororāreka, felled the British flagstaff for the fourth and final time, in what we now call the Flagstaff War.[1] If you ask most New Zealanders why Heke chopped down that pole, you'll get vague answers about sovereignty or anti-colonial protest. Some might mention it as a symbolic rejection of British authority. Others recall it as an act of defiance, full stop.

What's conveniently forgotten, or perhaps deliberately obscured, is this: Hōne Heke was protesting taxes.

Hōne Heke, The History Collection - Alamy

In 1841, the new colonial government introduced customs duties on tea, sugar, flour, grain, spirits, tobacco, and other foreign goods.[2] These tariffs hit Māori trade in the north particularly hard, fundamentally altering the economic landscape that had made the Bay of Islands the centre of New Zealand's early colonial economy.

Kororāreka had been a thriving trading hub. While described by some as the "hellhole of the Pacific", it was undeniably prosperous. Māori merchants and rangatira like Heke had built sophisticated, profitable businesses supplying visiting ships with provisions, engaging in trade with overseas merchants, and extracting fees from vessels using the harbour. It was commercial enterprise at scale.

Then came the Crown's taxes. Suddenly, the Treaty he'd signed in good faith at Waitangi in 1840 was being followed by higher prices, reduced economic opportunity, and decisions made in Auckland without meaningful consultation (let alone consent). The government was taking a cut of every transaction, strangling the very trade that had made the Bay of Islands so prosperous.

Every ship that entered the harbour now paid customs duties to the Crown instead of port fees to local chiefs. Every bag of flour, every barrel of tobacco, every luxury good imported carried a government tax that drove up prices and reduced trade volumes. The economic sovereignty Māori chiefs believed they'd retained under the Treaty was being systematically dismantled, one tariff at a time.

Heke saw what was happening and he wasn't having it. He'd studied the American Revolution, contemporary accounts confirm this, and understood exactly what "taxation without representation" meant. He even flew the American flag during his rebellion, a detail often airbrushed out of modern retellings because it complicates the narrative. It's hard to cast Heke as simply anti-European when he's explicitly invoking American revolutionary principles and symbols.[2]

The flagstaff itself was deeply symbolic, but not in the way most people think. Yes, it represented Crown authority. But more practically, it represented the customs regime. Ships entering the harbour saw that flag and knew they'd be paying duties. It was a constant visual reminder of who now controlled the commerce of the Bay.

When Te Haratua cut it down on 8 July 1844 under Heke's orders, it was a statement: these taxes are not legitimate.[1] The Crown re-erected it. Heke personally chopped it down on 10 January 1845, wielding the axe himself. They put it up again, this time with iron cladding for protection, convinced that surely this would stop the attacks. Heke cut it down anyway on 19 January; the iron made it harder, but not impossible.

And finally, on 11 March 1845, Heke and Kawiti's forces overran the hill in a coordinated assault, killed the defenders, and felled that flagstaff one last time before sacking the town in outright economic warfare.[1]

Was it just about taxes? Of course not. Historians rightly point to the complex power dynamics within Ngāpuhi following the death of Hongi Hika in 1828, Heke's rivalry with Tāmati Wāka Nene for the paramount chieftainship, the loss of direct income from port fees, and broader questions about rangatiratanga versus sovereignty.[3] Heke was also frustrated by the capital's move from the Bay of Islands to Auckland, which had already damaged the region's economic prospects before the customs duties compounded the injury.

History is never monocausal. But the tax grievance was real, significant, and extensively documented in contemporary accounts. The Taxpayers' Union recently highlighted this often-ignored aspect of our history, noting that after Heke's rebellion, the government abolished customs duties in the Bay of Islands and declared it a free port.[2] Bad taxes were repealed because someone was willing to stand up and say "this isn't fair", and back it up with action. The policy change came too late to prevent war, but arrived nonetheless.

Some modern interpreters find this story uncomfortable as it shows a Māori rangatira fighting for economic freedom and against government overreach. It doesn't fit neatly into the box of noble savage resisting colonisation, nor does it suit the narrative of Māori as natural collectivists unconcerned with commerce, profit, and individual enterprise.

Heke was a businessman. A successful one. He understood trade, supply and demand, competitive advantage, and market dynamics. He recognised that excessive taxation kills economic activity and punishes productive enterprise. He saw government imposing costs without delivering corresponding benefits to those being taxed. And he fought back using the tools available to him in 1840s New Zealand.

Too often, Heke is reduced to a caricature; the man who chopped down the flagpole. This airbrushing of history to fit modern narratives does his character and mana a profound disservice. He was a principled, strategic thinker who would be puzzled, perhaps even insulted, by how shallow his legacy has become in popular memory. Reducing him to a one-dimensional figure of resistance obscures the sophisticated economic and political reasoning behind his actions.

The problem he identified hasn't gone away. If anything, it's getting worse. New Zealand's Tax Freedom Day, the date each year when we theoretically stop working for the government and start working for ourselves, has been creeping steadily later. In 2019, it fell on 9 May.[4] By 2021, it had slipped to 11 May.[5] The 2022-2023 period saw it jump dramatically to 20 May,[6] before settling at 16 May in 2025.[7]

That's seven days later in just six years. We're now working 136 days into the year, more than a third of it, just to pay the tax bill before we earn a single dollar for ourselves. Put another way, if you started work on 1 January, you wouldn't start earning money you could actually keep until mid-May.

The trend is troubling. Government's share of the economy keeps growing, driven by bracket creep (where inflation pushes people into higher tax brackets without any real increase in purchasing power), council rates rising over 10 percent annually for three consecutive years, and ever-expanding government spending that refuses to shrink even when politicians promise restraint.[7,8]

Despite tax cuts announced with great fanfare, despite redundancies in the public sector making headlines, and despite endless talk of fiscal discipline, New Zealanders paid nearly 5 percent more in total tax in 2025 than the year before.[8] Core Crown expenses rose from $139 billion to an estimated $144.6 billion. Welfare spending has ballooned from $26.6 billion pre-COVID to $47.8 billion in 2025; that’s nearly double in just five years.[7]

Local government deserves scrutiny too. Council rates have increased by more than 10 percent for three straight years, adding days to our collective tax burden.[7,8] While central government debates tax brackets and income tax rates, local councils have been quietly and relentlessly increasing their take.

Today, we might not resort to chopping down flagpoles (the IRD would take a dim view, and the penalties would be rather more than a military campaign in the bush). But Heke had it right: governments that tax without meaningful consent, that impose burdens without corresponding benefits, that take without giving value in return, these governments deserve to be challenged.

New Zealand has a long tradition of healthy scepticism toward authority and bureaucratic overreach. We question power. We push back against unreasonable demands. We expect government to justify what it takes from us. Perhaps we inherited some of that attitude from Heke, certainly his spirit lives on every time a New Zealander questions a rates rise or challenges a new tax.

His methods were blunt. The Flagstaff War brought death and destruction to the Bay of Islands. People died defending and attacking that pole. Towns were burned. The social fabric was torn. Violence is a terrible way to resolve policy disputes, and we've developed better mechanisms for democratic accountability since 1845.

But strip away the violence and look at his core complaint: unjust taxation forcing up prices, reducing opportunity, and transferring wealth from productive enterprise to government coffers without adequate justification or benefit. Does that sound familiar? It should. It's the same complaint we hear today, just expressed in different forums with different tools.

When you hear politicians talking about the "cost-of-living crisis," remember it was a cost-of-living crisis driven by customs duties on basic goods that sparked Heke's rebellion. When businesses complain about regulatory burden and compliance costs, remember Heke's merchants struggling with the Crown's new tariff regime.

When you question whether you're getting value for your tax dollar, especially when Tax Freedom Day keeps sliding later into the year, when rates keep rising, when spending keeps growing, you're asking the same question Heke asked in 1844.

We have elections, select committees, submissions processes, ratepayer advocacy groups. We have the Taxpayers' Union keeping score. We have media scrutiny and public debate. These are better tools than axes and muskets, and we should be grateful for them.

But fundamentally, we’re asking the same questions: when does taxation cross the line from legitimate funding of essential government services to unjust extraction? When does the government's share of the economy become so large that it hinders rather than helps our collective prosperity? At what point do we say "enough"?

This week, 181 years after that final flagstaff fell, perhaps we should remember Hōne Heke not just as the man who chopped down a pole, but as New Zealand's first tax rebel; a rangatira who understood that economic dignity, self-determination, and common sense matter more than government revenue. A businessman who recognised that prosperity comes from productive enterprise, not from government spending. A leader who knew that consent matters, that representation matters, that value for money matters.

That's a legacy worth celebrating. And it's a reminder worth heeding as Tax Freedom Day continues its unwelcome creep deeper into the year.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References

[1] New Zealand History, "The Flagstaff War," nzhistory.govt.nz

[2] New Zealand Taxpayers' Union, "Waitangi Day 2026," taxpayers.org.nz

[3] Academic historical analysis of the Northern War, various sources

[4] Baker Tilly Staples Rodway, "Tax Freedom Day 2019," May 2019

[5] Baker Tilly Staples Rodway, "How Tax Freedom Day, on 11 May, affects you," May 2021

[6] Baker Tilly Staples Rodway, "Tax Freedom Day 2024," May 2024

[7] Baker Tilly Staples Rodway, "Tax Freedom Day 2025," May 2025

[8] RNZ, "Taxpayers forking out almost 5% more than last year," 15 May 2025

Two Years of Drift: New Zealand's Squandered Mandate for Change

Article # 445

In late 2023, New Zealanders voted decisively for change. After six years of Labour government under Jacinda Ardern and Chris Hipkins, the country was exhausted. The NZX had become one of the worst‑performing stock markets in the developed world [1]. Trust in core institutions, from the police to the healthcare system, had cratered [2]. Real economic growth was negative [3]. The cost of living was crushing ordinary families, while housing remained stubbornly unaffordable.

The coalition government swept to power on a mandate to reverse this decline. But two years later, that mandate has been squandered through timidity and a fatal misreading of the moment.

It's tempting to view this government's approach through the lens of John Key and Bill English's post‑GFC strategy. Between 2008 and 2017, that duo carefully managed spending cuts while allowing growth to flourish organically [4]. They made incremental reforms, maintained fiscal discipline, and let the private sector drive recovery. It worked brilliantly. Unemployment fell, growth returned, and National won three consecutive elections.

But 2026 is not 2010, and the global playing field has fundamentally changed. Interest rates have surged after over a decade of easy money [5]. New Zealand's underlying productivity crisis can no longer be ignored [6].

This government has tried to apply the Key‑English playbook to a radically different situation. Ministers speak reassuringly of “green shoots”, yet the economy contracted 0.9% in Q2 2025, then grew just 1.1% in Q3, a volatile pattern that speaks to underlying fragility rather than sustained recovery [7]. Real GDP per capita continues falling [8].

The retail sector tells the story most viscerally. Boxing Day sales slumped 12.4%, consumers spent just $51.2 million on non‑food retail, down from $58.5 million the previous year [9]. As Simplicity chief economist Shamubeel Eaqub observed, “For a lot of businesses this should be their saving grace” [10].

January 2026 brought only marginal relief: core retail spending lifted a mere 0.6% compared to the same month last year, with weather events depressing regional performance and retailers “just treading water as the economy moves sideways, rather than forwards,” according to Retail NZ CEO Carolyn Young [11]. In the meantime, retail business liquidations surged 34% year‑on‑year [12].

Consider ACT leader David Seymour's State of the Nation speech on Sunday, where he diagnosed the core problem with brutal clarity. “People work their guts out only to find that they're further behind,” he said, noting young New Zealanders simply “can't make the numbers add up” when looking at student loans, wages, taxes, and housing costs. He called emigration a “flashing light on the dashboard” and observed that previous generations worked hard “because hard work was a rewarding strategy. That deal feels broken.” He admitted the government is “on track to post a small surplus by 2030, but after that, our ageing population will put us back in the red for more decades of deficit spending.” Yet his proposed solution, reducing the number of ministers to 20 and departments to 30, only epitomises the incrementalism that has defined this government. When your coalition partner polling at 7.6% is calling for bolder action than you are, you've misread the moment [13].

With the election now confirmed for 7 November 2026, Prime Minister Christopher Luxon’s party has a narrow lead in recent polls, but the fundamentals are troubling. The latest Roy Morgan poll has National at 34.5% compared to Labour's 30.5%, with the coalition government on 52% versus the opposition's 44% [14]. Yet 51.5% of voters say New Zealand is “heading in the wrong direction” [15].

The Argentina Mirror

In 1913, Argentina's per capita income exceeded Germany, France, Sweden, Italy, and Spain [16]. Like New Zealand, it was a resource‑rich agricultural powerhouse built on classical liberal foundations. Both countries ranked among the world's wealthiest in the first half of the 20th century [17].

Argentina's fall was dramatic. Decades of Peronist corporatism culminated in the crisis that brought Javier Milei to power. By December 2023, Argentina faced 211% annual inflation, 42% poverty, a 15% quasi‑fiscal deficit, and an economy in free fall [18].

Milei cut the budget by 30% and balanced it by his second month in the job [18]. He implemented 1,246 deregulations through August 2025 [18]. He abolished 10 ministries and fired more than 53,000 public employees [18]. Annual inflation fell from 211% to around 32% by January 2026 [18–21]. GDP grew 6.3% and investment surged 32% in the second quarter of 2025 [18]. More than 11 million people have been pulled out of poverty [18].

The results are transformative. After Milei eliminated rent controls, rental housing supply tripled and real prices fell 30% [18]. When he deregulated agricultural markets, vaccine costs for livestock producers dropped by two‑thirds [18]. Home appliance prices fell 35% after eliminating import‑licensing schemes [18].

There are real victories here. They’re 28‑year‑old Franco signing a 30‑year mortgage,  “unthinkable only a couple of years ago” [18]. They’re freelancer Cecilia finally able to focus on work instead of navigating convoluted tax laws [18]. They’re farmer Pedro Gassiebayle reinvesting in his business and thinking about efficiency for the first time [18].

To be sure, Argentina's transformation faces headwinds. Monthly inflation ticked up to 2.9% in January 2026 in the fifth consecutive monthly increase, and questions have emerged about the government's statistical methodology [19–21]. The path remains narrow and fraught. But even with a few snags, the direction is unmistakable: from complete collapse toward functioning markets.

New Zealand's Drift

Compare that to New Zealand. Two years after a change in government, there's been no meaningful regulatory reform despite endless consultation. Government spending has barely been constrained [22]. Infrastructure delivery remains slow and over‑budget [23]. Housing consents have fallen [24]. The promised Fast‑track Approvals Bill has been watered down. RMA reform has been incremental when transformation was needed.

Most damningly, the fundamental drivers of our decline remain unaddressed. We still can't build houses efficiently. We still can't deliver infrastructure on time or budget. Our planning system still makes simple projects take years to consent. Meanwhile, retailers close their doors while politicians tout those elusive green shoots.

The Key‑English approach worked because the GFC was primarily a demand shock. New Zealand's current malaise is structural.

We have a productivity crisis decades in the making [25]. We have infrastructure crumbling from underinvestment [26]. We have planning and regulatory systems that strangle growth.

As Austrian economist Ludwig von Mises told Argentines in 1959: “Economic recovery does not come from a miracle; it comes from the adoption of sound economic policies” [18].

The Electoral Reckoning

With nine months until the election, this government faces an uncomfortable reckoning. Voters were promised change and received continuity. They were told to trust the process while their living standards declined. Now they're being asked to believe in green shoots while retail spending barely budges and liquidations surge.

The opposition will hammer a simple message: You had your chance and you wasted it. And they'll be right. This government has fundamentally misread the moment. It applied a playbook designed for managing cyclical downturns to a structural crisis requiring transformation.

What makes Argentina's transformation particularly instructive is that Milei turned the mainstreaming of libertarian thought into political victory [18]. He became the first political leader in 80 years to propose that the whole corporatist state had to be torn down and replaced with limited government [18]. New Zealand faces no such ideological battle. We already have strong institutions, low corruption, an independent central bank, and largely functional markets. We don't need revolution; we need our government to use the mandate voters gave them.

The tragedy is that we could reform from strength if our leaders found the courage. Instead, we're drifting toward the point where only painful corrections remain viable. Postponing necessary reforms doesn't achieve stability. It ensures that, when reform finally comes, it's painful and disruptive.

Two years ago, voters gave this government a mandate for change. Nine months from an election, with retail sales barely growing and businesses liquidating at record rates, they're learning that careful management of decline is still decline. As Milei declared to Argentines: “Either we persist on the path of decadence, or we dare to travel the path of freedom” [18].

New Zealand faces the same choice. Two years ago, voters chose change but received decadence, polite, incremental, delivered with press releases about green shoots while retailers close their doors.

Argentina's history suggests we're running out of time to change course. The voters will render their verdict on November 7.

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 445

---

References

1. NZX. Market performance data, 2020–2023.

2. Statistics New Zealand. New Zealand General Social Survey: Trust in public institutions, 2018–2023.

3. Statistics New Zealand. Gross Domestic Product (GDP) data, 2022–2025.

4. New Zealand Treasury. Fiscal consolidation analysis, 2008–2017.

5. Reserve Bank of New Zealand. Official Cash Rate (OCR) data, 2021–2023.

6. OECD. Productivity statistics for New Zealand.

7. Statistics New Zealand. Quarterly GDP data, Q2–Q3 2025.

8. Statistics New Zealand. Real GDP per capita data, 2024–2025.

9. Worldline NZ. Retail spending data and Boxing Day sales figures, December 2025.

10. RNZ. “Tough December for retailers, as Boxing Day sales slump 12.4 percent.” 13 January 2026.

11. Inside Retail NZ / Ragtrader. Retail sector reports, January 2026.

12. Centrix. Retail business liquidations data, reported February 2026.

13. RNZ / Reid Research. Polling data on ACT Party support, January 2026.

14. Roy Morgan. New Zealand voting intention poll, January 2026.

15. Roy Morgan. Government confidence rating, January 2026.

16. Maddison Project Database. Historical GDP per capita comparisons, 1913.

17. Maddison Project Database. Long‑term international income comparisons, early 20th century.

18. Vásquez, Ian, and Marcos Falcone. “Liberty Versus Power in Milei’s Argentina.” Cato Institute – Free Society, Fall 2025.

19. ABC News. Argentina inflation reporting, February 2026.

20. Fortune. Argentina inflation and economic reform coverage, February 2026.

21. Washington Times. Argentina inflation and fiscal policy reporting, February 2026.

22. New Zealand Treasury. Budget documents, 2024–2026.

23. Infrastructure Commission Te Waihanga. Project delivery and cost‑overrun reports.

24. Statistics New Zealand. Building consents data, 2024–2025.

25. New Zealand Productivity Commission. Long‑term productivity analysis.

26. Infrastructure Commission Te Waihanga. Infrastructure deficit assessments.

The Squeeze Play: When Essentials Outpace Everything Else

There's a peculiar phenomenon unfolding across New Zealand households, and it doesn't add up. While families cut back on discretionary spending, three relentless forces continue their upward march: rates, power, and insurance premiums.

Kiwibank's latest inflation analysis reveals the problem.[1] Overall inflation sits at 3%, but council rates are up 8.8% year-on-year and electricity has surged 11.3%. Meanwhile, rent and building costs remain soft, responding as they should to economic pressure. This is Economics 101 – except for the outliers that won't bend.

Households respond to price signals by cutting spending, businesses adjust to market conditions, but monopolistic and quasi-monopolistic services continue their upward trajectory regardless of economic headwinds. When essentials become the only thing still inflating, we're not seeing healthy price discovery – we're watching economic dysfunction concentrate in the places people can't escape.

The Democratic Disconnect

In Hastings – Hawke's Bay's largest district – the mayoral election delivered an instructive lesson in vote-splitting. Marcus Buddo had a detailed plan about rates, spending, and debt. Steve Gibson had a plan of ideas. Damon Harvey had a plan of sorts. Between them, they split the centre-right vote.[2][3] Wendy Schollum had a plan to have a plan – and won with 6,722 votes, representing 26.06% of the total vote.[3]

What ratepayers inherited is a focus on process, not outcomes. The problem isn't reviewing assets or benchmarking contracts – it's the absence of a clear plan for cutting spending, reducing debt, and passing savings to ratepayers. In her first month, the new mayor reported focusing on "bringing our new council together," "establishing how we'll work as a team," and "meeting with staff to look at how we can do more with less."[14] Classic "all hui and no doey" [16,17]– lots of meetings, team-building, and singing while rates grow at triple the rate of inflation.[1] 

The RBNZ may deliver some further relief through rate cuts, as economists predict.[1] But that relief will be swallowed by cost increases that don't respond to monetary policy. Council rates aren't discretionary. Power bills aren't negotiable. Insurance premiums exist beyond household bargaining power. The very things households need most are the things rising fastest, creating a squeeze that monetary policy cannot relieve.

The Rates Reality

Hastings imposed a 19% rates increase for 2024/25[5][6] and another 15% for 2025/26.[7] These aren't just numbers on a page – they represent real pain for households already stretched thin by the cost of living crisis. For an average property paying $3,000 annually, rates have jumped to approximately $4,000, with another increase pushing that toward $4,600.

Ratepayers have done their bit – the cyclone-specific targeted rate elevated these increases to the upper band among New Zealand councils. But here's the problem: this is temporary revenue with a 16-year sunset clause,[6] yet spending patterns suggest permanent cost increases have been baked in, with significant portions funding non-cyclone expenditure.

When the cyclone charge expires, does the council try to keep ratepayers paying the cyclone charges to fund other council nice-to-haves, or does it reduce rates? The current trajectory builds in a structural deficit that future ratepayers will inherit. It's a classic government budget problem: temporary revenue streams funding permanent spending commitments. The logic doesn’t add up, and costs get kicked down the road regardless.

Across New Zealand, councils have faced unprecedented cost pressures. A 2024 report commissioned by Local Government NZ found that construction costs for bridges increased 38%, sewage systems 30%, and roads and water supply systems 27% over three years.[8] The average rates increase across the country hit 15% for 2024/25,[8] with some councils proposing even higher increases. But these pressures, while real, don't explain why councils can't find operational efficiencies to partially offset infrastructure cost inflation.

The Residential Reckoning

Nowhere does this squeeze play out more starkly than in residential rental property, where New Zealand's retirement wealth delusion meets economic reality.

For decades, Kiwis were sold a simple story: property is the path to retirement security. Buy a rental. Watch it appreciate. Collect rent. Retire comfortably. It's been cultural gospel, reinforced by favourable tax treatment and the absence of capital gains taxes. An entire generation built its retirement strategy around this asset class.

But that story is fast becoming a tragedy. Residential landlords face the same 8.8% rates increase, insurance premiums that have doubled or tripled post-Gabrielle.[1] These costs aren't negotiable. They simply arrive and must be paid. Unlike businesses that can adjust their cost structures or pass costs to customers, landlords operate in a market with hard ceilings.

Tenants can't just absorb corresponding rent increases endlessly. The market has found its ceiling through the hard limit of what people can actually pay when their own costs are climbing. Tenants are facing their own squeeze – grocery bills up, power bills up, their own insurance costs rising. There's no capacity to absorb 8-11% annual rent increases. So who wears it? The landlord.

When non-negotiable costs grow at 8-11% annually, but rent increases are market-capped at 3-4%, the gap widens, and the squeeze tightens. Properties once generating positive cash flow now require subsidies from other income. The "investment" becomes a wealth destroyer rather than a wealth builder.

The residential property investment model was built for an era where rates grew modestly and insurance was predictable. That era is over. We now have a cohort who bet retirement security on an asset class where holding costs accelerate faster than income. Some will sell. Some will hold on, hoping for capital appreciation to compensate for negative carry. Many will discover too late that their retirement strategy has a fundamental flaw.

It's sad – not because property investors deserve special sympathy, but because it represents massive misallocation of national savings. An entire generation channelled wealth-building into residential property instead of productive assets or diversified investments. Capital that could have funded business growth, innovation, or infrastructure went into bidding up house prices instead. Now they're discovering that when monopolistic cost structures meet market-limited revenue, leverage works in reverse.

The Policy Vacuum

The Kiwibank data disproves the myth of symmetrical adjustment.[1] Households adapt. Markets respond. But essentials march to their own drum, disconnected from broader economic discipline. This asymmetry matters because it means traditional economic responses – tightening monetary policy, reducing household spending – fail to address the source of inflation when it concentrates in monopolistic services.

The government is considering rates-capping legislation to refocus councils on "doing the basics, brilliantly."[10] But rates capping may be only the opening salvo. The Government has just announced proposals to eliminate regional councillors entirely, replacing them with 'Combined Territories Boards' made up of mayors.[15] More significantly, each region will be required to prepare a 'regional reorganisation plan' within two years, with options including merging territorial authorities into unitary councils. The Government's stated goal: "cut duplication, reduce costs, and streamline decision-making."[15]

For councils like Hastings already stretched thin by cyclone recovery, this represents both opportunity and threat.

The opportunity: forced consolidation might finally deliver the operational efficiencies that should have been found voluntarily.

The threat: poorly designed reorganisation could create even larger bureaucracies with less accountability. The pressure to demonstrate fiscal discipline just intensified dramatically.

Council external debt has surged from $353 million in December 2023[11] to $472 million as at 30 June 2025,[13] and is projected to reach $700 million by 2030.[9] That's debt more than doubling in less than three years, with the trajectory showing no signs of slowing. Interest payments alone consume an ever-larger share of rates revenue, creating a vicious cycle where borrowing to fund current operations crowds out funding for actual services.

With voter turnout at just 44.71%[3] and Schollum winning with 26.06% of votes cast, approximately 12% of eligible voters delivered her a victory. She has three years to prove she deserves to be re-elected, which means proving she understands how angry ratepayers are about rate rises. The mandate is thin. The patience is thinner.

For property investors, the question is starker: how long can negative carry be sustained before the retirement wealth strategy becomes the retirement wealth trap? For how many years can landlords subsidise tenants from other income before they capitulate and sell? And when they do sell, who buys investment property with known negative carry characteristics?

Until we confront why essentials climb at double-digit rates while the broader economy slows, we're not solving inflation. We're watching it concentrate in the places people can't escape. That concentration makes the burden harder to bear and the economic distortions more severe.

That's not economics adapting. That's economics breaking down, one essential service at a time.

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 435

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References

[1] Kiwibank Economics (2025). "NZ Inflation: What's really happening?"

[2] NZ Herald (2024). "Hastings mayoral race - Wendy Schollum claims the win, but her closest rival hasn't conceded."

[3] NZ Herald (2024). "Local elections 2025: Wendy Schollum new Hastings Mayor as last-minute voters extend her lead."

[5] Hastings District Council (2024). "Council reduces proposed rate increase."

[6] Wikipedia (2025). "2022–2025 term of the Hastings District Council."

[7] NZ Herald (2025). "Central Hawke's Bay tries to lower rates hike to 10% as cyclone-hit Hastings sticks with 15%."

[8] 1News (2024). "New Zealand homeowners facing an average rates rise of 15%."

[9] NZ Herald (2024). "Hastings facing one of highest rates rises in country - council could hit $700 million debt."

[10] RNZ (2025). "Local Government New Zealand crying foul over potential rates capping."

[11] NZ Herald (2024). "Hastings District Council nearly $400 million in debt as cyclone costs compound."

[13] Hastings District Council (2025). "2024-2025 Annual Report."

[14] Schollum, W. (2024). Facebook post, Mayor Wendy Schollum of Heretaunga Hastings, November 2024.

[15] New Zealand Government (2025). "Local Government Reorganisation Proposals." BayBuzz Special Alert.

[16] NZ Herald. (2020). Too much hui and not enough do-ey: Why workplace meetings can be wasteful. Retrieved from https://www.nzherald.co.nz

[17] National Māori Authority. (n.d.). Matthew Tukaki on suicide prevention: “Too much hui and not enough doey – so we are taking action right now.” Retrieved from https://www.nationalmaoriauthority.nz

The 12-Month Tax Gambit: Labour's Calculated Risk

Announcing a major tax policy a year before an election isn't just unusual; it's almost unheard of.

Conventional political wisdom dictates you either implement unpopular measures early in your term, or promise them after securing victory. Labour's decision to foreground a 28% capital gains tax ‘CGT’ a full year out from polling day demands examination, particularly through the lens of economist Arthur Laffer. His insight cuts straight through political calculation: speeding fines are a tax. Governments use taxes to stop people doing things they don't want them to do. So why would you tax investment when the country desperately needs more of it?¹

The timing becomes immediately suspect. Labour sits in opposition facing a National-led government, and historically, opposition parties campaign on aspiration rather than taxation. Helen Clark's 2005 Labour government actively campaigned against CGT proposals, recognising the electoral toxicity.² Yet here we are in late 2025, with Labour essentially writing National's attack ads 12 months in advance.

The Political Theatre

The political play is obvious: announce now, let the controversy "settle," and by election day the CGT feels like old news rather than shocking revelation. Labour hopes voters will be desensitised to what might otherwise be campaign-ending policy. It's political inoculation through extended exposure, with the policy carefully designed as "CGT light" (exempting family homes, farms, KiwiSaver and shares) to avoid the comprehensive wealth taxation that spooked voters in previous attempts.²

Yet as business commentator Damien Grant observes, the policy amounts to "a marketing plan sketched on the back of a napkin that had been used to wipe the lipstick off a chardonnay glass after drinks at a Fabian Society soiree."⁶ The policy amounts to a few pages in a glossy press release with less substance than a frozen coke.

If you own property in July 2027 and sell it after that date, you pay 28% of any increase in value, with no allowance for inflation. Family homes are exempt. That's essentially it—the rest is left to imagination and future consultation.

Recent polling shows Labour's framing is working – 43% support versus 36% opposition.² The 12-month runway allows this narrative to solidify. Labour bets that sustained messaging about "fairness" will ultimately land better than National's "tax on ambition" counter-narrative.

Laffer Curve | Source: Norway's Wealth Tax Unchains a Capital Exodus

The Fine Fallacy

Laffer's analogy cuts through the fluff. When government fines speeding, fewer people speed – that's the point. When government taxes cigarettes heavily, fewer people smoke – that's the objective. These are taxes deliberately designed to discourage the behaviour.

Applied to investment taxes, the logic is inescapable. When government taxes investment gains at 28%, fewer people invest. Yet that's meant to be revenue-neutral economic policy rather than deliberate discouragement? You cannot fine an activity and simultaneously expect more of it.

The contradiction becomes starker considering New Zealand's actual needs. Treasury warns that 52% of total tax comes from personal income tax, and the group paying this tax is shrinking due to an ageing population.⁴

The country desperately needs productive investment in commercial property, business expansion, and capital formation. Yet Labour proposes taxing precisely these activities, at rates designed to be punitive enough to raise revenue.

This is the economic equivalent of installing speed cameras on the motorway while simultaneously complaining that traffic isn't moving fast enough. You cannot discourage and encourage the same behaviour simultaneously.

The Implementation Damage

The July 2027 implementation date provides convenient political distance: win in November 2026, govern for eight months, then introduce legislation.²

But here's where political cleverness creates economic damage - the announcement effect begins immediately. Why would a developer start a commercial property project in 2026 knowing that any gains realised in 2028 or 2029 will face 28% taxation? Investment decisions from now until 2027 will be distorted by anticipated future taxes, locking capital out of productive uses or sending it offshore.³

The economic damage begins not when the tax takes effect, but when it's announced. We're living through that damage period now. The speeding camera has been installed, and the signs are up; don't be surprised when drivers slow down.

The British Warning

Laffer's analysis of Gordon Brown's decision to raise Britain's top rate from 40% to 50% provides the cautionary tale. The UK Treasury's own "Laffer section" showed the increase "not only did not get more revenue, it got you a lot less prosperity. People left the country, people used tax shelters, dodges, loopholes, all that."¹ As Laffer emphasised, this wasn't his opinion imposing American economics on Britain—"This was Britain doing the Laffer curve."¹

As Laffer notes from decades of US tax data: "Every time we've raised the highest tax rate on the top 1% of income earners, three things have happened. The economy has underperformed, tax revenues from the rich have gone down, and the poor have been hammered."¹

Conversely: "Every single time we've lowered tax rates on the rich, the economy has outperformed. Tax revenues from the rich have gone up and the poor have had opportunities to earn a living, to live a better life."¹

The Practical Nightmares

The practical problems compound the economic ones. Grant notes that inflation has already created havoc in Australia, where properties often can't be sold “because almost all of the price is considered a capital gain. This will be worse on the Hipkins plan because there is no indexation.”⁶

Consider a property bought in 2015 for $500,000 is now worth $800,000. Under Labour's plan, the entire $300,000 gain faces 28% taxation – that’s $84,000. But how much of that gain is real appreciation versus inflation? Without indexation, investors pay tax on phantom gains that merely reflect currency debasement.

Meanwhile, definitional nightmares await. Australia's capital gains tax guide runs to 339 pages, with court judgements adding hundreds more.⁶ Is replacing a kitchen a capital improvement or maintenance? What about landscaping? A 2028 Fisher and Paykel dishwasher replacing a 1980s Westinghouse: expense, or capital upgrade? As Grant notes drily: "Tax lawyers and accountants will be kept busy."⁶

The Chartered Accountants Institute supports Labour's proposal – hardly surprising, given it guarantees full employment for their profession dealing with compliance complexity.

The Fiscal Illusion

Even Chartered Accountants acknowledge that CGTs "do not generate significant revenue in the short or even medium terms. Long term, however, they typically provide a steady revenue stream… Using them to cover a specific policy expense is unusual."⁴ Yet Labour wants to use this non-existent revenue immediately to subsidise doctor visits.

As Grant observes: "There is a cash shortfall on Labour's own analysis in the early years which, like everything else in this policy, the resolution is left to the imagination."⁶ Here's the speeding fine logic again: if you install cameras to generate revenue from fines, you're simultaneously reducing the very behaviour that generates the revenue.

Successful speed cameras mean less speeding, and therefore less revenue. A capital gains tax that successfully deters property speculation means less property investment, and again, less revenue.

The Historical Pattern

This is Labour's seventh CGT attempt since 1973.² Norman Kirk's first attempt taxed gains at up to 90%, a rate so confiscatory it was quickly abandoned. Phil Goff's 2011 version, David Cunliffe's 2014 proposal, and Jacinda Ardern's 2019 attempt all failed politically.

Each previous effort proved politically costly and economically counterproductive. Voters instinctively understand Laffer's speeding fine logic, even if they can't articulate the economics by name. They recognise taxing investment reduces investment, just as fining speeding reduces speeding. Winston Churchill’s timeless observation perfectly captures the impossibility of taxing your way to prosperity – you cannot stand in a bucket and lift yourself up by the handles.⁵

The Alternative Vision

Laffer's prescription for struggling economies is brutally simple: "You want a low-rate, broad-based flat tax, spending restraint, sound money, minimal regulations, and free trade. And then get the hell out of the way."¹ Labour offers the opposite with new taxes on capital, sketchy implementation details, and revenue projections that don't add up.

As Laffer puts it: "Poor people don't work to pay taxes. They work to get what they can after tax. It's that very personal and very private incentive that motivates them to work, to quit one job and go to another job, to get the education they need to do it."¹ Replace "poor people" with "investors" and the logic remains - capital seeks returns. Tax those returns heavily enough, and capital goes elsewhere.

Perhaps most revealing: if this policy were genuinely beneficial for economic growth, why the elaborate political choreography? The answer lies in Laffer's observation about lottery tickets: "Everyone—tall, short, skinny, fat, old, young—they all want to be rich. Why does your government then turn around and tax the living hell out of the rich?"¹

New Zealanders don't want to punish success; they want pathways to achieve it themselves. They buy lottery tickets hoping to strike it rich. The government encourages dreams of wealth while simultaneously taxing the achievement of wealth.

The Verdict

The election will shortly reveal whether Labour's calculated 12-month strategy succeeds politically. By announcing early, they've given the policy time to settle, given themselves something concrete to campaign on, and satisfied membership demands for action on wealth taxation.

But both Laffer's economic analysis and Grant's practical critique suggest that regardless of electoral outcome, the policy itself represents strategic error. It's economic theory ignored in favour of political positioning.

New Zealand has better options. Genuine broadening of the tax base, reform of property taxation to encourage productive use, addressing infrastructure bottlenecks, and creating conditions for productivity growth would all contribute more to long-term prosperity than taxing capital gains at 28%. But those approaches require the hard work of reform rather than the easy politics of taxing "wealthy property investors."

Is Labour's CGT announcement politically canny, or economically catastrophic? When you deliberately discourage an activity through taxation, you can’t be surprised when you get less of it.

Labour has installed the camera; investment will slow accordingly. Whether that's clever politics or economic self-harm depends entirely on whether you're focused on winning the next election or building the next generation's prosperity.

As Laffer would note, you cannot tax an economy into prosperity. And you most certainly cannot stand in a bucket and lift yourself up by the handles.

Nick Stewart
(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 433

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References

1. Simmons, M. (2024). Reality Check: Interview with Arthur Laffer. Times Radio.

2. Opes Partners (2025). 'Does New Zealand Have a Capital Gains Tax? [2025]'. Available at: https://www.opespartners.co.nz/tax/capital-gains-tax-nz

3. RNZ (2025). 'What you need to know: Seven questions about a capital gains tax'. Available at: https://www.rnz.co.nz/news/business/577065/what-you-need-to-know-seven-questions-about-a-capital-gains-tax

4. Chartered Accountants Australia and New Zealand (2025). 'Capital gains tax must be considered as part of tax reform'.

5. Churchill, W.S. (1906). For Free Trade. London: Arthur Humphreys.

6. Grant, D. (2025). 'Hipkins' capital gains tax policy leaves more questions than answers'. Stuff. Available at: https://www.stuff.co.nz/politics/360878756/damien-grant-hipkins-capital-gains-tax-policy-leaves-more-questions-answers