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

NZ's Economic Costume: Why Kiwis Feel Poor Despite Being "Rich"

Tonight is Halloween - a celebration of masks, illusions, and things that appear frightening but aren't real. How fitting, then, to discuss New Zealand's latest economic costume: the world's fifth-wealthiest country per capita, according to Allianz's latest Global Wealth Report.[1]

Each Kiwi is apparently worth $617,000 on average. Pop the champagne, right? Not quite.

The mask of prosperity doesn't quite match the face underneath. Most New Zealanders are too busy checking their bank balances and wincing at grocery receipts to celebrate this dubious honour.

At a recent conference abroad, colleagues from other nations questioned why New Zealanders exhibit such a "small dog complex" about our economy and stock market when we rank so highly in global wealth tables. "You must be a very wealthy nation," they observed, puzzled by our apparent lack of confidence. Their bewilderment was understandable—on paper, we look remarkably prosperous.

But the disconnect between this glowing statistic and daily financial reality reveals something troubling about how we measure prosperity - and exposes an uncomfortable truth about New Zealand's economic decline. Our "complex" isn't insecurity. It's realism.

A Nation of Landlords

Napoleon famously dismissed Britain as "a nation of shopkeepers"; a merchant class focused on trade rather than grand imperial pursuits.

If the French Emperor were observing New Zealand today, he might call us "a nation of residential landlords." We've become obsessed with buying and selling houses to one another. We treat property as our primary investment vehicle and wealth-creation strategy.

That impressive $617,000 wealth figure is overwhelmingly driven by this fixation: property values.[2] Housing represents approximately 50-58% of New Zealand household wealth.[3] Yet curiously, when the Herald reports that stripping out real estate sees us drop only to eighth place in net financial assets, something doesn't add up. If more than half our wealth is property, removing it should see us plummet far further down the rankings.

This data inconsistency itself reveals the problem: international wealth comparisons struggle to accurately capture economies where asset bubbles distort the picture. Regardless of the exact ranking, the core truth remains – housing wealth is fundamentally different from productive wealth.

If you own a $1.2 million house in Auckland, congratulations on being wealthy on paper. But alas, you can't pay for petrol with housing equity. That "wealth" is locked away, inaccessible unless you sell and move somewhere cheaper (which increasingly means moving south or to Australia[4]). Meanwhile, you're servicing a massive mortgage at interest rates that peaked above 7%.

For those who don't own property, the inflated housing market represents the opposite of wealth. It's a barrier that pushes homeownership further out of reach with each passing year.

We've become experts at shuffling residential properties between ourselves while creating little new productive value. The resulting "wealth" is a mirage. It makes the statistics look good while leaving people feeling financially squeezed.

The GDP Reality Check

Here's where the wealth ranking crumbles entirely. New Zealand's GDP per capita tells a completely different story. In the 1950s, New Zealand ranked third globally in GDP per capita. Today? We've plummeted to 37th.[5]

GDP per capita – which measures actual economic output and productivity – sits more than 20% below the OECD average. The Productivity Commission noted we should be 20% above that average given our policy settings, but we're achieving the exact opposite. As one economist bluntly put it: "We may be punching above our weight, but that's only because we are in the wrong weight division."[6]

In 2024's economic performance rankings, New Zealand placed 33rd out of 37 OECD countries.[7] We beat only Finland, Latvia, Turkey, and Estonia. Per capita output has been declining since December 2022.[5]

These are not the statistics of a wealthy, thriving nation.

When you lay bare these numbers, Kiwis' so-called "small nation complex" makes perfect sense. We're not suffering from false modesty; we're experiencing economic reality the wealth rankings fail to capture.

The Debt Burden

The wealth figures also conveniently ignore what we owe. New Zealand and Australia have seen their debt ratios surge by 15.2 percentage points to reach 113% of GDP.[1] High asset values paired with equally high debt levels mean many households are drowning in mortgage payments, leaving little for savings or discretionary spending.

The Reserve Bank was among the world's most aggressive in raising interest rates, and the economy has faltered accordingly.[5] Per capita output has contracted while unemployment climbs. Firms are downsizing. This is the lived experience behind the statistics—and it bears no resemblance to the fifth-wealthiest nation on earth.

Sixty Years of Relative Decline

The long view is sobering. New Zealand has been growing significantly slower than other OECD countries for six decades.[6] We've dropped from elite economic status to below-average performer. Our isolation, small market size, and weak productivity growth have compounded into structural disadvantages that successive governments have failed to overcome.

The wealth ranking actually highlights our problem. We've substituted asset appreciation for genuine economic growth. Rather than building productive capacity, improving wages, or fostering innovation, we've watched house prices soar and called it prosperity.

Napoleon's shopkeepers at least sold goods to customers beyond their own shores. Our landlords primarily rent to each other.

The Need for Fiduciary Advice

For individuals navigating this challenging economic landscape, the disconnect between headline wealth and financial reality makes professional guidance more critical than ever. Understanding the difference between illiquid property wealth and accessible financial assets, managing debt strategically in a high-interest environment, and building genuine financial resilience requires expertise beyond newspaper headlines.

Working with a qualified financial adviser who operates under fiduciary duty – i.e. is legally obligated to act in your best interests – can help cut through the noise. Whether you're trying to balance mortgage stress with retirement savings, questioning if your "wealth" is working effectively, or simply wondering why the statistics don't match your bank account, professional advice tailored to your specific circumstances is invaluable.

The gap between perception and reality has never been wider. Kiwis understand what the statistics obscure: you can't eat your house equity, and paper wealth means nothing when your purchasing power is eroding. What my international colleagues mistook for a national inferiority complex is actually clear-eyed recognition of our economic challenges. In uncertain times, sage financial counsel from a trusted fiduciary adviser isn't a luxury. It's essential for turning illusion into genuine security.

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. 431

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References

[1] Allianz Global Wealth Report 2025. Available at: https://www.allianz.com/en/economic_research/publications/specials_fmo/global-wealth-report.html

[2] New Zealand Herald (October 2024). "New Zealand ranks among world's top five wealthiest countries per capita in rich list report." Available at: https://www.nzherald.co.nz/business/new-zealand-ranks-among-worlds-top-five-wealthiest-countries-per-capita-in-rich-list-report/MX2QDDZWXFBBNF3NT5734XTW3E/

[3] New Zealand Treasury (2023). "Estimating the Distribution of Wealth in New Zealand." Working Paper 23/01. Available at: https://www.treasury.govt.nz/sites/default/files/2023-04/twp23-01.pdf

[4] Statistics New Zealand (July 2025). "Net migration loss to Australia in 2024." New Zealand recorded a net migration loss of 30,000 people to Australia in 2024, the largest calendar-year loss since 2012. The South Island's population grew at 1.4% annually (faster than the North Island's 1.3%), with Canterbury's Selwyn District and Queenstown-Lakes experiencing the fastest growth rates. Available at: https://www.stats.govt.nz/news/net-migration-loss-to-australia-in-2024/

[5] RNZ News (December 18, 2024). "NZ ranks low in global economic comparison for 2024." Available at: https://www.rnz.co.nz/news/business/537075/nz-ranks-low-in-global-economic-comparison-for-2024

[6] New Zealand Productivity Commission. "Economic Performance and Productivity Analysis." Referenced in Economy of New Zealand, Wikipedia. Available at: https://en.wikipedia.org/wiki/Economy_of_New_Zealand

[7] The Economist (December 2024). "OECD Economic Performance Rankings 2024."

Time to Cut the Banking Anchor: New Zealand’s Capital Ratio Handbrake

The Economic Handbrake We Can’t Afford

New Zealand’s economy is caught in a relentless cycle, bouncing between positive and negative GDP growth every three to six months like a yo-yo. The economy contracted by 0.90% in the second quarter of 2025, with GDP falling 0.5% over the year ended December 2024, following a technical recession in the September quarter. In these turbulent times, when economic momentum is more critical than ever, we’re handicapping ourselves with regulatory constraints that act as a handbrake on the very institutions that provide the lubrication our economy desperately needs.

The culprit? The doubling of bank capital ratios, a dramatic policy shift implemented through the collaboration between Adrian Orr at the Reserve Bank of New Zealand (RBNZ) and former Finance Minister Grant Robertson. The December 2019 Capital Review decisions included a significant increase in capital ratios that will fundamentally reshape New Zealand’s banking landscape by 2028 [1].

The “Big Four” banks, ANZ NZ, BNZ, ASB, and Westpac NZ, have been classified as “Domestic-Systemically Important Banks” (D-SIBs), meaning they’re considered so crucial to the economy that their failure would cause widespread damage. These banks will be required to hold a total capital ratio of at least 18% by 2028, compared to the much lower levels they previously held. Other banks, including Kiwibank, TSB, and smaller institutions, face somewhat lower but still substantially increased requirements of 16%.

To put this in perspective: capital is essentially the bank’s own money that acts as a safety buffer. The higher the capital requirement, the less money banks have available to lend to businesses and consumers. This policy response, designed to address what they characterised as a once-in-a-century crisis, has instead gummed up our economy and now represents a historical anchor dragging down our economic potential when we need to be cutting loose and sailing toward brighter days.

Banks: The Lifeblood of Economic Growth

Our banking system isn’t just a collection of financial institutions; it’s the circulatory system of our economy. Banks provide the essential mechanism, the lubrication that allows businesses to expand, entrepreneurs to innovate, and families to invest in their futures. When we constrain their ability to lend through excessive capital requirements, we’re essentially restricting the flow of economic oxygen throughout the entire system.

The Oliver Wyman report commissioned by the RBNZ found that New Zealand’s current Tier 1 capital requirements are relatively high by international standards, creating a competitive disadvantage that ripples through every sector of our economy [2]. This isn’t just a technical regulatory matter; it’s a massive shift that has fundamentally altered the competitive dynamics of our financial system and created a drag on economic growth.

The International Competitiveness Crisis

In a globalised world, economies compete not just on natural resources or innovation, but on the efficiency of their financial infrastructure. New Zealand already faces the challenge of high energy prices that make it difficult to compete with countries that enjoy cheaper power. Now we’re compounding this disadvantage by artificially constraining our banking sector with capital requirements that our competitors haven’t imposed on themselves.

International comparisons show that New Zealand banks are “in the pack” in terms of capital ratios relative to international peers, but our four largest banks reported a weighted average CET1 ratio of 10.5%, putting them in the bottom quartile on an unadjusted basis. However, the Reserve Bank has made amendments to better reflect New Zealand risks, with farm lending adjustments raising the average risk weight on banks’ exposures by around 20-30 percentage points compared to a usual implementation of the IRB framework [3].

This creates a double burden: higher costs of capital for businesses seeking to grow, and reduced lending capacity from institutions that could otherwise fuel economic expansion. It’s like running a marathon with weights strapped to our ankles while our competitors run unencumbered.

The Yo-Yo Economy Needs Stability, Not Constraints

New Zealand’s recent economic performance tells a troubling story. The New Zealand economy has contracted, on a per capita basis, for nine of the last 12 quarters, making for a deep and lengthy recession [4][5][6][7][8]. This represents a dire financial path that has been painful for all New Zealanders.

We’re caught in a pattern of brief growth spurts followed by contractions, creating uncertainty for businesses and discouraging long-term investment. In this environment, what we need is financial system flexibility, the ability for banks to respond quickly to lending opportunities that could break us out of this cycle.

Instead, we’ve imposed rigid capital constraints that reduce banks’ ability to capitalise on growth opportunities when they arise. It’s economic policy working against economic recovery.

A Political Lifeline in Economic Policy

The current context makes this review even more critical. The Reserve Bank has endured a difficult and disruptive period of late, culminating in Adrian Orr’s resignation in March 2025, three years before his contract was due to terminate [9][10]. Finance Minister Nicola Willis’s handling of Orr’s departure has not helped the situation, creating additional uncertainty around monetary policy leadership at a time when the economy desperately needs stability. Dr Anna Breman, formerly First Deputy Governor of Sweden’s Riksbank, has now been appointed as the new RBNZ Governor, beginning her five-year term on 1 December 2025 [14].

For the current government, recognising and correcting this policy overreach represents more than just good economics; it’s a potential political lifeline. Adrian Orr was appointed by Finance Minister Grant Robertson to be Governor in December 2017, with Robertson supporting Orr’s reappointment on the grounds of continuity and stability, while opposition National Party finance spokesperson Nicola Willis called for an independent review of the Reserve Bank’s performance.

Nicola Willis and Christopher Luxon have inherited an economy constrained by their predecessors’ regulatory overcorrection. Since 2019, concerns have been raised that the Reserve Bank’s capital settings may be undermining competition and efficiency in the banking industry, increasing the cost of lending to New Zealanders, and creating headwinds for economic growth [12][13].

By advocating for a return to more appropriate capital ratios, they could demonstrate decisive economic leadership and provide immediate relief to businesses and consumers struggling under current conditions. This isn’t about abandoning prudent regulation; it’s about acknowledging that the increased capital ratios were a crisis response that has outlived its usefulness.

The Path Forward

The RBNZ has opened consultation on New Zealand’s capital settings for deposit takers, with the consultation paper setting out two options for overall capital ratios, both materially reducing requirements compared with 2019 decisions [1][2]. Professor Quigley noted that the options are calibrated to a higher risk appetite than in the 2019 review, stating that “Under the Deposit Takers Act, we will have stronger tools for supervision and crisis management, as well as additional capacity and capability as a regulator. That means we can responsibly ease capital requirements, while still protecting financial stability”.

Dr Anna Breman and the RBNZ have the opportunity to demonstrate economic leadership by acknowledging that the crisis-era increases in capital ratios were appropriate for their time but inappropriate for our current needs. Returning to more appropriate levels would send a clear signal that New Zealand is serious about breaking free from its economic doldrums and positioning itself for sustainable growth.

The Robertson-Orr policy legacy has served its purpose. Now it’s time for new leadership to chart a different course, one that recognises the difference between crisis management and growth facilitation.

The Path to a Brighter Day

The handbrake has been on long enough. It’s time to release it and let our economy run at the speed it needs to compete and thrive in the modern global marketplace. The yo-yo economy can become a thing of the past, but only if we have the courage to cut the anchor and sail toward that brighter day that awaits.

Our banks are ready to power economic growth. Our businesses are ready to expand. Our entrepreneurs are ready to innovate. The only question is whether our regulators are ready to let them.

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. 426

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References

[1] Reserve Bank of New Zealand. (2025). Capital requirements for banks in New Zealand. https://www.rbnz.govt.nz/regulation-and-supervision/oversight-of-banks/standards-and-requirements-for-banks/capital-requirements-for-banks-in-new-zealand

[2] Reserve Bank of New Zealand. (2025). RBNZ invites feedback on review of capital requirements for deposit takers. https://www.rbnz.govt.nz/hub/news/2025/08/rbnz-invites-feedback-on-review-of-capital-requirements-for-deposit-takers

[3] Reserve Bank of New Zealand. (2025). 2017-2019 Capital Review. https://www.rbnz.govt.nz/regulation-and-supervision/oversight-of-banks/how-we-regulate-and-supervise-banks/our-policy-work-for-bank-oversight/capital-review

[4] Trading Economics. (2025). New Zealand GDP Growth Rate. https://tradingeconomics.com/new-zealand/gdp-growth

[5] New Zealand Herald. (2025, March 19). Out of recession: New Zealand’s GDP rises 0.7%. https://www.nzherald.co.nz/business/gdp-will-todays-data-show-the-end-of-the-recession/MTNBTKWXCNATTMH5DW4U7KJLNI/

[6] Wikipedia. (2025). Economy of New Zealand. https://en.wikipedia.org/wiki/Economy_of_New_Zealand

[7] International Monetary Fund. (2024). New Zealand: Staff Concluding Statement of the 2024 Article IV Mission. https://www.imf.org/en/News/Articles/2024/03/19/mcs-new-zealand-staff-concluding-statement-of-the-2024-article-iv-mission

[8] CNBC. (2025, March 19). New Zealand exits recession as fourth-quarter growth beats forecasts. https://www.cnbc.com/2025/03/20/new-zealand-exits-recession-as-fourth-quarter-growth-beats-forecasts.html

[9] Reserve Bank of New Zealand. (2017). Review of bank capital requirements [Speech]. https://www.rbnz.govt.nz/research-and-publications/speeches/2017/speech-2017-03-07

[10] Wikipedia. (2025). Adrian Orr. https://en.wikipedia.org/wiki/Adrian_Orr

[11] Oliver Wyman. (2025). Comparing New Zealand Bank Capital Ratios to International Peers. Report commissioned by Reserve Bank of New Zealand.

[12] NZ Adviser. (2025). RBNZ reviews bank capital rules amid competition concerns. https://www.mpamag.com/nz/news/general/rbnz-reviews-bank-capital-rules-amid-competition-concerns/547311

[13] Lister, M. (2025, September 23). On Point: ep 304 | Has your home bias left money on the table? [Audio podcast]. Craigs Investment Partners. https://podcasts.apple.com/nz/podcast/on-point/id1667364727?i=1000728078149&r=84

[14] New Zealand Herald. (2025, September 24). New Reserve Bank Governor announced: Swedish economist Dr Anna Breman gets top job. https://www.nzherald.co.nz/business/new-reserve-bank-governor-announced-dr-anna-breman-gets-top-job/JRJYGHVFJZABRKDFZTJJ2UKQVE/

Days of Auld are Long Gone: New Zealand's Housing Reality Check

Politicians are entitled to their opinions, but not their own numbers

The romantic notion of the great Kiwi dream – buying your first home for three times your annual wage – has gone the way of the moa. The harsh mathematics of New Zealand's housing market in 2025 tell a story that no amount of political spin can soften, especially after the spectacular crash that followed the pandemic bubble.

Consider this sobering reality: with 2.125 million private houses serving 2.042 million households, we're walking a tightrope. When Auckland's median weekly rent hits $650 and the average New Zealand house costs $881,508, we're not just talking about expensive property – we're witnessing the fundamental reshaping of how New Zealanders live.

The Crash That Changed Everything

The numbers from the recent crash are staggering. House prices peaked in November 2021, then fell 17.80% nationally, bottoming out in May 2023. Wellington was hit hardest, with prices plummeting 25.92% from their October 2021 peak. Auckland wasn't far behind, down 23.64% from its November 2021 high. Values are still down 22.5% from the peak in Auckland, 25% in Wellington, and the country as a whole has prices 17.2% lower than the post-Covid records.

Property sales tell an equally dramatic story. Sales peaked at 100,108 in June 2021, then collapsed to just 58,763 in May 2023 – a 41.30% drop in annual property transactions. This wasn't just a market correction; it was a complete unwinding of the pandemic property frenzy.

The crash was so severe that New Zealand's median multiple – the ratio of house prices to household income – fell from a peak of 11.2 in 2021 to 7.7 in 2024, according to Demographia's housing affordability survey. While still severely unaffordable by international standards, this represented the most significant improvement in housing affordability in decades.

The New Arithmetic of Home Ownership

The numbers don't lie, even when politicians might prefer they did. A typical first-home mortgage of $570,000 at 4.75% interest translates to $686 per week, or nearly $36,000 annually for three decades. That's not just a mortgage payment – it's a generational commitment that would make our grandparents' heads spin.

Back when houses cost three times your annual wages, families made do with second-hand everything, camping holidays, and no restaurant meals. Today's buyers face a vastly different equation: house prices have increased at 5.445% annually over the past 20 years, while wages have lagged behind at 4.2%. This isn't just about lifestyle expectations – it's basic mathematics working against ordinary New Zealanders.

Even after the crash, Reuters estimates suggest that nationwide home prices are approximately six times the average household income, leaving homeownership out of reach for many first-time buyers. The crash helped, but not nearly enough to restore the old social contract of affordable homeownership.

The Landlord's Dilemma

Even property investment, once considered a reliable path to wealth, tells a cautionary tale. Take a real example from the current market: a $794,000 four-bedroom house with a $400,000 mortgage, renting for $624 weekly. After rates, insurance, interest, maintenance, and management fees, the net return is a measly $1,609 annually – just 0.408% on the owner's $394,000 equity.

This isn't sustainable economics; it's financial masochism. Without underlying asset inflation of at least 2% annually, property investment becomes a fool's game. The magic isn't in rental returns – it's in the government's implicit commitment to maintaining inflation levels that protect asset values.

Construction activity has also remained depressed. Residential construction plunged by 4.9% in Q4 2024, to be 25% down from its previous peak in Q3 2022. The pipeline of new supply continues to shrink, setting up future supply shortages even as current oversupply keeps prices subdued.

The International Context

When we compare New Zealand house prices to similar economies, the picture becomes clearer. In New Zealand dollars, median house prices sit at $682,963 in the UK, $698,190 in the USA, $859,692 in Canada, and $1,001,619 in Australia. We're not alone in this crisis, but that's cold comfort for young Kiwis watching homeownership slip away.

In real inflation-adjusted terms, New Zealand's median house price has returned to pre-pandemic levels – meaning the entire pandemic boom has been erased, at least in purchasing power terms.

The Rental Reality

With approximately 625,000 households now renting – about 29% of all private dwellings – we've created a nation of reluctant tenants. These aren't people choosing flexibility; they're families priced out of ownership, paying someone else's mortgage while accumulating no equity of their own.

The mean weekly rent in New Zealand for the year to April 2025 reached $574, with Auckland commanding $631 weekly. However, there are signs of relief: average rent across the country dropped $27 a week in May compared to last year as oversupply finally benefits tenants.

The generational impact is staggering. Children growing up in rental properties today might inherit $250,000 from their parents, but not until they’re 70 years old - wealth that comes too late to influence their own housing trajectory.

Beyond Political Promises

Politicians love to promise housing solutions, but the mathematics of supply and demand operate independently of electoral cycles. Remember then-Prime Minister Jacinda Ardern's grand promise of 100,000 new homes? Pure unicorns and fairy dust – mere theatre and hokum for the masses. The promise evaporated faster than Heretaunga Plains morning mist, leaving behind nothing but disappointed.

With population growing at 1.252% annually and housing construction struggling to keep pace, the pressure cooker of demand continues building. Political promises can't magic houses into existence any more than they can repeal the laws of economics.

The solution isn't in clever policy tweaks, grandiose announcements, or first-home buyer subsidies that merely inflate demand further. It requires acknowledging that our housing market has fundamentally disconnected from local incomes and productivity – and that political theatre won't bridge that gap.

What's Changed, What Hasn't

The fundamental difference between then and now isn't just price – it's expectation versus reality. Previous generations bought homes with low expectations but even lower prices. Today's buyers face high expectations with even higher prices, even after the crash.

Property commentators note that while "a lot of those falls happened over 2022 and 2023," in recent times "it's been a lot flatter. They go up a bit, they go down a bit." The market has stabilised at these lower levels, but they're still far above what most young families can afford.

The old social contract is broken. Where once a single income could secure family housing, today's dual-income households struggle to service mortgages that consume their entire financial capacity for three decades, even at these "crashed" prices.

Current Market Signals

Recent data shows conflicting forces at play. Property values fell 0.2% in December 2024, marking the ninth drop in 10 months. Yet mortgage rates have declined dramatically, with debt-to-income ratio rules now adding new complexity to lending decisions.

National house prices have dropped by more than $137,000 since late 2021, yet some locations are showing signs of recovery. Property sales have started to recover, with 77,445 properties sold in the 12 months to July 2025, up from the trough but still well below peak levels.

The Hard Truth

New Zealand's housing crisis isn't a temporary blip or a problem that can be solved with good intentions and political rhetoric. It's a structural transformation that demands we reconsider everything from urban planning to taxation policy.

The days when hard work and modest expectations guaranteed homeownership are indeed long gone. Even after the most significant housing crash in a generation, the mathematics of homeownership remain stacked against ordinary families. What emerges next will define whether New Zealand remains a place where ordinary families can build generational wealth or becomes a playground for the already-wealthy while everyone else pays rent forever.

For those navigating this challenging landscape: have a plan. Make it one that's tested with evidence, tracked and measured against real outcomes – not political promises or wishful thinking. Consider seeking financial advice from a fee-only fiduciary who has no vested interest in selling you products or properties. The mathematics don't care about our hopes; they respond only to careful preparation and realistic expectations.

The numbers tell the story. The question is whether we're prepared to listen.

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Special thanks to Pita Alexander. Statistics sourced from Newsletter, 11 September 2025: "An Update on New Zealand Housing as at 31 August 2025"

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. 425

Why Holding Cash Feels Safe - But Isn't Always Wise

The ‘security’ of cash today often comes at the expense of tomorrow's purchasing power.

New Zealanders tend to hold cash reserves despite changing interest rate conditions. The RBNZ has cut the Official Cash Rate to 3.0% in August 2025 from its peak of 5.5% in early 2024, with term deposits following suit. While declining in line with the OCR, term deposit rates remain attractive; the highest rates on Canstar's database sit at 4.50%.

Yet, NZ’s economy contracted in the second quarter of 2025. Inflation increased to 2.70% in the same period[1] – well within the RBNZ's 1-3% target band but adding pressure to real returns.

The Money Illusion Trap

Many investors fall victim to what economists call "the money illusion": thinking about money in nominal rather than real terms[2].

A $100,000 term deposit earning 4.5% generates $4,500 annually, which feels like growth. But for someone paying 33% tax, the after-tax return is just $3,015 (3.015%). With inflation at 2.7%, this creates a real return of just 0.315%. For those in the top tax bracket (39%), this return becomes 2.745% - providing a microscopic real return of $45. That’s barely enough to buy a decent bottle of wine to drown your wealth preservation strategy sorrows.

Major bank economists forecast the OCR will fall to 2.5% by the end of 2025 or early 2026[3]. If term deposits drop to around 3%, a 33% taxpayer will earn an even measlier 2.01%.

Hidden Costs of Cash Comfort

Opportunity Cost: While current term deposits offer reasonable returns, historical equity market returns in New Zealand averaged 7-10% annually over longer periods. That 2-5% difference compounds substantially over decades.[4]

Rate Dependency Risk: With the two-year swap rate expected to drop to 2.8% as the OCR reaches 2.5%, retail deposit rates will follow. Unlike growth assets that can benefit from economic recovery, cash offers no upside participation.

Inflation Protection: Cash provides no hedge against rising costs. With administered prices driving near-term inflation pressures, purchasing power erosion remains a persistent threat.

The Economic Reality Check

New Zealand's economic recovery stalled in the second quarter. Spending is constrained by global economic policy uncertainty, falling employment, higher goods prices, and declining house prices. RBNZ notes there is scope to lower the OCR further if medium-term inflation pressures continue to ease as expected[5].

This makes holding large cash positions riskier; cash-savers face declining returns and miss potential recovery gains in other asset classes.[6]

Cash has its place – as part of a strategic, sophisticated portfolio, where professional advisers can implement a bond laddering strategy (providing income stability with superior yields to deposits), liquidity management to provide regular cash flow and reduce the need for large cash reserves and can recommend PIE funds and other tax-efficient structures that minimise the tax drag.

The Value of Professional Advice

History has shown many investors start panic selling during downturns, chasing performance at market peaks, or hoarding cash.

When cash returns are low, investors venture into adventurous territory: junk bonds, private credit, mezzanine debt arrangements, and other high-yield instruments that carry higher risks.

Working with a fee-only, fiduciary adviser is invaluable. Look for advisers who:

• Conduct thorough discovery of your financial situation

• Explain their investment philosophy and process clearly

• Provide transparent fee disclosure with no hidden commissions

• Demonstrate relevant credentials (CFP, AIF, CEFEX)

• Show measurable progress tracking methods

 The Bottom Line

With NZ’s economic headwinds, sitting in cash isn't the safe option - it's the wealth erosion option.

"She'll be right" doesn't cut the mustard when your money's losing value faster than a leaky boat. After tax and inflation, that "safe" term deposit is barely keeping you afloat. Your future wealth depends on making this distinction now, not when it's convenient.

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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. 423

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References

1. Trading Economics. (2025). New Zealand Inflation Rate - Q2 2025. Available at: https://tradingeconomics.com/new-zealand/inflation-cpi

2. Shafir, E., Diamond, P., & Tversky, A. (1997). Money Illusion. Quarterly Journal of Economics, 112(2), 341-374.

3. ANZ Bank New Zealand. (2025). Weekly Data Wrap: Economic Forecasts and OCR Projections. Available at: https://www.anz.co.nz/about-us/economic-markets-research/data-wrap/

4. NZX Limited. (2024). Historical Returns Analysis: New Zealand Equity Market Performance 1987-2024. Wellington: NZX.

5. Reserve Bank of New Zealand. (2025). Monetary Policy Statement August 2025. Wellington: RBNZ. Available at: https://www.rbnz.govt.nz/hub/publications/monetary-policy-statement/2025/08/monetary-policy-statement-august-2025

6. DALBAR Inc. (2024). Quantitative Analysis of Investor Behavior: New Zealand Market Study. Boston: DALBAR Research.

Our Broken Energy Market: When Bigger isn’t Better

There are three things on people's minds currently - rates invoices, insurance premiums, and power prices. They’re essential services where consumers have little choice, and providers face little competitive pressure. (1)

In the game of New Zealand’s energy market, the house always wins – furthermore, the house is government-owned, and participation isn't optional. Our state-controlled gentailers (the companies generating electricity AND selling it to consumers) have created an oligopoly, undermining business certainty and leaving regions vulnerable to catastrophic power failures.

The Centralisation Trap

When Cyclone Gabrielle devastated Hawke's Bay in February 2023, communities were plunged into darkness for weeks. The centralised grid proved helpless against nature's fury while gentailers counted profits from undamaged regions.

This isn't isolated failure - it's the predictable consequence of centralisation designed for corporate convenience rather than resilience.

New Zealand's gentailers - Genesis Energy, Mercury Energy, Meridian Energy, and Contact Energy - control approximately 85% of generation and retail markets (2). The government owns 51% stakes in three companies (3), creating a major conflict of interest where the referee owns most teams in the league.

It’s a state-protected illusion of choice. As power bills rise $10 monthly from April 2025 due to regulated increases (4), customers can supposedly switch providers. But when all major providers coordinate similar increases, what “choice” do we have?

The Hidden Tax

These companies reported record profits in 2024:

• Contact Energy $235 million (up 85%)

• Mercury NZ $290 million (up 159%)

• Meridian Energy $429 million (up 300%)

• Genesis Energy $131.1 million (up 29%)

Combined, they posted over $1.08 billion (5) whilst manufacturers close plants due to unaffordability.

NZ was built on low-cost energy to attract global businesses. Now, with PM Christopher Luxon acknowledging our power prices are "among the highest in the western world" (6), manufacturers are departing. Energy costs rose a widely cited 600% since 2021 (7), the cause sited for major closures.

The gentailer oligopoly represents an indirect tax disguised as market returns. When state-owned enterprises deliver billions to government coffers (8), politicians avoid raising tax rates whilst extracting revenue from every household through inflated electricity prices.

The Single ICP Stranglehold

Here's the regulatory elephant in the room: the "one ICP (Installation Control Point) or provider" rule that locks consumers into single-provider dependency. This artificially prevents households and businesses buying electricity from multiple sources, eliminating true competition at the consumer level.

Kāinga Ora received an exemption from this rule in 2023-24 (9), proving competitive choice is possible when bureaucratic barriers are removed. If state housing can access competitive electricity markets, why can't everyone?

The Distributed Solution

The Electricity Authority recently announced new rules requiring gentailers to offer "non-discrimination" in hedge contracts - fixing the symptom whilst ignoring the disease. Critics warn these measures could backfire, pushing up electricity prices as gentailers raise internal costs rather than lowering external ones (10).

Regulatory tinkering sidesteps the fundamental problem: vertical integration allows gentailers to manipulate both sides of the market.

Real reform requires abandoning the failed "bigger is better" approach. With the stroke of the legislative pen, the current "one ICP or provider" rule could be swept away, allowing consumers to decouple from single-provider dependency.

True energy democracy means communities generating power through local renewable resources and selling excess back to competitive retailers who don't control generation.

Thinking ahead (and learning from the past)

The Commerce Commission's approval for Contact Energy's acquisition of Manawa Energy (formerly Trustpower) represents another step towards market concentration. This feels eerily reminiscent of Progressive Enterprises' acquisition of Woolworths (NZ) Ltd in 2002 - where promised efficiencies never materialised for consumers (11). Instead, we got a duopoly making $430 million per year in excess profits - $1 million per day at consumers' expense (12). This grocery duopoly now ranks among the world's most expensive markets, with prices 3% above the OECD average (13).

Despite the Government's latest announcements about "levelling the playing field" (14), industry critics worry these measures won't crack down hard enough on the big four. The proposed changes preserve the fundamental structure that creates the problem.

New Zealand faces a choice: continue protecting state-owned energy giants that extract maximum profits from captive consumers… or embrace distributed energy systems with clear separation between generation and retail.

When communities control their energy future, the gentailers lose their power over New Zealand's economy. It's time to choose freedom over monopoly, resilience over vulnerability, and competition over state-protected oligopolies.

References

1. RNZ. “The essential item that's 900% more expensive than in 2000.” 27 August 2025. https://www.rnz.co.nz/news/business/571151/the-essential-item-that-s-900-percent-more-expensive-than-in-2000

2. Consumer NZ. "Profits surge for New Zealand's gentailers." 31 August 2023. https://www.consumer.org.nz/articles/profits-surge-for-new-zealand-s-gentailers ; North & South Magazine. "Power Play." September 2024.

3. Wikipedia. “New Zealand Electricity Market.” Accessed 27 August 2025.
   https://en.wikipedia.org/wiki/New_Zealand_electricity_market

4. Commerce Commission. "Electricity Lines and Transmission Charges: What are they, why are they changing and what does this mean for your electricity bill?" 2025. https://comcom.govt.nz/regulated-industries/electricity-lines/electricity-lines-and-transmission-charges-what-are-they,-why-are-they-changing-and-what-does-this-mean-for-your-electricity-bill

5. Electric Kiwi Times. "Big Four Gentailers Profiting at the Expense of Kiwi Households." 31 July 2024.

6. Energy Connects. "NZ Takes Urgent Action as Energy Price Rises Hurt Businesses." 26 August 2024. https://www.energyconnects.com/news/utilities/2024/august/nz-takes-urgent-action-as-energy-price-rises-hurt-businesses/

7. Industry Edge. “How is NZ’s Energy Crisis Impacting the Pulp, Paper and Packaging Industry?” 1 September 2024. https://industryedge.com.au/how-is-nzs-energy-crisis-impacting-the-pulp-paper-and-packaging-industry/

8. New Zealand Herald. "Mercury sees average 9.7% power price rise from April." 25 February 2025.

9. Electricity Authority. "Exemptions granted for innovation trial." 1 April 2024. https://www.ea.govt.nz/news/general-news/exemptions-granted-for-innovation-trial/

10. Stuff. "Will new rule big four electricity companies really bring down power bills?" https://www.stuff.co.nz/politics/360795971/will-new-rule-big-four-electricity-companies-really-bring-down-power-bills

11. Commerce Commission. "Progressive applies for clearance to acquire Woolworths." 16 May 2001. https://comcom.govt.nz/news-and-media/media-releases/archive/progressive-applies-for-clearance-to-acquire-woolworths ; Commerce Commission. "Commission releases Progressive/Woolworths decision." 26 July 2001. Commerce Commission. "Market study into the grocery sector: final report." 8 March 2022. https://comcom.govt.nz/news-and-media/news-and-events/2022/grocery-market-study-recommends-changes-to-improve-competition-and-benefit-consumers ; Consumer NZ. "Petition: stop misleading supermarket pricing." Accessed 12 August 2025. https://campaigns.consumer.org.nz/supermarkets

12. Commerce Commission. "Market study into the grocery sector: final report." 8 March 2022. https://comcom.govt.nz/news-and-media/news-and-events/2022/grocery-market-study-recommends-changes-to-improve-competition-and-benefit-consumers ; Consumer NZ. "Petition: stop misleading supermarket pricing." Accessed 12 August 2025. https://campaigns.consumer.org.nz/supermarkets

13. RNZ. "NZ grocery prices higher than OECD average, Commerce Commission says." 4 August 2025. https://www.rnz.co.nz/news/business/569172/nz-grocery-prices-higher-than-oecd-average-commerce-commission-says ; NZ Herald. "Grocery Action Group hits out at supermarkets as Kiwis keep paying high prices for groceries." 7 August 2025.

14. Electricity Authority. "Energy Competition Task Force looks to level the playing field between the gentailers and independent generators and retailers." August 2025. https://www.ea.govt.nz/news/press-release/energy-competition-task-force-looks-to-level-the-playing-field-between-the-gentailers-and-independent-generators-and-retailers/

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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. 422

Value vs Values: The True Cost of Short-Term Thinking

The weekly budget trap cuts across all wealth demographics. It makes you think, “I can’t afford those $200 boots that will last ten years. I’ll just buy the $40 ones that last eight months, because they cost less now.”

But this isn’t financial logic; it’s a fallacy. You spend more and get less value. The mathematics are brutal: those $40 boots become $600 over a decade, whilst the quality pair would have saved $400.

It’s easy to just blame pay cheques or tax brackets, but this is typically more about human psychology and cash flow management than poverty. Even high earners often live month to month as lifestyle creep sets in, optimising for immediate affordability rather than lifetime value (i).

Are you buying what you need, or filling the void?

Somewhere along the way, we transformed shopping from necessity into recreation. Buying essentials became buying feelings—the momentary rush of acquisition, the brief satisfaction of choice, the fleeting sense of control. We end up with wardrobes full of clothes we don't wear, garages packed with gadgets we don't use, and credit card bills that remind us monthly of our attempts to purchase happiness.

The cruel irony is that this consumption-driven approach to fulfilment often leaves us feeling more empty, not less. Each purchase promises to be the one that finally satisfies, yet the satisfaction fades faster than the credit card bill arrives (ii).

The Temu temptation.

Consider the Temu phenomenon: millions of consumers buying directly from manufacturers they'll never meet, purchasing products with no meaningful recourse if things go wrong, no customer service to speak of, and no ongoing relationship beyond the transaction. You buy with a click, guilt-free, because you never have to look anyone in the eye.

This represents the ultimate evolution of consumer culture—a generation that has learnt to decouple purchasing decisions from moral considerations entirely. The vendor is invisible, the supply chain is opaque, and the true costs are externalised to people and places you'll never encounter.

What does thinking short term really cost us?

When we optimise for immediate affordability over long-term value, we inadvertently support systems that externalise their true costs.

• Environmental degradation occurs when cheap goods mean cutting corners on sustainability.

• Labour exploitation thrives when low prices depend on underpaid workers in poor conditions.

• Community erosion accelerates when bargain-hunting drives business to the lowest bidder, often far from home.

This is where frameworks like B Corp certification become valuable—not as the solution to everything, but as a useful validation tool. When you're trying to align your spending (and your financial activity in general) with your values, B Corp status provides third-party verification that a company actually operates according to stakeholder-focused principles (iii).

Critics might dismiss this shift towards values-driven business as merely the world "going woke," but this misses the fundamental point. Perhaps it's time to recognise that whilst things haven't exactly gone to the dogs, this is simply the new normal.

Better business practices, stakeholder consideration, and community responsibility are essential adaptations to a world where consumers increasingly demand authenticity and accountability. Furthermore, they’re invoking responsibility for the long-term consequences of today’s decisions; in life and in finance, some careful forward thinking is always a good idea.

The case for prioritising value

The fundamental question isn't whether to buy cheap or expensive goods—it's whether our economic system should encourage decisions that prioritise immediate savings over long-term value (as it currently seems to). When short-term thinking is economically rationalised across all income levels, the issue isn't individual choices – it’s the systems that make those choices feel necessary.

This is where holistic financial planning becomes essential. Understanding the true lifetime cost of our decisions—whether buying boots or choosing business partners—helps us align our spending with our values whilst building genuine long-term wealth. It's not just about budgeting for today; it's about creating a financial strategy that reflects who we want to be and the world we want to live in (iv). 

The goal isn't to shame anyone for buying what they can afford today. It's to build a world where what people can afford today also serves their interests tomorrow—and doesn't come at someone else's expense.

References

(i) Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux.
(ii) Ariely, D. (2008). Predictably Irrational: The Hidden Forces That Shape Our Decisions. HarperCollins.
(iii) B Corp Movement. (2024). About B Corps. Retrieved from https://www.bcorporation.net/
(iv) Jackson, T. (2017). Prosperity without Growth: Foundations for the Economy of Tomorrow. Routledge.

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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. 421