Generational wisdom can be helpful as it gives context to everyday life. But when it comes to financial matters, it’s best to go with proven methodology.
All Aboard the Brain Train: Next stop, Australia…
There’s a well-known jibe from former PM Sir Robert Muldoon which states that New Zealanders moving to Australia would “raise the IQ in both countries.”
Unfortunately, we can’t say the same now. We’re looking at a brain drain.
Inflation – Are We Out of the Woods Yet?
Finally… Some good inflation-related news following the latest Stats NZ announcement of inflation at 6.7%. This is down from 7.2% and might signal a slowdown from the ruthless inflationary pace we’ve seen the past few years.
Down the rabbit hole, chasing stocks
Even if you’ve been regularly contributing to your investments or KiwiSaver, you will likely have noticed a dip since 2022. Some may be thinking, “Why should I contribute if I’m going nowhere, or even backwards?”
Brick by Brick: Building Generational Wealth
Generational wealth is exactly what it sounds like; wealth (assets, property, other valuables) which is passed down by at least one generation. When you hear the term, you likely think of historic ‘old money’ examples like the Kennedys, the Rockefellers, or those with highly visible business empires like the Disneys or the Waltons.
The 300: Staying Strong in Uncertain Times
300 can have all kinds of meanings. It’s the number of articles we’ve just hit in this column, for example – a great cricket innings. Mathematically, it’s the sum of 2 prime numbers and also of 10 consecutive prime numbers. It’s also famously the number of Spartans who, against all odds, held back the masses of the invading Persian army for two days in the Battle of Thermopylae.
Investors, don’t panic over deficit headlines
We’re spending more than we’re earning overseas – to the extent that this is the largest annual account deficit to GDP ratio since records began in March 1988. The previous largest was during the global financial crisis in December 2008.
A Swiss Miss
The saga of wobbly banks continues with the private-sector bailout of First Republic, which had lost another third of its already depressed value as at 17 March.
Silicon Valley Bank: Why NZ Investors need not panic
Fifteen years is not long enough for most of us to have forgotten the pain of the GFC. However, while undoubtedly unnerving for investors, this is not shaping up to be GFC 2.0 as matters stand.
Bills, Bills, Bills...
This is the highest since February 2020, back in the initial uncertainty of covid times... Only the economic landscape is quite different.
The Case for Continual BCP Improvement
Following the unprecedented events of Cyclone Gabrielle, many businesses will have found their business continuity plans (BCP) being severely tested.
Government Funded, Locally Led
The next few years will be tough. But if the Government does it right, and nurtures a local led approach, this is an opportunity for us to come back stronger (and more resilient) than ever.
Rebuilding Hawke's Bay's Economy
by Nick Stewart
The floods, having caused devastation to land and life, will also devastate the Hawke’s Bay economy by putting pressure on many businesses who are also having deal with flooded homes and staff members who have lost everything. Many have still not regained their pre covid strength before being dealt this latest blow.
Our horticulture, viticulture and cropping businesses will be unable to operate profitably this year. This will have a huge downstream impact on our regional economy, even if the influx of infrastructure & rebuilding of flood damaged buildings provides an influx of cash in other areas.
Like the Christchurch earthquake and covid, the government will find a way to fund the rebuild for the flood damaged areas.
There’s a solution to finding some funds for a rebuild: Stop vanity projects and concentrate on providing essential aid to places like the Hawke’s Bay, Wairoa, and Gisborne. Places where, if the roads aren’t functional, we’re entirely cut off.
Can we really afford light rail in Auckland when Wairoa and Gisborne are completely cut off from the rest of New Zealand?
Can we afford to spend years back and forth on navel-gazing exercises like Let’s Get Wellington Moving? The recent pedestrian crossing addition near the airport came with a $2.4M price tag – and opposition from the airport itself.[i]
Then there’s the doomed cycleway across the Auckland Harbour Bridge. $51M spent on planning only to scrap a project which shouldn’t have been considered a priority in the first place, given it only served a very specific subset of the city’s populace.[ii]
We need to stop the dithering, recategorize certain projects as ‘nice to haves’, and provide the necessities for productive areas like Hawkes Bay and Gisborne.
This is not the only way that the Government could help us rebuild our economy. They can help us to help ourselves without having to spend much money (which will ultimately save money for the taxpayer).
A pragmatic Government would take the lessons from Christchurch and managing insurance claims, and pressure insurance companies to settle quickly and fairly with those who have suffered flood damage.
Even more important is for the Government to take a firm line with the banks. Banks complain that the increase in their capital ratios has made lending difficult and forced them to call in loans, or not reissue debt where they would have done so in the past.
For our growers this has meant sound, longstanding businesses with cashflow issues caused by a poor season have not been able to convert their seasonal finance into long term debt. In the past banks have allowed this. They know that in a normal ten-year period there will be some good years, some bad years, and some extremely profitable years. This tends to balance out over time, while season by season financing puts our growers in a very tough position.
The Government could ease up on the capital ratio requirements for banks, if the banks agree to allow businesses to convert this season’s debt to long term debt. The Government could also provide guarantees to banks who provide loans to our successful viticulture and horticulture businesses – who are now going to have a terrible year due to the floods.
The Government has a huge number of levers it can use to help our region recover from the floods. It is the Government’s influence, as much as actual spending, that is a key component here. The key is to front-foot the package and give the damaged region and its people confidence.
The impact of Cyclone Gabrielle has been compared to Cyclone Bola in 1988 – it’s likely much worse, as the brunt of Bola was mostly localised to Tairāwhiti/Gisborne while Gabrielle has severely damaged several regions (and has surpassed Bola’s death toll already). Northland was hammered with property damage and loss of power. Auckland lost power, lives, and now has red and yellow zoned homes. Coromandel has property and road damage. Gisborne and Hawke’s Bay are all the above, plus core infrastructure and crop losses. It’s a grim list.
With Cyclone Bola, the compensation package was huge for its time. It was the brainchild of the David Lange-led 4th Labour Government. The farm funds alone were $50M, which is $121M today adjusted for inflation. In this agriculture package, compensation was paid on the basis of 60% of non-insurable losses based on market values, also incorporating income and stock losses.[iii],[iv]. The wider package cost the government $110M, or $268M today adjusted for inflation. When you consider how much the Hawke’s Bay region has grown in terms of population, economic intensification and productivity over 35 years the potential rebuild cost is sobering.
The aftereffects of Gabrielle are going to hurt for a while because they impact the nation’s primary growing and food-producing regions. Even those who got off lightly in the actual storm will feel its lingering presence. It will be hard for the population to avoid the inflationary impact from the reduced fresh produce, and the stimulatory effect of the rebuild. Furthermore, as we move into repair mode, we (and the Government) need to be thinking of not just clean up, but risk management.
We’re living in a time where climate change is a real and present risk, and these extreme events are becoming ever more likely. How can we rebuild our infrastructure so our cell towers and electricity aren’t brought down in one fell swoop? How can we reduce the flood risk present over multiple regions? How can we best secure a road network which will stay open for supplies and aid?
We need to think for the future. We need to push both local and national government to think for the future. It’s hard to go beyond what’s happening right now when it’s still unfolding and everything feels so raw, but this initial impact is just the beginning of dealing with an event of this magnitude. In the months and even years to come, we will see the social and economic impact of Cyclone Gabrielle – much as we did with Bola.
Hopefully a robust announcement is forthcoming. The sooner, the better.
Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX certified financial planning and advisory firm. Stewart Group provides 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 an Authorised 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
[i] https://www.rnz.co.nz/news/national/467465/controversial-wellington-pedestrian-crossing-gets-the-green-light
[ii] https://www.newshub.co.nz/home/politics/2022/04/prime-minister-jacinda-ardern-defends-51-million-spent-on-cancelled-auckland-cycle-bridge.html
[iii] https://www.inflationtool.com/new-zealand-dollar/1988-to-present-value?amount=50000000&year2=2023&frequency=yearly
[iv] http://nzjf.org.nz/free_issues/NZJF33_1_1988/D06AF7BE-BE5B-41C0-A2D9-03236C4845AC.pdf
https://nzhistory.govt.nz/culture/the-1980s/1988
New Tech, Same Story: Be Wary of the Hype
For all those tired of hearing about crypto, you’ll be pleased to hear there’s a new flavour of the month investment to talk about: AI.
The Year That Might Be
Last year was a doozy. Here in NZ, we were gripped by headlines around the cost of living crisis, housing, and extreme weather events. It was an up-and-down year for markets too—in the end, one with more down than up.
Home Loan Repayments: Up, up, and away...
Watching inflation, mortgage rates and the OCR try to outpace each other in 2022 was a bit like watching a slow-motion train crash. Now we’re seeing the aftermath; mortgagees previously in a secure position are struggling to deal with massive jumps in home loan repayments.
Hurry Up and Wait: The Trouble With Market Timing
Which wolf will you feed?
A well-known Cherokee legend tells of a man teaching his grandson that inside each of us, two wolves fight – one darkly evil, capable of greed, anger, self-pity, and guilt. The other is light and good, joy, peace, serenity, generosity, compassion and faith. As the story goes, the grandson asks, “But which one will win?”
The grandfather replies with a quiet smile, “The one I feed.”
It Ain’t All Bad: Change, Growth, and Resolutions
Change is something we’ve all had to become familiar with over the past few years. With once-in-a-lifetime weather events rolling out alarmingly regularly, a global pandemic and war in Europe, change has been the running theme for a while now.
Shirtsleeves to Shirtsleeves? Not as common as you’d think…
One of the common-held beliefs around financial planning and wealth is that most family wealth only lasts three generations: One to make the wealth, one to maintain it, and one to spend it. If you look up the three-generation wealth curse, you’ll find article after article about it. So, why does this happen? How does a family go from self-starting to feckless in such a short time?
