Is Kiwi Prepared for a Recession? | New Zealand Investment News

With the recession looming, David Boyle, head of sales and marketing at Mint Asset Management, has a tough opinion on kiwi savings ideas…

New Zealand’s last major recession was in 2008. Interestingly, according to the Reserve Bank of New Zealand, the average floating mortgage rate was 10.57% as of January 2008, and you could get an average of 8.27% on a six-month term deposit. . We are in the middle of the Global Financial Crisis (GFC) and the selfie stick was invented.

Going back to mid-2023, variable mortgage rates offered by major banks are between 8.14% and 8.64%, while 6-month deposit rates hover around 5.6%. We are probably on the cusp of a so-called “gentle” recession. And this is the year that ChatGPT was on everyone’s lips and has become homework for some.

From 2020 onwards, the Financial Services Council will Financial Resilience Index, measures the economic confidence and well-being of New Zealanders. This only takes a snapshot of a point in time (this time he’s in March 2023), but it compares how resilient New Zealanders feel about their financial well-being year-over-year. is helpful. With around 2,030 responses, it is a valuable sample and a good barometer for testing New Zealand sentiment and money.

Some of the key statistics from the report:

• 48% of New Zealanders worry about money daily or weekly, up 300,000 from last year
• The overall negative impact of financial problems on our well-being is growing, and mental health is disproportionately affecting younger generations.
• 39% of respondents (equivalent to 1.5 million New Zealanders) were unable to access $5,000 within a week without borrowing in an emergency, an increase of 5% since 2022
• 62% of respondents are not ready for retirement (57.4% last year)
• The number of people who reported investing in their household fell by 3% to 83%

I strongly support research. When it comes to money matters, there’s enough research to resink the Titanic. The key is to take advantage of the insights gained and apply them in practice to improve identified problems.

If I grabbed my crystal ball and saw what these stats and insights would look like in 2024, I suspect the numbers would be worse overall. The impact of rising interest rates on the debt of property owners and business owners would have begun in earnest. With rents and the cost of living in general likely to rise and interest rates likely to remain high for a long time, I suspect many households will be nearly full. This means less discretionary spending, which could lead to more unemployment and lower household incomes for many.

This is just a guess, and sadly the glass is half empty at the moment, but this is not my normal view of the world. What we do know is that many Kiwi households are having a much tougher life than in years past.

The reason I feel this way is a statistic about whether you can unexpectedly access $5,000 within a week without going into debt. Don’t get me wrong. 5,000 is a lot of money to keep, let alone get, for many people, but not having access to funds when emergencies or life events occur can be a difficult and slippery slope. may be lost. come back from Please don’t recommend me to “buy now pay later” for groceries, especially if you have to use a credit card, third tier lender or payday lender.

Once you’ve eliminated high-interest debt, setting aside a savings buffer, sidecar, and emergency savings is the second pillar on your financial health list. For many, it is incredibly difficult to amass, and it is only until you need it that you fully appreciate its value, not only for your financial health, but for your overall well-being. we know it’s not.

The trick is to make it so simple and easy that you don’t even know you’re doing it.

Te Ara Ahunga Ora (Retirement Commission) last year set up a savings working group as part of its work related to the 2022 Retirement Income Policy Review. Its purpose is to delve deeper into the savings problem, examine the savings opportunities that the private sector can consider, and make recommendations to improve saving behavior for those who are not currently saving but have the means to do so. was to do

It came up with:

1 Prioritize open banking and leverage technology-based savings solutions to deliver better customer outcomes

2. Apply behavioral insights to improve customer outcomes through CoFI and knowledge sharing
3. Visually show customers what spending decisions will cost over the life of the liability
4. Direct customers with regular debt to better products
5. Consider the emergency savings opportunity with KiwiSaver.sidecar products
6. More culturally responsive products and partnerships to better meet the needs of Maori and Pacific peoples

All exceptional ideas to implement. Many of them have already been identified but have not yet been undertaken for various reasons.

There is light at the end of the tunnel. Open Banking will finally start in May next year. This is very interesting because it means that New Zealanders can control who receives their financial information, which could lead to significant improvements, such as providing a visual view of a personalized financial health dashboard. Hope to connect. Think of this as a portal that gives you a complete snapshot of your finances, preferably on a daily basis, and how your spending or savings decisions affect your retirement goals.

One of the other key recommendations the group has identified is one that many of us have suggested in the past is to open an emergency savings account using the KiwiSaver contribution system (through employers and the IRS). is to save to and start saving. that buffer.

Another great example of automated (small, long-term) savings is ASB’s ‘Save the Change’ initiative. This has helped the New Zealander save him $425 million since 2010. This is a great example of using technology to round up payments to the nearest dollar. Of which he should have one or he two siphoned into a savings account and hopefully be there, out of sight and out of consciousness when he hits a speeding bump on the highway.

Regardless of what the future holds for the economy in the next 12 months and beyond, the value of the savings buffer cannot be underestimated and is seen as a major industry effort without even asking ChatGPT should. The answer is.

Disclaimer: David Boyle is the Head of Sales and Marketing for: Mint Asset Management Limited. The above article is for informational purposes only and does not constitute investment advice.

Mint Asset Management is the issuer of the Mint Asset Management Fund.Download a copy of the Product Disclosure Statement here.