Rate-cut reality check - too little, too late: Nick Stewart
It's hard for hope not to fade when our government appears to lack the mettle to take the bull by the horns. The 'price of butter' facade may have fooled some, but not many. Butter is a product that hasn't changed in eons – full cream milk, add salt and churn. No smoke and mirrors or PR spin, just butter. Yet politicians obsess over its retail pricing while avoiding hard decisions on fiscal consolidation that might actually address underlying inflation pressures.
The great capital migration
Capital flows as freely as people in an interconnected world. Just as 230,000 Kiwis have voted with their feet over two years seeking better opportunities offshore, smart money increasingly looks beyond our borders for superior returns.
The recent emigration shows a damning verdict on New Zealand's economic trajectory. These are productive citizens, who see limited prospects in a country determined to tax productivity whilst subsidising speculation. Human capital flight and financial capital mobility share parallels –both respond to incentives and seek the best risk-adjusted returns.
Housing market dysfunction remains
Our housing market remains in purgatory, with prices stubbornly elevated while transaction volumes are sluggish. Latest data shows 'days to sell' extending and prices slipping nationally for six of the past seven months. Wednesday's modest rate cut is unlikely to break this deadlock.
Young Kiwis are emigrating, recognising their homeownership prospects have been systematically destroyed by policies prioritising incumbent wealth over economic dynamism. The social contract promising hard work would lead to homeownership has been broken: 72% of Kiwis without a home believe buying a property is beyond their reach. Yet, many Kiwis remain dangerously over-exposed to residential real estate.
Rethinking investment
The traditional Kiwi approach of leveraging into property and hoping for the best is dangerous where house prices may stagnate while debt service costs remain higher.
Global equity markets continue to climb, with the S&P 500 delivering 5-year annualised returns of 15.71%. Meanwhile, New Zealand's NZX50 has delivered a dismal 1.8% annualised return over the same period.
The performance gap is devastating. A $100,000 investment in the S&P 500 over five years would have grown to $208,000, versus approximately $109,000 in the NZX50. This $99,000 difference is a documented reality for investors who remained domestically focused while global opportunities compounded wealth at dramatically higher rates.
Complexity extends beyond simple asset allocation. Tax implications vary dramatically between domestic and international investments. Currency hedging decisions can make or break returns. Liquidity needs must account for potential emigration scenarios – a consideration rational investors now embrace.
Economic crossroads ahead
New Zealand stands at an economic crossroads between fiscal irresponsibility leading to Japanese-style stagnation, or making hard decisions to restore economic dynamism. Next Wednesday's timid rate cut suggests we're choosing the former.
For investors, the message is clear: adapt or suffer consequences. Capital, like talent, flows to where it's best treated. The 230,000 Kiwis who've recognised this reality are canaries in the coal mine. Smart investors should ensure their wealth enjoys the same mobility their fellow citizens have embraced.
The coming rate cut won't be cause for celebration – it will be a symptom of deeper malaise and policy impotence facing structural decline.
- Nick Stewart's iwi affiliations are Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha).
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But they don't have the ability to just increase their fees and tap into other sources of income that private schools do.' What the money will be used for? In Wellington, Yule says the private school subsidy is going to be used to keep fees as low as possible at Scots College and increase accessibility for the school. It will also go towards running costs. Dilworth School in central Auckland is receiving the subsidy but because of its unique position with every student funded fully through a scholarship, the funds will be used elsewhere. Dilworth School in Epsom, Auckland provides full scholarships to its students. Photo / Dean Purcell The money at the boys' boarding school, headmaster Dan Reddiex says, will instead go towards offsetting the cost of food for students, investing in teachers, driving academic results and funding extracurricular activities such as sending their premier choir Fortissimo to the Big Sing Finale in Dunedin. The school's whānau community is not typically in a position to fully fund school trips, he says. 'We provide seven meals a day for our students and inflation has hit hard in this area.' Meanwhile, Avery says the subsidy will support a range of ongoing projects at St Cuthbert's College. These include enhancing its suite of facilities, improving flood resistance in the school's buildings and paying teachers and staff members' salaries. It will also contribute to improving its outdoor campus – Kahunui – in the Bay of Plenty, a place where Year 10 students travel to attend a month-long school camp that embraces off-the-grid learning. At Knight's school in Porirua, Year 6 students used to travel to El Rancho in Waikanae – 45 minutes up the road – for a two-night camp. However, now that community funding is unavailable, the future of camps for their senior students is uncertain. 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Avery says the subsidy is a recognition of the role independent schools play in educating a percentage of the Kiwi population, which takes the financial pressure off the rest of the education system. Similarly, Seymour says private school students suddenly flooding into the state sector would create an enormous cost for the Government. 'This whole debate to me says something about where we are and where we could be as a country. What you've got is a small group – about 4% of children and their parents and grandparents – often making big sacrifices to pay independent school fees because in their view, that's a better future for them,' he says. 'Rather kind of sneering, resentful tone, we should say, 'okay, that's a choice people make', I may or may not make it for myself, but we should be happy for other people. 'Those people are actually saving the taxpayer a lot of money.' In Porirua, Knight believes the $160,000 increase St Cuthbert's College is receiving could make 'a world of difference' at her small school. She says the money would go towards funding two more teachers or more teacher aide support. Eva de Jong is a New Zealand Herald reporter covering general news for the daily newspaper, Weekend Herald and Herald on Sunday. She was previously a multimedia journalist for the Whanganui Chronicle, covering health stories and general news. Sign up to The Daily H, a free newsletter curated by our editors and delivered straight to your inbox every weekday.
