2020 is half over and for some people that will be a good thing! NZ has been successfully out of lockdown 3.5 weeks, the borders are still closed to overseas visitors and there are a steady stream of Kiwis coming home, some for good. In the past there has been the complaint about the “brain drain”, as Kiwis train here and then move overseas. Now hopefully that talent is returning home.
This creates a situation with more people looking for work, on top of those that have lost their jobs due to redundancies and businesses closing down.
Some decisions for businesses to liquidate or to make staff redundant is being deferred as the Government wage subsidy extension and the small business cash loans offered by the IRD are used to help sustain businesses. This is leaving some people living in a place of uncertainty for extended periods of time. If you have a job and you are concerned about the future of your position, then get in touch so that we can help you plan for having safety nets in place and to manage through the time of uncertainty.
It is not all bad out there, there are some great stories of success as people think outside the square and adjust their businesses to accommodate more online activity, and greater flexibility for staff to continue to work from home.
Today is the start of the new financial year for KiwiSaver. If you are not employed or are self employed you can set up a voluntary contribution of at least $20.06 per week to ensure that you receive the full Government Contribution of $521.43 next year. Over the course of July the Government Contribution will be automatically deposited into your KiwiSaver Fund.
The analysis of the markets during the lockdown and big market downturns through March are starting to come through. It seems that roughly 3.5% of KiwiSaver Members switched from a growth fund to a conservative fund in March. This decision has meant that if they had a fund of $35,000, their KiwiSaver fund crystallised a $4,000 loss. Please talk to us before you switch funds!
Now is a good time to also be reviewing your PIR rate to ensure you are not paying too much tax if you have had a pay decrease, or if you are earning more that you don’t end up with an unexpected tax bill.
First home buyers are still very active in the market. The demand for property is still good and properties that are in good condition are being snapped up. Towns with high levels of tourism are noticing some drop in prices. Tenants are enjoying the reduced rental rates and having more choice in the market. The Ex-pats returning home to NZ will also need housing and will be coming home with $$. This could help to retain the value of properties in some of the markets.
The Reserve Bank of New Zealand kept the OCR rate the same at their latest update on June 24th. So it is back to the Banks to pass on the benefits of this to their customers. KiwiBank has taken the first brave step.
Banks and Finance
Interest rates have continued to drop and this is making loans more affordable particularly for first home buyers. The Reserve Bank has provided the Banks with a number of tools to help them to support people during this time of financial uncertainty, but the Banks are not necessarily passing those benefits on to their customers (you).
Banks are struggling with protecting their brand. The banks still need to follow the responsible lending rules to ensure that they are not putting their customers in a difficult position. The risk of passing on some of the RBNZ benefits to their customers is that as the market interest rates move back up the clients may not be able to afford the higher rates, or they fund a business that cannot sustain the additional debt, and that business is required to liquidate. The banks don’t like to call loans in and to force house sales as it is bad press. The banks will always endeavour to recover as much as possible from their customers before going to the Reserve Bank guarantees.
The banks want to ensure that clients have certainty of income. They are looking at the role and industry people are working in and making a judgement based on the Banks analysis of the market. Banks are also wary of self employed incomes. With the drop in interest rates there is definitely the potential for you to ease your cashflow by reviewing your loans.
To finish up
Janneke is looking forward to starting her Level 5 training this week. Definitely good weather to be settling in for some indoor study! The log burner is getting a workout and Elise has wired the Building on Basics office to improve our internal performance. We are also considering wiring in coffee IV lines.
Our office manager Theo is generally happy with how the business is progressing, but intends to bring in a new policy that all team members must bring him treats.
Elise and the team