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Budget blow for capital markets

Thursday, May 28th 2009, 4:59PM 1 Comment

by Philip Macalister

The biggest news for advisers in this year's Budget was the announcement of nearly $12 million in funding for adviser regulation. The government made quite a bit of noise about this announcement (well it did have its own press release), but one can't help thinking that it's not that big. Firstly the $12 million is over four years. Secondly the government is saying that from 2012 onwards the regulations will have to be self-funding. That means advisers and companies, and ultimately consumers, will be paying for the protection. The other thought is that this isn't that new. The previous government had flagged something similar. The next point of interest, and something that was unexpected, was the plan to can KiwiSaver mortgage diversion. The general feedback on this is that it's an OK move. Not many savers had taken up the option and also with the changes that National made to KiwiSaver late last year in reducing contribution rates it was almost not worth having the ability. Anyone in KiwiSaver with a mortgage is better to increase their current repayment rates. I would say that removing the diversion option will remove some of the administrative complexity of KiwiSaver for fund managers and also that mortgage diversion always seemed at odds with the savings regime. The good news, and it is good news, is that there are no further changes to KiwiSaver. That means the industry can get on with promoting the scheme and educating members. Also it should give advisers confidence in dealing with clients. The other Budget announcement worth mentioning is the decision to stop contributions to the NZ Super Fund. It is easy to understand the logic, but on the other side one wonders if it is too short-sighted as this is the time to pick up cheap assets. Much of the money investors will make in the medium term will actually be in the short-term. Of more concern is that this decision will have a significant impact on New Zealand's capital markets. While many argue not enough of the fund is invested locally, many millions of dollars do go into New Zealand assets. Well they used to until now.
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Comments from our readers

On 30 May 2009 at 4:43 pm Simon Owen said:
Firstly, adviser regulation funding is four years well overdue (thanks Labour). $3M per year is not a lot, but then the issues currently facing us are not that all complicated. Sure, investing is a complex and emotional science, but the sooner that there are some fundamental legal boundaries for this industry the better I say.

Secondly, government money should always be invested for safety and the best return. If that currently happens to be overseas, so be it. Budget 2009 is a wake up call to New Zealand. We need step up to the plate and hit that home run. We're in a unique position to be global leaders - let's not fail.
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ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
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CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 ▼3.40 ▲3.50 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - ▲2.25 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
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SBS Bank 4.54 2.79 2.79 3.15
SBS Bank Special - 2.29 2.29 2.65
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.29 2.59 2.79
The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
TSB Bank 5.34 3.09 3.29 3.45
TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
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Westpac Special - 2.29 2.69 2.79
Median 4.55 2.73 2.99 2.80

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