Investor confidence sinks as GDP shock fuels OCR cuts
Prime Minister Christopher Luxon (pictured left) has doubled down on optimism for a year of economic growth, even as New Zealand posted “frustrating” GDP figures and investor sentiment slid to its lowest level in years, 1News reported.
GDP contracted 0.9% in the June quarter, more than double economist forecasts of a 0.3–0.4% decline. The result has already prompted major banks to revise their official cash rate (OCR) expectations, with Westpac, ASB and Kiwibank now all forecasting a larger 50 basis point cut in October, with further easing likely in November.
Investor confidence slumps to near-pandemic lows
The bank said the slump reflected a “flat” housing market, volatile share prices and global uncertainty. Confidence varied across the country, with the Lower North Island the least optimistic while Aucklanders were the most upbeat, likely due to tentative signs of improvement in the housing market.
Housing and global risks weigh on investors
“It’s been a challenging six months, with markets affected by uncertainty around tariffs and global issues, alongside concerns at home, such as the housing market, which hasn’t bounced back the way people expected it to,” said ASB senior economist Chris Tennent-Brown (pictured right).
Tennent-Brown added that international markets had since improved.
“Markets had improved and were knocking around record highs in the case of the US share market,” he said. “Understandably, global issues are still weighing on Kiwi investors’ minds, and there is still a lot of uncertainty both here and abroad.”
Westpac chief economist Kelly Eckhold said the weaker GDP figures signalled more slack in the economy than the Reserve Bank expected.
“It’s left us concluding that the Reserve Bank will think there is quite a bit of excess capacity sitting in the economy as of Q2 than they thought previously,” he said, adding that the case for a faster path to lower rates was now stronger.
Mixed sentiment across investments
While overall confidence fell, the survey revealed stronger faith in managed funds. However, confidence in KiwiSaver eased when investors were asked which asset class they expect to provide the best returns.
“It was pleasing to see confidence in managed investments lift over the quarter, although confidence in KiwiSaver did ease within the survey when investors were asked which investment they expect to provide the best return,” Tennent-Brown said.
More than half of investors with concerns said they had already adjusted their portfolios or considered doing so. Many cited global instability, with 51% of respondents “very concerned” about political and economic risks abroad.
Long-term strategies emphasised
Tennent-Brown said short-term volatility underscored the need for consistency.
“The second quarter highlighted the importance of sticking with long-term strategies and savings goals, rather than chopping and changing to try and time markets,” the ASB economist said.
He added that younger investors under 39 were the most confident group, while over-60s were the least optimistic, likely reflecting different asset exposures.
For property investors and homeowners, he said now was a good time to review long-term strategies with an adviser, especially with rate cuts expected in October that could influence both borrowing costs and investment decisions.
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