A World of Conflict

“You can bomb the World into pieces,
but you can’t bomb it into peace”

Michael Franti

The ongoing Iranian conflict is proving to be a win/lose situation for the Coalition. The positive is that the average New Zealander has grasped the fact that a possible Labour-led coalition would not have the ability to handle the economic headwinds that the conflict has created, and yet on the other side, it has stalled what at the start of the year looked like an economic rebound. After the Ardern/Covid years, it is generally accepted that a Labour-led Coalition would look to borrow its way out of any downturn. That in itself is not necessarily a bad thing, as long as the borrowing is put into areas that stimulate and grow our economy, not just as handouts. This is currently reflected in both Australia and the United Kingdom, where left-leaning parties in power are continuing to borrow excessively and providing ever increasing cost of living subsidies, with what appears to be the view that they never have to pay the borrowed money back.

There are parts of our economy that are very buoyant, namely tourism, showing strong growth and agriculture, with Fonterra announcing next year’s payout range of $8 – $11 per kg, and wool prices are at the highest level in the past 15 years. The Reserve Bank has taken a prudent approach to the OCR, by keeping it on hold, at the latest review, as although inflation is running above their mandated range, this is due to external factors, rather than a rampant economy. Inflation is generally a result of an active economy, hence the reference to the Reserve Bank moving to a monetary policy of tightening, but that is not the case in New Zealand currently. However, the Bank has signaled that OCR increases are on the way.

Speaking of external factors, there has been little press about the obscene profits that the Worlds oil companies have been reaping as a result of the Middle East conflict. The top 100 oil and gas companies banked profits of $USD30m per hour for the first month of the conflict, with Shell’s profit for the first three months of 2026 more than doubling to $USD6.9bn, whilst for the same period BPs increased to $USD3.2bn.

The Iranian conflict only started on the 28th of February.

The recent Budget is termed responsible and shows input from all three coalition parties, with an emphasis on our Health system and Education and Transport, with little in the way of frilly vote buys. One can surmise that if Winston Peters wasn’t part of the ruling parties, there would have been an adjustment to Superannuation as the ever-increasing burden of this on the Government books needs to be dealt with at some point.

The unreported bright parts to this Countries economy have shown up in this year’s trading figures with the rest of the World. We posted an $NZD1.92bn surplus in April, after a surplus of $NZD430m in March and $NZD257m in February, with 40.00% of our beef production being exported to the United States, under the ever-changing environment of Trump’s tariffs. The press in New Zealand seem to only report negative news, proposed redundancies for the Public Service, a faltering coalition, business ‘closing down, etc. Notice that the cost of housing doesn’t get any news currently as house price increases have stalled, along with rents. Whilst away from the main centres, New Zealand Inc is fairing well, with Farmers having money to spend and tourism destinations seeing strong demand. There should be positive news from the Field Days event this month.

With us now now within the six- month window of the next national election, the numerous polls indicate a close-run election, despite an absence of much in the way of policies from the opposition block. As is usual, there are investment decisions being put on hold. Whether this be the purchase of a house, or in the case of Shane Jones, trying to get large offshore investment into Oil and Gas exploration here. Why would an offshore investor put money into an industry that the opposition has stated they will ban again, if they get into power? This shows an ongoing issue with the three-year electoral term and a very differing view of New Zealand’s direction from the left and the right-leaning parties. This is further exacerbated by the disproportionate power that the more extreme parties hold in any Coalition Government.

New Zealand feels as if it needs to get the election out of the way and we will move back into a path of growth, as our population is now experiencing some sector upliftment.

The financing markets have tightened over the past few months, as funders are nervous about security values, exit strategies and some localities. There is still plenty of liquidity in the non-Bank market, but proposals need to be well presented to get a positive result.

New Zealand’s construction activity is at a low level and now is the time to be looking to progress projects, both from a construction price and the fact that the right sort of product will still be in demand, particularly six to twelve months out, when we revert to lower levels of stock.

Please contact us should you have a proposal that you would like to discuss on a no-obligation basis.