What the Budget means for you

Over the past month, global markets have shown notable resilience. Economic data from the United States continues to point to a relatively strong backdrop, with employment remaining robust and GDP growth holding up well compared with many other developed economies, including New Zealand. The US economy has also benefited from increased energy self‑sufficiency, reducing its reliance on Middle Eastern oil and helping it maintain a more stable footing. While cost‑of‑living pressures persist, their impact in the US remains more contained than what we are experiencing locally.

A major talking point in markets has been the growing focus on prospective high‑profile listings, particularly across the technology and artificial intelligence space. Companies such as SpaceX, Anthropic, and OpenAI are frequently cited as potential IPO candidates, with expectations that these offerings could attract a substantial amount of global capital, with SpaceX alone expecting to raise $75 billion with the company valuation targeting approximately $1.7 trillion. In some cases, valuations appear to be driven more by future growth expectations than by current profitability, highlighting the importance of careful analysis as capital increasingly flows towards businesses still in the early stages of monetisation.

Against this backdrop, we and the fund managers we work with continue to closely monitor market conditions and investor behaviour. AI‑related leaders such as Nvidia, Microsoft, Intel, Micron and others have dominated market news. This volatility has created active buying and selling opportunities, but it has also led to sharp short‑term market movements, including a notable pullback late last week (NASDAQ fell ~4%) as technology stocks retreated and recession concerns resurfaced in market commentary. Some investors also took profits to release capital to participate in the IPOs.

Looking ahead, interest rate expectations remain a key area of focus. There is a growing possibility that the US Federal Reserve may need to hold rates higher for longer, or even consider further hikes rather than cuts. Closer to home, ongoing cost‑of‑living pressures raise the risk that the Reserve Bank of New Zealand may also be forced to maintain a tighter monetary stance. In this environment, we remain disciplined, selective and focused on long‑term fundamentals as markets continue to adjust.

If you have any queries or concerns about how your investments are faring in the current markets or your financial, investment, lending, or retirement planning matters, please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.

Sincerely,

The Team at Trilogy Financial Solutions

Budget 2026

Budget 2026 is built around tight spending and a focus on core services. The Government is keeping a close eye on day‑to‑day spending, aiming to return the country to surplus by 2028/29, while putting more money into areas like health, infrastructure, defence and public safety. It expects the economy to grow at a steady pace over the next four years, with wages gradually rising faster than prices, rather than delivering a quick lift through tax cuts or large cash payments. Government debt is still rising for now, but is forecast to peak in 2027/28 and then slowly fall.

Key changes and what they mean for you:

• The Foreign Investment Fund (FIF) de minimis threshold increased from $50,000 to $100,000. This means you only need to apply FIF rules if the total cost of your offshore investments (excluding most listed Australian shares) exceeds $100,000 in a given tax year.

  • For a joint portfolio, the threshold is $200,000.

• Most households will not see new tax cuts or one‑off payments, so there is no immediate boost to take‑home pay.

• Health services receive more funding, which should help over time with hospital capacity, access to care and waiting times, especially in some regions.

• More money is going into roads, transport and other infrastructure, which supports jobs and growth but takes time to show up in daily life.

• Spending on police, prisons and defence is increasing, with the aim of improving public safety.

• Cost‑of‑living help is targeted and temporary, offering some relief at the margins rather than a major change.

• A new levy on banks and insurers will fund financial regulation, with a risk that some of the cost is passed on through fees, interest rates or insurance premiums.

• Savings in other parts of the public sector mean some services and supports are under pressure, particularly for lower‑income households.

For everyday life, this Budget is more about gradual change than quick wins. The government’s message is that living standards should slowly improve as wages catch up with and move ahead of inflation, rather than through Budget‑day giveaways. Public services like health and education may improve over time, but much of the new funding is seen as catching up after years of strain. For many middle‑income households, the impact is likely to feel muted, while the effects are more noticeable for those who rely heavily on public services or targeted support.

Key indicators

At Trilogy Financial Solutions, we monitor a focused set of key economic indicators to assess the outlook for markets and the health of the New Zealand economy. Movements in interest rates, inflation, employment, and the currency influence market sentiment, asset prices, borrowing costs, and household spending, and the following indicators highlight where conditions currently stand and what they may mean for investors ahead.

Official Cash Rate (OCR)

The Reserve Bank of New Zealand’s (RBNZ) Official Cash Rate is 2.25% (as at early June 2026).

Outlook: We expect the cash rate to increase over time to keep up with inflation. The next OCR meeting will be held on 8 July, and we expect the RBNZ to hike rates at this meeting. Over the next 12-18 months, our expectation is that the RBNZ will increase the OCR by 1%.

Inflation

Annual inflation was 3.1% in the first quarter of 2026.

Outlook: In New Zealand, inflation data is reported with a three‑month lag and is increasingly driven by non‑tradable, domestic pressures, while monthly offshore data highlights the quicker impact of global price movements. With fuel and energy costs rising and feeding through to most goods and services, we expect inflation pressures to build again over the coming quarters.

Mortgage rates

The standard floating rate, according to RBNZ, is 6.15% as at May 2026.

Outlook: The window for locking in mortgage rates below 5% looks to be diminishing fast. Rates will trend higher over the next 6–12 months, so any opportunity to re-fix your current loans for longer would be ideal.

Currency (NZD/USD)

The New Zealand dollar is trading at approximately USD 0.58 per NZD.

Outlook: We expect the New Zealand dollar to trade in a 0.56 to 0.60 range against the US dollar, reflecting an interest rate differential of around 1.5% that continues to favour the USD. Offsetting this to some extent, New Zealand’s widening trade surplus, which reached NZD 1.92 billion in April, indicates stronger export activity than imports and should help provide underlying support for the NZD.

Unemployment

The national unemployment rate is 5.3% in the first quarter of 2026.

Outlook: New Zealand's labour market remains subdued, with softer hiring demand coinciding with the increase in labour supply from strong migration over recent years. While unemployment has risen, it remains well below the levels experienced during the early 1990s recession. Anecdotally, graduates and workers aged 55+ appear to be finding conditions particularly challenging.

CBOE Volatility Index (VIX)

The VIX index measures the market's expectation of 30-day volatility for the S&P 500. The VIX index is trading at approximately 19 as at 12 June 2026.

Outlook: The VIX will vary depending on the expected volatility in the market. If geopolitical tensions, including the conflict in the Middle East, de-escalate, the VIX could fall to around 14 to 15. However, if these conflicts persist, the VIX may continue to trade above 15.

Staff update

We would like to share a few changes within the TFS team.

Our previous adviser, Andrew Webster, has recently left Trilogy Financial Solutions to join his family business in a different industry. We thank Andrew for his contribution and wish him and his family all the very best in this next chapter.

At the same time, we are pleased to welcome two additional Financial Advisers to the team, strengthening our ability to support clients with high‑quality, personalised advice.

Usha Ganti - Financial Adviser

Usha brings over 17 years of experience in financial services, having worked with Westpac New Zealand, ANZ Bank and JBWere across wealth management, private banking and investment environments. She has strong expertise in investment portfolio solutions, KiwiSaver and retirement planning and is known for building close client relationships and delivering positive financial outcomes.

Jerome Ty - Financial Adviser

Jerome has spent the past two years as Trilogy Financial Solutions’ in‑house Paraplanner, building strong experience supporting advisers and clients across the advice process. He now works directly with employees and personal clients, with a particular focus on workplace savings advice and helping clients build KiwiSaver and investment strategies aligned to their goals.

We’re excited about the strength of our growing team and the support we can continue to provide to our clients.

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Upcoming important dates

20 June

Cut-off for KiwiSaver Government Contributions

June

Tax reports available for managed funds clients

June - August

KiwiSaver member tax statement published

8 July

Next OCR update

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If you would like to discuss your current portfolio, retirement planning needs, goals-based investing approach, or any other financial planning matters please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.

We are always happy to help.

Sincerely,

The Team at Trilogy Financial Solutions

Disclaimer: This newsletter is for informational purposes only and should not be treated as financial advice.

What we’re seeing in markets, KiwiSaver and on the ground in China

Markets have been volatile in recent months, with periods of uncertainty followed by sharp recoveries. While short‑term movements can be noisy, long‑term outcomes continue to be driven by company earnings and underlying fundamentals. Staying focused on the bigger picture remains as important as ever.

In this edition of our newsletter, we share insights to help cut through the noise. Chiti reflects on his recent trip to China and what he observed on the ground, including how businesses and markets are positioning themselves. We also provide an update on KiwiSaver, along with a snapshot of current market conditions and what has been driving recent performance.

We hope these updates provide useful context and reassurance and help you stay informed and confident as a long‑term investor.If you would like to discuss your current portfolio, retirement planning needs, goals-based investing approach, or any other financial planning matters, please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.

Chiti’s China trip

I recently visited China and travelled through several major cities, including Beijing, Suzhou, Wuxi, Hangzhou, and Shanghai. What stood out most was the sheer scale and speed of development across the country.

These are not just large cities by global standards; they are mega-urban economies:

• Shanghai: ~24.7 million people

• Beijing: ~21.5 million people

• Hangzhou: ~10.7 million people

• Suzhou: ~6.9 million people

• Wuxi: ~4.6 million people

Source: worldpopulationreview.com

To put this into perspective, several of these cities individually have populations larger than entire countries, yet they are seamlessly connected and highly efficient.

Infrastructure & Transport

China’s infrastructure development is truly world-class:

• The country has built one of the largest high-speed rail networks in the world, with trains running at 300–350 km/h, linking major cities and dramatically reducing travel times.

• Cities like Shanghai, Suzhou, and Hangzhou are so well connected that travelling between them feels like commuting within a single mega-region.

• Shanghai’s metro is one of the largest in the world, moving millions of people daily with remarkable efficiency.

Clean Energy & Technology

Another striking observation was China’s push towards sustainability:

• A large portion of vehicles in major cities appear to be electric or hybrid, supported by widespread charging infrastructure.

• Large-scale installations of wind turbines and solar panels are visible across cities and surrounding regions.

• This reflects a strong national focus on renewable energy and emissions reduction, embedded into urban development.

The Shanghai Skyline

The highlight of the trip was undoubtedly Shanghai’s skyline. Standing along The Bund and looking across to Pudong, you are met with a breathtaking display of modern architecture: towering skyscrapers, iconic buildings, and a skyline that feels both futuristic and elegant.

By night, the city truly comes alive. The illuminated towers, reflections on the Huangpu River, and the sheer density of high-rise buildings create one of the most spectacular urban views in the world. It is a powerful symbol of China’s rapid growth and ambition.

Overall Impression

China’s development is happening at an extraordinary pace. The world leading level of scale and efficiency is created by a combination of:

• Massive population centres

• Advanced transport systems (HSR + metro)

• Rapid urbanisation

• Strong adoption of clean energy and energy transition.

While markets will always experience periods of volatility, sustained economic growth has historically supported strong equity market performance over time. If China delivers the level of growth currently expected, this creates a compelling long‑term backdrop for investors.

This is the lens through which we view China today. The bull reflects optimism grounded in fundamentals, not short‑term market moves. Over the next decade, we believe China has the potential to deliver a prolonged bull market as economic growth translates into rising company earnings and shareholder value.Fund managers have taken a similar view and increased their exposure to emerging markets such as China, India, etc.

KiwiSaver changes

With KiwiSaver tax statements now finalised, attention turns to the government contribution and a number of changes that took effect from 1 July 2025.

• The annual government contribution has been reduced. The rate is now 25 cents for every dollar contributed, down from 50 cents, which means the maximum contribution has fallen from $521.43 to $260.72 per year.

• Eligibility has also changed. Members aged 16 and 17 can now receive the government contribution if they meet the other criteria, while members with taxable income above $180,000 per year are no longer eligible.

Over the coming weeks, members who have fallen short of contributing the amount required ($1,048.86) to receive the full government contribution will receive reminders about topping up their contributions to maximise what they are entitled to.

Please ensure you have contributed the full amount to your KiwiSaver to receive the maximum government contribution by 15 June 2026.

Market update

• Markets have recovered strongly, with several major equity benchmarks pushing to all-time highs as investors look past the Iran war shock and back into growth, earnings, and liquidity.

• The UAE’s exit from OPEC is a structural negative for the cartel’s influence over oil prices, but near-term export disruption looks limited; the bigger market effect is a possible shift in longer-term supply dynamics.

• The Federal Reserve held rates steady at 3.50%–3.75% in its late-April decision, with debate inside the FOMC keeping the path for future cuts uncertain.

• In the U.S., large-cap equities have generally outperformed, with the S&P 500 trading near record territory in early May, while New Zealand shares look more defensive and the NZD has remained relatively soft versus the U.S. dollar.

• For NZ investors, that mix points to a stronger U.S. growth/risk backdrop versus a more cautious local market, with oil and rates still the main cross-asset drivers to watch.

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If you would like to discuss your current portfolio, retirement planning needs, goals-based investing approach, or any other financial planning matters, please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.

We are always happy to help.

Sincerely,

The Team at Trilogy Financial Solutions

Middle East ceasefire, what happens next?

We know many of you have been concerned about the conflict in the Middle East and the impact it has had on daily life and financial markets. The recent announcement of a ceasefire is a welcome and positive development, particularly given the significant human cost of the conflict. While tensions in the region have not disappeared entirely, the ceasefire has helped ease some of the immediate uncertainty that markets and households have been grappling with.

Over recent months, the conflict has had real-world consequences, from higher fuel prices at the pump to increased costs flowing through supply chains. Energy prices, particularly oil, influence many aspects of everyday living. Financial markets also responded to this uncertainty, with share markets experiencing volatility and bond yields rising as investors reassessed risk.

It is worth remembering that markets often react quickly to headlines and sentiment in the short term. In the longer term, however, they tend to be driven by fundamentals such as corporate earnings, balance sheet strength, and economic growth. Individual companies may go through periods of volatility, but well-run businesses typically remain resilient over time, continue to generate profits, and, ultimately, see their share prices reflect that underlying value.

These periods of heightened volatility can feel unsettling, much like being caught in a storm. Yet once the storm passes, conditions usually settle and clarity returns. This pattern is common in financial markets, and it is something we plan for rather than react to.

We closely monitor market volatility using indicators such as the VIX (CBOE Volatility Index), often referred to as the fear gauge for equity markets, as well as the MOVE (Merrill Lynch Option Volatility Estimate), which tracks volatility in bond markets.

VIX Index over the past 3 months

MOVE Index over the past 3 months

Equity and bond market volatility moved in tandem: the VIX hovered around 19 ahead of 28 February, spiked to around 30 before easing following the ceasefire announcement, with a similar surge and subsequent pullback evident in the MOVE index.

These measures help us understand investor sentiment and guide portfolio positioning. During times of uncertainty, the most effective course of action is to remain diversified and focused on your long-term objectives rather than short-term market moves.

At Trilogy Financial Solutions, we focus on managing risk through a combination of complementary investment strategies rather than relying on a single approach. This includes goals-based investing; dollar-cost averaging (DCA); active management via active funds and model portfolios; and diversification across asset classes, sectors, and geographies. This multi-strategy approach is designed to help reduce volatility and deliver more consistent outcomes across different market conditions. Your investments are also managed by high-quality fund managers that we have selected for their experience, discipline and long-term track records. We continue to follow a structured and consistent investment approach, focused on managing risk while helping you achieve your personal goals.

While the ceasefire has reduced some immediate concerns, it is still difficult to predict how the situation will evolve over time. What is clear is that there is strong global pressure for stability and resolution, particularly given the impact of energy prices on the cost of living. And with important elections approaching in the US, New Zealand and other parts of the world, there is further incentive for leaders to avoid prolonged disruption and economic strain.

We are working with the most current information available, and we recognise that conditions can change quickly. We will continue to monitor developments closely and keep you informed. As always, our focus remains on guiding you through changing market conditions with a steady, disciplined approach, keeping your investments aligned with your long-term plans and goals.

If you have any queries or concerns about how your investments are faring in the current markets or your financial, investment, lending, or retirement planning matters, please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.

Sincerely,

The Team at Trilogy Financial Solutions

OCR remains at 2.25%

At its latest meeting this April, the Reserve Bank of New Zealand (RBNZ) kept the Official Cash Rate (OCR) unchanged at 2.25%. This outcome was widely expected by markets and reflects the central bank’s current balancing act. On one hand, inflation has been pushed higher by energy and fuel costs linked to global events. On the other, the domestic economy is still showing signs of softness, and the Reserve Bank is mindful of not adding unnecessary pressure by lifting rates too quickly. The decision signals patience rather than complacency, with policymakers choosing to wait for clearer evidence before making their next move.

Importantly, the Reserve Bank indicated that while a rate rise was not close at this meeting, the option of increases later in the year remains firmly on the table if inflation proves more persistent rather than temporary. Much of the current inflation pressure is expected to be transitory, driven largely by fuel prices. If those pressures ease as supply conditions normalise, the Bank may be able to maintain a longer-term view. However, if inflation stays elevated and moves outside the 1–3 per cent target range for longer, further action may be required. Markets are already pricing in the possibility of rate increases before year end, even though the timing and pace remain uncertain.

For investors and households, this environment has a few practical implications. Mortgage rates have already begun to creep higher, even without a change in the OCR, as banks factor in higher funding costs and future expectations. At the same time, returns on cash and term deposits are becoming more attractive.

This makes cash management an increasingly important part of portfolio construction. We are currently favouring shorter-term and laddered term deposits, typically three to six months, which provide flexibility to take advantage of higher rates if they emerge later in the year. As always, our focus is on helping you balance stability, flexibility and long-term growth while positioning your money sensibly as interest rate conditions gradually evolve.

Energy Efficient Loans

Our in-house mortgage specialist, Adrian Dale, shares his views on energy-efficient loans banks are offering at low interest rates.

Market Update

New Zealand

• NZ markets are likely taking cues from the lower oil price and improved risk tone after the Iran ceasefire news, which should help inflation expectations and transport costs.

• The local backdrop is still shaped by interest-rate debate, with inflation proving sticky enough to keep the Reserve Bank cautious.

U.S.

• U.S. equities have firmed as ceasefire hopes reduced immediate Middle East risk and eased some pressure on sentiment.

• The strong March payrolls report showed the labour market remains resilient, so the Fed still has little reason to rush rate cuts.

Australia

• The ASX has been under pressure from earlier oil spikes, higher inflation fears and weaker risk appetite.

• Energy-sensitive sectors remain in focus, with lower oil after the ceasefire likely helping sentiment, even if the inflation backdrop is still uncomfortable.

Asia

• Asian markets have been supported by the ceasefire announcement, which eased fears over energy supply through the Strait of Hormuz.

• Japan remains sensitive to oil and currency moves, while broader Asia is also watching tech demand and weaker global growth signals.

Europe

• European shares have benefited from the softer risk backdrop, with lower energy prices helping offset some geopolitical stress.

• The region still has a constructive growth story, supported by improving demand and easier inflation, but markets remain alert to any renewed conflict shocks.

Commodities

• Gold and silver are reacting to the ceasefire in opposite ways at times: safe-haven demand has eased, but volatility and geopolitical uncertainty are still keeping prices elevated.

• Oil has been the main driver, with prices falling sharply after the ceasefire as traders priced in lower disruption risk to supply routes. However, the Strait of Hormuz remains closed, allowing only a select number of vessels to pass through.

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Upcoming important dates

27 May

Next OCR Update

Late May

Tax reports available for wrap clients

May - June

Tax reports available for managed funds clients

20 May - 10 June

TFS Quarter 2 review season

June - August

KiwiSaver member tax statement published

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If you would like to discuss your current portfolio, retirement planning needs, goals-based investing approach, or any other financial planning matters please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.

We are always happy to help.

Sincerely,

The Team at Trilogy Financial Solutions