What the Budget means for you
- 2 days ago
- 6 min read
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.
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
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.