Market Update: Survey shows investors turn away from housing, plus … are Aussie bank profits too big? – Inside Economics – Full Analysis

Be wary of overly dramatic headlines. The numbers will tell the best story.

That’s because when it comes to in-depth analysis about possible ramifications, whether the Strait of Hormuz will stay open, the size of China’s oil reserves and all that detail, you can bet that the big investment firms are doing the work.

What we can say so far (as at Tuesday evening NZT) is that we haven’t seen any panic on markets.

Oil prices are up, but by less than 10%. Equity market moves haven’t been any more dramatic than we might expect to see in a regular week of wild Donald Trump proclamations.

Those are obvious places to watch closely over the coming days and weeks. To that, I’d add currency markets as we tend to see a flight to safety (ie the US dollar) when things get really serious.

Gold markets are also a good proxy for the general level of investor fear.

You can also look at the Volatility Index (VIX) on the Chicago Board Options Exchange.

It measures market sentiment by aggregating prices of S&P 500 options to show expected volatility over the next 30 days.

Unsurprisingly, the index has risen in the past four days, but it still hasn’t hit a new peak for the year to date.

Longer-term, if you’re looking for evidence of an emerging supply-side shock that will cause inflation, shipping costs could be key. For a gauge on that, look to the Baltic Dry Shipping Index. It tracks rates for vessels transporting dry commodities – so not oil or gas but almost everything else.

If that gives some of you flashbacks to the Covid era, that’s because the Baltic Dry Index was in the headlines when it spiked to record levels in 2021 because of a combo of lockdowns and the blockage of the Suez Canal.

So far, the index has remained well within the range that it has traded for the past few months.

Guessing game

Meanwhile, if you want to get a sense of how futile the speculation about long-term impact is, check out the Reserve Bank of Australia’s statement on the war.

Reserve Bank of Australia Governor Michele Bullock has warned that the conflict could result in either a supply shock that could add to inflation pressures or, if prolonged, hit economic growth and reduce inflation.

Right, so we should brace ourselves for the possibility that inflation could go up or that it could go down. Got it.

End of era for mum-and-dad landlords?

ASB’s latest Investor Confidence survey shows that for the first time in years, owning your own home or having a property investment is no longer seen as providing the best returns on balance among those surveyed.

KiwiSaver and managed funds are now the top two performers in the eyes of investors, reflecting growing confidence in diversified and professionally managed investment options, the survey found.

This is information that would have been handy for my column on Sunday.

In that, I speculated that the extended housing market downturn (now entering its fifth year) would hopefully drive cultural change in Kiwi attitudes to investing.

Looks like I was on the right track.

“While property has long been considered the gold standard for investment, Kiwi are increasingly recognising the value and convenience of managed funds and the long-term benefits of KiwiSaver, favouring the flexibility and potential for growth,” ASB senior economist Chris Tennent-Brown said.

He noted that the under-30s have been leading the way in this shift in sentiment for some time (not surprising, given the extent to which they’ve been locked out of the housing market).

“However, this quarter’s findings show a change in sentiment among most other age groups,” Tennent-Brown said.

“The generational divide is apparent, with the over-60s holding steady in their belief that your own home is still the best investment, which is unsurprising.

“Gen Z, on the other hand, believe the best returns currently lie in investing in shares of publicly listed companies, signalling the rise of the DIY investor as an accessible path to growing your portfolio.”

Meanwhile, the survey showed some positive signs for the economy, with investor confidence having lifted to 11% for the fourth quarter to December 31, 2025 (from 10% in Q3).

The lower North Island reported the most significant rise, jumping from 3% in the third quarter to 10% in the fourth quarter.

Here’s hoping the Middle East conflict doesn’t derail the trend.

Aussie bank profits

What’s your viewpoint on the Aussie banks taking profits offshore?

Should the Government introduce legislation to cap the profits they make? I’m sure a former PM who now is associated with the ANZ would fiercely object. Interested in your feedback.

Regards,

Ross B.

Hi Ross,

Well, I do wish a larger percentage of our banking sector were owned locally. The $7 billon or so in combined profits that the big four Aussie-owned banks made in 2025 does represent a substantial drain on the nation’s current account.

It puts our economy on its back foot from the get-go.

But no, I don’t think the Government should be legislating to cap profits.

That’s a slippery slope that usually doesn’t end well for economies.

It’s the Government’s job (via the Commerce Commission and the Reserve Bank) to ensure we have a competitive and stable banking sector that delivers good service and doesn’t rip us off.

Once the rules and regulations are in place, businesses should be free to maximise their profits. That’s capitalism.

I do wish we had done a much better job of deregulating our banking sector through the late 1980s, 1990s and early 2000s.

The ASB and Trust Bank networks that were sold to the Commonwealth Bank and Westpac could have been floated on the NZX.

But at the time, the local finance sector was still shellshocked by the 1987 crash and the failure of the BNZ in 1990.

There was a belief that New Zealand didn’t have enough depth in capital markets then. It was probably true in the 80s and 90s, but not by 2003, when the Commerce Commission actually had to get a special exemption to allow ANZ to buy National Bank (from Lloyds).

That should never have happened.

There still isn’t enough depth to capital markets for New Zealand to own all its banks, although the rise of KiwSaver and the Super Fund mean we could probably afford to have at least one of the big four listed here.

Anyway, that’s all water under the bridge. The big four banks are Aussie-owned. Now what?

I think there are good arguments for the Government to be doing more to increase competition.

We’re still waiting for the green light on open banking in this country.

That would open a path for more competition in retail banking services.

The Government could also do more to supercharge Kiwibank as a viable competitor (see question below).

Plans for a $500 million capital raise were scrapped last December.

Perhaps a partial listing is still on the cards. I’m sure National and Act would be keen. But it would take an almighty trade-off with NZ First to get that on the policy agenda.

I should also point out that not all the profits go offshore. Many New Zealanders benefit from dividends, either through direct investment in the big banks or via their KiwiSaver accounts that almost certainly have Aussie bank exposure.

One way to stop so much of the bank profit heading offshore is simply for New Zealand to grow its savings pool and increase it ownership of the banks by investing in them.

Finally, for the record, former Prime Minister Sir John Key is also now a former ANZ director.

He stepped down from roles on both the local board and the Aussie board in 2024.

Local options

Q: Can you explain to a layperson why we are pretty much forced to use Australian banks that send their profits offshore?

Why can’t the Government fund Kiwibank to the point that it can compete for mortgage lending, so we could easily choose to use it and promote a homegrown company?

Every time I re-mortgage, I ask my adviser if they can get me a loan with Kiwibank. He laughs in my face.

David B.

I feel like your mortgage broker could be a bit more positive. KiwiBank definitely argues it does compete for mortgage lending.

Maybe let your broker know that Kiwibank does now pay commission to mortgage advisors (it made a point of not doing so when it initially launched).

There are also other locally owned options via smaller outfits like TSB and SBS where you can get a mortgage.

Whether any of these players can match the big Aussies is another matter.

That goes to your underlying point, that the big four Aussie banks do have the deepest pockets and that often equates to the best deals.

As discussed above, Kiwibank could be scaled up, and in fact, the Government has opened a path for it to raise more capital if it wants to.

It was a commercial decision by Kiwibank not to raise $500m in capital that it had originally planned to.

The bank now believes it can keep growing organically – presumably by competing for mortgages like yours.

Kiwibank delivered its half-year result last week and reported good growth in the mortgage market.

Here’s what it reported: “Total lending increased by $1.8 billion, taking Kiwibank’s loan book to $37.6 billion.

“Retail home lending grew 1.6 times faster than the market, increasing $1.3b, reflecting strong demand for Kiwibank’s competitive rates.

“In the six months to December 2025, Kiwibank accounted for 13% of all net new bank mortgage lending growth, helping 6213 Kiwis get on the ladder and more than 3000 to refinance.”

That’s pretty good going.

Traditionally, it is the business banking market where KiwiBank has struggled to compete with the Aussies.

That’s an area where a capital raise or partial listing might accelerate things if and when the time is right.

Two steps forward, one step back

I borrowed that headline from an Infometrics release on the latest filled jobs numbers.

The monthly employment numbers have been providing economists with some early insight into the state of the labour market.

Infometrics economist Rob Heyes notes that filled job numbers rose 0.2% (4217 jobs) between December 2025 and January 2026 (seasonally adjusted).

“But with the December result revised down to a 0.3% fall, it feels like one step forward, two steps back.”

That sentiment could be applied to a lot of data we’ve seen in the past week or so.

ANZ’s Business Outlook and Consumer Confidence surveys both took a step back in February.

Consumer and business sentiment remained in positive territory but ebbed back a bit as banks lifted mortgage rates late last year and in early January.

ANZ chief economist Sharon Zollner noted that responses to the surveys improved after the Reserve Bank’s dovish Monetary Policy statement softened the market outlook for rate rises.

It seems like Kiwis remain highly sensitive to interest rate movements.

We’re going to have to get over that because the Official Cash Rate can’t stay in stimulatory territory forever.

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.

To sign up to his weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here. If you have a burning question about the quirks or intricacies of economics send it to liam.dann@nzherald.co.nz or leave a message in the comments section.