New Zealanders in Kiwisaver are urged to stay calm and stay the course as stock markets tumble.
The global uncertainty comes off the back of US President Donald Trump's sweeping tariffs on imported goods from the rest of the world.
Simplicity Chief Economist Shamubeel Eaqub says tariffs have caused significant damage to the global economy in the past - and the uncertainty has added to existing economic pressures.
"We really gave it up around the world after the first world war, because we had the depression and we saw the extraordinary damage that it does to our own people and to the global economy. But we also don't know if these policies will actually last the distance - there's so much uncertainty."
LISTEN ABOVE
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
You're listening to the Sunday Session podcast with Francesca Rudkin
from News Talks edb to look on not to look?
Speaker 2 (00:14):
Is that how you're feeling about your kivsaver balance? In
recent days, global markets have tumbled since US President Donald
Trump's Liberation Day tariffs were announced, with trillions of dollars
wiped from world markets. So what impact will these tariffs
have on our retirement nest eggs? Do we need to
panic about our ki we saver balance just yet? To discuss,
I'm joined by chief economists for kiwisaver provider Simplicity, Chamu,
(00:37):
Bill yakob I Hope I said that correctly. Shame you, Bille,
good morning.
Speaker 1 (00:41):
Nice to bear with us.
Speaker 3 (00:42):
Very well, Francesca, thank you very much.
Speaker 2 (00:45):
CNN's US Political Commentators says this is the biggest economic
policy era of our lifetime. What do you make of
that statement?
Speaker 3 (00:54):
Absolutely agree. We have experimented with tariffs in the eighteen
hundreds and the early nineteen hundreds. We really gave it
up around the world after the First World War because
we had the depression and we saw the extraordinary damage
that it does to our own people and to the
global economy. But We also don't know if these policies
will actually last the distance. There was just so much
(01:17):
uncertainty around what Trump will do, what other countries around
the world will do. And it's the uncertainty that's as
big a problem as the policies themselves.
Speaker 2 (01:27):
Is this uncharted territory for Kiwi Saber, it is unchatted.
Speaker 3 (01:31):
So if you recall, kvsiver is very young, it's only
been around for a little while. The last time we
had a big financial market crash was doing the Global
Financial Crisis and there was very early on, so none
of us really had much money in markets back then,
so it is the first test of it. But also
what we're seeing is the uncertainty and the moves in
the markets are probably as quick and as big as
(01:53):
we saw when COVID first started.
Speaker 2 (01:56):
So, chemmy Bill, what impact have we seen so far
in the day since Trump's announced these tariffs.
Speaker 3 (02:01):
We've seen extraordinary fall off in markets. So you know,
all of us will have our different investments and some
of them will be exposed to what's happening in financial
markets around the world, and equity markets to shares in
particular have fallen pretty sharply, particularly in the US they've
done about ten percent in the last few weeks, which
is a lot if you think about how much how
hard it is to save ten percent or grow your
(02:22):
money by ten percent. When that kind of happens in
a very short period of time, that does have a
very big impact on our balances. But it is paper losses, right,
because we haven't sold our shares yet, but on paper
it looks like we've gotten worse off.
Speaker 2 (02:36):
It doesn't help that we already sort of had a
volatile start to twenty twenty five, didn't We were already
seeing sort of drops and key we say the balances
we had, but.
Speaker 3 (02:44):
It's on the back of very strong growth in markets
in recent years. We've had some spectacular years on the
back of pandemic. Surprisingly because we had so much stimular
so much money going around the economy, we actually got
a lot of very strong gains. But you're absolutely right,
this year has got enough to a bad start and
it hasn't gotten better in the in recent weeks.
Speaker 2 (03:04):
So how our providers react to the tariffs, what moves
are you making?
Speaker 3 (03:09):
Well for us at simplicity, it's really important that we
stay the course because our investment philosophy is quite simple.
Our view is that stick to markets, be patient, be
low cost, and on average you'll come out better off
because history shows us that we have more good years
than bad years. So if you can't time the market,
because no one can, then time in the market is
(03:31):
what really matters. So we want to make sure that
for our members that they're in the right kind of funds,
because that's the choice you can make. And number two,
we keep on making sure that we're still giving the
best possible service we can. It's very hard to predict
these unpredictable things and say that we're going to be
making the right pecks for you and make you rich
in this environment. I think that's a full errand, but.
Speaker 2 (03:53):
It's worth remembering that because you know, I mentioned this
to someone. I said, oh, you're worried about you Q seven.
They went, no, why would I be. I'm not retiring
for fifteen years. Markets go up and down, you know,
So so I imagine that those who are panicking maybe
looking at you know, hitting sixty five or retiring in
the next two to five years, I could totally understand
why it's a consumed for them. But for the rest
(04:13):
of us, do we all just need to take a big,
deep brief and go Markets go up, markets go down.
It's the long game. Just sit here, we'll get back
to where we need to be.
Speaker 3 (04:22):
Absolutely, for those people who need money soon, either for
your retirement or because you've got a first home that
you want to buy and you want to access the deposit,
it's really important that you're in the right kind of fund.
So if you're in a conservative fund or a balance fund,
then you wouldn't have been affected nearly as much by
the big movements in equity markets because in most balance funds,
(04:43):
for example, will have only sixty percent of their portfolio
in equities. The others will be in bonds and things
which haven't fallen much, if at all, so you would
have been quite protected. So there are two things that
we can decide as kiy servers, which is around what
kind of fund are we in? Is that the right
risk for my needs? And the second one is how
much do I contribute? So as long as those two
(05:04):
decisions are right, because it's time and savings rather than
short term savings, you'll be fine. Even though we have
this market volatively and they do feel scary, but if
you take the long view, the history tells us that
history doesn't repeat. By the rhymes and the historical experiences,
over the long run, you will come out better off.
Speaker 2 (05:23):
What if you are about to hit sixty five, though,
does that become harder to manage?
Speaker 3 (05:27):
Well, even if you're sixty five, you're probably going to
live for another thirty or forty years. The difficulty, of course,
is that you may not be contributing for that period
of time. So if you're getting older, if you're close
getting nearer your retirement age, it's really important that you're
in the right kind of fund. So if you'd think
you're going to need that money soon, you should not
be in an aggressive fund, and you should go and
speak to your financial advisor about this buying lunch. You'd
(05:50):
be in a more balanced fund or a conservative fund,
depending on what your needs are. So that's the choice
you can make, and it gives you a huge amount
of protection. And it's really important that rather than trying
to time the market, we get the right kind of
fund that's right for you.
Speaker 2 (06:05):
There's a large amount of under certainty around this isn't
there and how it plays out and how other countries
are going to react, or even if you know how
Trump handles things going forward. Does that make it harder
for providers here and managed funds?
Speaker 3 (06:20):
Absolutely, it makes it hard for everybody. And so if
you're trying to understand what's going on in the world,
just even as an economist, I find it very uncertain
because Trump is extraordarly unpredictable. We don't know if it's
actually going to push through with all the tariffs that
he has announced in the form for the next however
long it might be. We have also seen the retaliation
by other countries, so China has imposed retiliatory tariffs, so
(06:43):
we're going to see this tit foot ted, possibly escalating
overcoming days, weeks, and months, and that might have a
really big impact on countries like New Zealand because we
trade so much with China and the US there are
number one and number two trading partners, so there is
the kind of direct ecing to make effects as well
as the impact on financial markets. And again that's why
at Simplicity we've taken that very deliberate cho is that
(07:07):
rather than trying to make active decisions around what we
invest in and which stocks we invest in, we want
to be passive and as hands off as possible because
the market movements are by their definition unpredictable, so we
want to make sure that what we're doing instead is
giving people the right exposures without adding cost and judgments
(07:27):
which might lead us astray.
Speaker 2 (07:29):
What about mortgage rates, what impact might all this have
on them?
Speaker 3 (07:33):
Well, it's a little bit unpredictable, but my view is
that given the increase uncertainty in the world, we will
see the reserve Band continuing to cut interest rates, which
at the margin will put pressure downward pressure on mortgage rates. Now,
the only sort of spanner in the works for people
who would like to go out and buy something is
when things are uncertain, banks become less confident to lend
(07:55):
you money, so it might be harder to get the mortgage.
But at the margin, I think what we will see
as a result of the trade wall is that interest
rates on the margin will be lower than otherwise, and
mortgageurts would be lower than otherwise.
Speaker 2 (08:08):
Okay, I saw your comments yesterday that you thought a
new club of countries would form around trade out of
all this, Can you explain that to me?
Speaker 3 (08:17):
Absolutely? Because America has essentially become an unreliable partner after
being essentially the architect of the global order, the Western
Alliance that was built after the Second World War, where
they really promoted free trade, rules based order and all
those kinds of things. And now essentially Trump has done
away with that. But a lot of the other countries,
(08:39):
like US, like Europe, like UK like Japan, Korea, a
lot of these countries have actually benefited massively from free
and open trade. And I think we're going to find
a parallel track of countries strengthening the ties on the
back of this, and we should because we know that
trade that has significant benefits, we have benefited massively from it.
(09:01):
If America is not going to be involved, how can
we find another way of doing things where we have
deeper ties and even less friction in trade, So then
this disruption that we're seeing coming from America can at
least be moderated by these other places. And quite often
it's going to be just strengthening up existing free trade agreements.
(09:21):
And we've got some fabulous quality free trade agreements in
New Zealand. It's really about using the excellent talent that
we have in our Ministry of Foreign Affairs in trade
to go how can we negotiate even better things? So
we're getting closer to those a parallel block of countries
that still believe in the world that's free of friction
when it comes to trade, so.
Speaker 2 (09:40):
It would be important for us to go with them.
Speaker 3 (09:43):
I think so. I think this is this is one
chance that there's a wind of opportunity where we either
take the wrong track of going down the protectionist path,
which would serve New Zealand very badly, or we choose
the path of continuing our leadership of rules based open
trade that New Zealand has participated in pretty much over
the course of the last eighty years. I think that
(10:04):
is our strength, that is our brand, that is our reputation.
I think we should lean into it because it will
be a benefit for New Zealand consumers and exporters.
Speaker 2 (10:12):
Shami, Bill, thank you so much for your time this morning.
Really appreciated that was chief economist. The key we save
provided simplicity. Sham you Bill Jakob.
Speaker 1 (10:21):
For more from the Sunday session with Francesca Rudkin, listen
live to News Talks it B from nine am Sunday,
or follow the podcast on iHeartRadio.
You're listening to the Sunday Session podcast with Francesca Rudkin
from News Talks edb to look on not to look?
Speaker 2 (00:14):
Is that how you're feeling about your kivsaver balance? In
recent days, global markets have tumbled since US President Donald
Trump's Liberation Day tariffs were announced, with trillions of dollars
wiped from world markets. So what impact will these tariffs
have on our retirement nest eggs? Do we need to
panic about our ki we saver balance just yet? To discuss,
I'm joined by chief economists for kiwisaver provider Simplicity, Chamu,
(00:37):
Bill yakob I Hope I said that correctly. Shame you, Bille,
good morning.
Speaker 1 (00:41):
Nice to bear with us.
Speaker 3 (00:42):
Very well, Francesca, thank you very much.
Speaker 2 (00:45):
CNN's US Political Commentators says this is the biggest economic
policy era of our lifetime. What do you make of
that statement?
Speaker 3 (00:54):
Absolutely agree. We have experimented with tariffs in the eighteen
hundreds and the early nineteen hundreds. We really gave it
up around the world after the First World War because
we had the depression and we saw the extraordinary damage
that it does to our own people and to the
global economy. But We also don't know if these policies
will actually last the distance. There was just so much
(01:17):
uncertainty around what Trump will do, what other countries around
the world will do. And it's the uncertainty that's as
big a problem as the policies themselves.
Speaker 2 (01:27):
Is this uncharted territory for Kiwi Saber, it is unchatted.
Speaker 3 (01:31):
So if you recall, kvsiver is very young, it's only
been around for a little while. The last time we
had a big financial market crash was doing the Global
Financial Crisis and there was very early on, so none
of us really had much money in markets back then,
so it is the first test of it. But also
what we're seeing is the uncertainty and the moves in
the markets are probably as quick and as big as
(01:53):
we saw when COVID first started.
Speaker 2 (01:56):
So, chemmy Bill, what impact have we seen so far
in the day since Trump's announced these tariffs.
Speaker 3 (02:01):
We've seen extraordinary fall off in markets. So you know,
all of us will have our different investments and some
of them will be exposed to what's happening in financial
markets around the world, and equity markets to shares in
particular have fallen pretty sharply, particularly in the US they've
done about ten percent in the last few weeks, which
is a lot if you think about how much how
hard it is to save ten percent or grow your
(02:22):
money by ten percent. When that kind of happens in
a very short period of time, that does have a
very big impact on our balances. But it is paper losses, right,
because we haven't sold our shares yet, but on paper
it looks like we've gotten worse off.
Speaker 2 (02:36):
It doesn't help that we already sort of had a
volatile start to twenty twenty five, didn't We were already
seeing sort of drops and key we say the balances
we had, but.
Speaker 3 (02:44):
It's on the back of very strong growth in markets
in recent years. We've had some spectacular years on the
back of pandemic. Surprisingly because we had so much stimular
so much money going around the economy, we actually got
a lot of very strong gains. But you're absolutely right,
this year has got enough to a bad start and
it hasn't gotten better in the in recent weeks.
Speaker 2 (03:04):
So how our providers react to the tariffs, what moves
are you making?
Speaker 3 (03:09):
Well for us at simplicity, it's really important that we
stay the course because our investment philosophy is quite simple.
Our view is that stick to markets, be patient, be
low cost, and on average you'll come out better off
because history shows us that we have more good years
than bad years. So if you can't time the market,
because no one can, then time in the market is
(03:31):
what really matters. So we want to make sure that
for our members that they're in the right kind of funds,
because that's the choice you can make. And number two,
we keep on making sure that we're still giving the
best possible service we can. It's very hard to predict
these unpredictable things and say that we're going to be
making the right pecks for you and make you rich
in this environment. I think that's a full errand, but.
Speaker 2 (03:53):
It's worth remembering that because you know, I mentioned this
to someone. I said, oh, you're worried about you Q seven.
They went, no, why would I be. I'm not retiring
for fifteen years. Markets go up and down, you know,
So so I imagine that those who are panicking maybe
looking at you know, hitting sixty five or retiring in
the next two to five years, I could totally understand
why it's a consumed for them. But for the rest
(04:13):
of us, do we all just need to take a big,
deep brief and go Markets go up, markets go down.
It's the long game. Just sit here, we'll get back
to where we need to be.
Speaker 3 (04:22):
Absolutely, for those people who need money soon, either for
your retirement or because you've got a first home that
you want to buy and you want to access the deposit,
it's really important that you're in the right kind of fund.
So if you're in a conservative fund or a balance fund,
then you wouldn't have been affected nearly as much by
the big movements in equity markets because in most balance funds,
(04:43):
for example, will have only sixty percent of their portfolio
in equities. The others will be in bonds and things
which haven't fallen much, if at all, so you would
have been quite protected. So there are two things that
we can decide as kiy servers, which is around what
kind of fund are we in? Is that the right
risk for my needs? And the second one is how
much do I contribute? So as long as those two
(05:04):
decisions are right, because it's time and savings rather than
short term savings, you'll be fine. Even though we have
this market volatively and they do feel scary, but if
you take the long view, the history tells us that
history doesn't repeat. By the rhymes and the historical experiences,
over the long run, you will come out better off.
Speaker 2 (05:23):
What if you are about to hit sixty five, though,
does that become harder to manage?
Speaker 3 (05:27):
Well, even if you're sixty five, you're probably going to
live for another thirty or forty years. The difficulty, of course,
is that you may not be contributing for that period
of time. So if you're getting older, if you're close
getting nearer your retirement age, it's really important that you're
in the right kind of fund. So if you'd think
you're going to need that money soon, you should not
be in an aggressive fund, and you should go and
speak to your financial advisor about this buying lunch. You'd
(05:50):
be in a more balanced fund or a conservative fund,
depending on what your needs are. So that's the choice
you can make, and it gives you a huge amount
of protection. And it's really important that rather than trying
to time the market, we get the right kind of
fund that's right for you.
Speaker 2 (06:05):
There's a large amount of under certainty around this isn't
there and how it plays out and how other countries
are going to react, or even if you know how
Trump handles things going forward. Does that make it harder
for providers here and managed funds?
Speaker 3 (06:20):
Absolutely, it makes it hard for everybody. And so if
you're trying to understand what's going on in the world,
just even as an economist, I find it very uncertain
because Trump is extraordarly unpredictable. We don't know if it's
actually going to push through with all the tariffs that
he has announced in the form for the next however
long it might be. We have also seen the retaliation
by other countries, so China has imposed retiliatory tariffs, so
(06:43):
we're going to see this tit foot ted, possibly escalating
overcoming days, weeks, and months, and that might have a
really big impact on countries like New Zealand because we
trade so much with China and the US there are
number one and number two trading partners, so there is
the kind of direct ecing to make effects as well
as the impact on financial markets. And again that's why
at Simplicity we've taken that very deliberate cho is that
(07:07):
rather than trying to make active decisions around what we
invest in and which stocks we invest in, we want
to be passive and as hands off as possible because
the market movements are by their definition unpredictable, so we
want to make sure that what we're doing instead is
giving people the right exposures without adding cost and judgments
(07:27):
which might lead us astray.
Speaker 2 (07:29):
What about mortgage rates, what impact might all this have
on them?
Speaker 3 (07:33):
Well, it's a little bit unpredictable, but my view is
that given the increase uncertainty in the world, we will
see the reserve Band continuing to cut interest rates, which
at the margin will put pressure downward pressure on mortgage rates. Now,
the only sort of spanner in the works for people
who would like to go out and buy something is
when things are uncertain, banks become less confident to lend
(07:55):
you money, so it might be harder to get the mortgage.
But at the margin, I think what we will see
as a result of the trade wall is that interest
rates on the margin will be lower than otherwise, and
mortgageurts would be lower than otherwise.
Speaker 2 (08:08):
Okay, I saw your comments yesterday that you thought a
new club of countries would form around trade out of
all this, Can you explain that to me?
Speaker 3 (08:17):
Absolutely? Because America has essentially become an unreliable partner after
being essentially the architect of the global order, the Western
Alliance that was built after the Second World War, where
they really promoted free trade, rules based order and all
those kinds of things. And now essentially Trump has done
away with that. But a lot of the other countries,
(08:39):
like US, like Europe, like UK like Japan, Korea, a
lot of these countries have actually benefited massively from free
and open trade. And I think we're going to find
a parallel track of countries strengthening the ties on the
back of this, and we should because we know that
trade that has significant benefits, we have benefited massively from it.
(09:01):
If America is not going to be involved, how can
we find another way of doing things where we have
deeper ties and even less friction in trade, So then
this disruption that we're seeing coming from America can at
least be moderated by these other places. And quite often
it's going to be just strengthening up existing free trade agreements.
(09:21):
And we've got some fabulous quality free trade agreements in
New Zealand. It's really about using the excellent talent that
we have in our Ministry of Foreign Affairs in trade
to go how can we negotiate even better things? So
we're getting closer to those a parallel block of countries
that still believe in the world that's free of friction
when it comes to trade, so.
Speaker 2 (09:40):
It would be important for us to go with them.
Speaker 3 (09:43):
I think so. I think this is this is one
chance that there's a wind of opportunity where we either
take the wrong track of going down the protectionist path,
which would serve New Zealand very badly, or we choose
the path of continuing our leadership of rules based open
trade that New Zealand has participated in pretty much over
the course of the last eighty years. I think that
(10:04):
is our strength, that is our brand, that is our reputation.
I think we should lean into it because it will
be a benefit for New Zealand consumers and exporters.
Speaker 2 (10:12):
Shami, Bill, thank you so much for your time this morning.
Really appreciated that was chief economist. The key we save
provided simplicity. Sham you Bill Jakob.
Speaker 1 (10:21):
For more from the Sunday session with Francesca Rudkin, listen
live to News Talks it B from nine am Sunday,
or follow the podcast on iHeartRadio.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!