Personal Finance

  • Westpac unveils debit card that earns its user airpoints, also throws in a PayTag contactless payments sticker

    In a move that may entice some customers away from EFTPOS, Westpac says it's launching New Zealand's first airpoints earning debit card.

    Westpac says its new debit card works like an EFTPOS card, drawing funds directly from a customer’s transaction account such as a cheque account.

    The MasterCard debit card can be used online, over the phone and overseas. Customers will earn one airpoints dollar for every $250 spent on the card, and receive a PayTag contactless payment sticker for their mobile phone, through which they can pay for items that cost less than $80.

    Westpac replaced BNZ as one of Air New Zealand's airpoints partners in May. Westpac also offers four airpoints credit cards including a business card, and an airpoints earning home loan. The bank's airpoints earning credit cards offer one airpoint for between every $65 to $120 spent.

    To earn airpoints dollars with the debit card, Westpac customers will need an eligible personal transaction account with a minimum of $500 deposited monthly.

    “We have had excellent growth with the airpoints programme and we expect that to continue with the debit card where customers, who prefer to pay with their own money, can still earn rewards," Shane Howell, Westpac's chief products officer said.

    However, the push towards contactless MasterCard debit cards, and away from EFTPOS, is unlikely to thrill retailers because they don't pay a specific transaction cost for EFTPOS transactions but will be expected to for MasterCard ones.

  • Median rents surge in Auckland, rise modestly in Wellington and decline in Christchurch

    The costs of renting a typical three bedroom house in Auckland was $40 a week more expensive in September than it was in September last year, while tenants in Wellington will likely be paying $5 a week more and those in Christchurch will probably be paying $20 a week less than they were a year ago.

    According to the Ministry of Business Innovation and Employment, the national median rent for three bedroom houses that were newly tenanted in September was $380 a week, up $15 a week compared to September last year.

    Over the same period, the national median rent for two bedroom flats increased by a more modest $10 a week, from $290 a week in September last year to $300 a week last month.  

    The information is drawn from the bonds received by the Ministry's Building and Housing division, which holds them on behalf of tenants and landlords, making it the most comprehensive database of tenancy information in the country.

    However there were substantial differences between the three main centres, with rents in Auckland rising strongly over the last 12 months, rents in Wellington posting modest rises and rents in Christchurch declining.

    In Auckland, the median rent for three bedroom houses has increased from $550 a week in September last year to $590 in September this year, while the median rent for two bedroom flat in the city has risen from $395 a week in September last year to $412 in September this year.

    Over the last two years, the median rent for a three bedroom house in the city has gone up by $60 a week, exactly double the increase in the national median over the same period.

    Rents are also up in Wellington City although the rises are much more modest, with the median rent for a three bedroom house in the Capital increasing by just $10 a week, from $350 a week in September last year to $360 a week last month, with the median rent for two bedroom flats increasing by the same amount.

    But the news from Christchurch was better for tenants than it was for landlords last month, with the median rent for a three bedroom house in the city down $20 a week in September compared to a year earlier, while two bedroom flats were down $5 a week over the same period (see table below).

    Weekly Median Rents

      September 2015 September 2014 September 2013
    Auckland 3 brm house $590 $550 $530
    Auckland 2 brm flat $412 $395 $380
    Wellington 3 brm house $485 $480 $470
    Wellington 2 brm flat $360 $350 $300
    Christchurch 3 brm house $430 $450 $420
    Christchurch 2 brm flat $325 $330 $300
    NZ all housing types $360 $350 $330

  • Bernard Hickey looks at whether to fix or float and how long to fix when the Reserve Bank is cutting interest rates and targeting Auckland property investors

    By Bernard Hickey

    Earlier this year most borrowers thought the next move in interest rates was likely to be up and therefore fixing for as long as possible made sense. Some people leapt at chance in February to fix for 10 years. Oh how the times have changed.

    The decisions on June 11, July 23 and September 10 by the Reserve Bank to cut the Official Cash Rate by a cumulative 75 basis points to 2.75% and signal at least one more cut has certainly taken a few by surprise. Most floating mortgage rates were cut by the same amount and shorter term fixed mortgage rates have fallen more than 100 basis points over the last six months.

    Average one year mortgage rates are down by more than 1.5% to around 4.3% in the last year. If you'd asked someone a year ago if that would happen, they would have laughed you out of the forecasting room.

    Also, through the winter the Reserve Bank and the Government launched a pincer movement to try to slow house price inflation in the Auckland market, which Finance Minister Bill English has described as a "feeding frenzy."

    The Government introduced a "bright line" test from October 1 that will assume that anyone selling an investment property within two years of buying it is doing so as a trader and therefore must pay income tax on any capital gains made over that period. The Reserve Bank has also announced it will restrict Auckland rental property investors to no more than a 70% loan to value (LVR) ratio from November 1.

    Many borrowers who are buying property in Auckland or elsewhere will wonder how this changes their decisions about whether to buy and how long to fix, if they're not already floating.

    The mid-May announcements of the 'bright line test' and the new Auckland landlord LVR restrictions appear not to have had much impact yet on property markets, particularly in Auckland where sales volumes rose over the last year to record levels and median house prices also marched on up to new records. Auckland house price inflation is running at an annual rate of 20-25%, whereas inflation elsewhere is closer to 5%, or none at all. The lower interest rates have softened any blows on the regulatory front.

    Real estate agents and valuers even point to a pick up in activity in Waikato/Bay of Plenty as investors spill out of Auckland with plenty of equity and look to keep borrowing above 70% in those markets outside of Auckland. There are initial signs through late September and early October that auction clearance rates are falling as some buyers pull away from the market, but it has yet to feed through into the sales volumes and prices data.

    The question for many will be whether the slowing economy, thanks to a slump in dairy prices and weak wage growth, starts to drag on house prices. Certainly that slowing economic outlook is helping the outlook for interest rates.

    Weak GDP figures published on June 18 caused economists to slash their forecasts for the Official Cash Rate and most expect it will fall a further 50 basis points to 2.5% by early next year because inflation is so weak. Some even think it could fall to 2% and others argue it should fall to 1.5% if the Reserve Bank was really serious about getting inflation back up to the 2% level it is supposed to target. Annual CPI inflation was 0.4% in the June quarter.

    Economists are divided on whether the Reserve Bank will cut again on October 29, with most saying the Reserve Bank will wait until its full December 10 Monetary Policy Statement before cutting again.

    Independent forecaster BERL thinks the Reserve Bank should cut the OCR to 1.5%. See my article on that here.

    So how does this fit into the decision fix or float?

    My view for several years has been that interest rates stay lower and for longer than most economists have forecast. They may even fall more than some expect.

    That makes me more likely to fix for a shorter than a longer term. The banks subsidise fixed rates at the expense of higher floating rates, so even though floating should make more sense if rates were to fall, the cheapest most flexible option is a shorter fixed mortgage. The idea of a 10 year fixed mortgage scares me witless.

    That rate of 5.75% for 10 years might have looked good earlier in the year, but what if the long term average for mortgage rates is in the process of a structural fall to more like 4-5% instead of the 7.4% we've seen on average over the last decade? Imagine the break fees on a 10 year mortgage. As it turns out, TSB have already cut their 10 year rate to 5.75% and it is well above the 4.3% low rates on offer for one year fixed rate mortgages.

    Could they go lower?

    The slump in fixed mortgage rates has made it much more difficult to justify paying the 6.0% offered by most banks for floating rate mortgages. The question then is: how long to fix?

    The answer to that question depends on your view on where inflation in New Zealand and globally is going, and what you think central banks will do about it.

    The jury is in overseas. They are treating this very low inflation and deflation as a cyclical issue that needs to be addressed with even lower interest rates and money printing. The People's Bank of China has also eased monetary policy repeatedly in recent months, as has the Reserve Bank of Australia. The Reserve Bank of New Zealand was an outlier for all of last year.

    Only the US Federal Reserve is talking about putting up rates, albeit from almost zero percent, but it has talked about it now for years without actually doing it. Some think there will finally be a US rate hike in December, but there remains plenty of doubts about whether rates will actually rise much at all. There may be a small hike and then a long pause. Long term bond yields have actually fallen in the last month on worries about China exporting deflation.

    The global trend over 15 years has been for interest rates to fall ever lower. It's not just about falling petrol prices. There is now a growing debate about whether the deflation is structural and linked to changing technology, the globalisation of services and ageing populations. For now, central banks think it's cyclical. The wisdom of crowds in financial markets, particularly bond markets and stock markets, suggest it might be structural.

    Structural or cyclical?

    If it is structural then interest rates could remain low and possibly fall even further. Remember that interest rates averaged around 3% for all of the 1800s during the first age of industrialisation as new machines lowered the cost of production.

    Some argue the world is entering a second age of industrialisation that delivers a similar type of 'supply shock' that lowers prices of goods and services for decades to come. The age of the smartphone has clearly driven down prices for many services, including shopping, accounting, music, telecommunications and taxis. Could we see many other areas such as education, health and financial services similarly transformed in a deflationary way?

    Calculating the gains

    There is a way to work out which mortgage and which rate saves you the most money, relative to floating rates. has built a special fixed vs floating calculator. See the table below for the latest calculations on a NZ$500,000 mortgage.

    Here's a table that shows the benefits of moving a NZ$500,000 mortgage of moving from a floating rate of 6.0% to the various fixed options, assuming different interest rate tracks. The gains are indicated as a positive and the losses are negative. The middle track for the OCR is in line with market expectations. See all mortgage rates here.

    The latest estimates, given the drop in fixed rates in recent months, suggest fixing is cheaper than floating across the board.

    OCR rate by late 2016 One year fixed (4.39%) Two year fixed (4.9%)
    OCR at 2.5% (low) + NZ$8,268 + NZ$7,904
    OCR at 3.5% (middle) + NZ$11,134 + NZ$10,769
    OCR at 4.5% (high) + NZ$14,282 + NZ$13,917

  • Combination of rising sharemarkets & falling NZ dollar help reduce NZ Super Fund's tax bill by almost 90%

    By Gareth Vaughan

    Finance Minister Bill English, struggling to return the Government's books to surplus, may not be happy to hear the annual tax bill of one of the country's biggest corporate taxpayers has dropped nearly 90%.

    The New Zealand Superannuation Fund's annual report, issued yesterday, shows its June 2015 year income tax expense was $122.652 million. Certainly not an insignificant sum, especially from an entity that hasn't received any government contributions for six years and is tasked with helping meet the rising cost of superannuation payments to retirees, and thus reduce New Zealanders' future tax burden.

    The $122.652 million is, however, down about 89% from the $1.095 billion of income tax paid by the Super Fund in the year to June 2014. That means the Super Fund had an effective tax rate of just 3.18% this year versus 25.18% last year.

    John Payne, head of tax at the Super Fund, told the combination of rising sharemarkets and the falling New Zealand dollar was key in the big turn around.

    "I think it's quite unusual. Equity markets have gone up significantly and at the same time the Kiwi has depreciated significantly. And that has created the circumstance. I'd like to think it was clever tax planning but certainly that wasn't the case. It was just how the markets moved," Payne said.

    The drop in effective tax rate to 3.18% from 25.18% in 2014 was primarily due to how investment income is taxed, Payne said.

    The Super Fund made significant gains on its physically-held equity investments as a result of rising global equity markets and these gains aren't subject to tax. Physical equity holdings are taxed via the Fair Dividend Regime, being a deemed dividend of 5% of the market value of these stocks. The effect from this was magnified by the Super Fund's exposure to physically-held equities increasing and its use of derivatives, which are taxed on a mark-to-market basis, declining during the year. On top of this tax deductible losses from currency hedging due to the NZ dollar's fall were also a significant contributor.

    Payne pointed out that in 2012 the Super Fund's effective tax rate was 80.97%  because the opposite scenario occurred. Global equity markets fell with no tax deduction available for these losses, but the Super Fund recorded taxable gains from currency hedging as the NZ dollar rose.

    Since last year Payne said the Super Fund had reduced its equity exposure through derivatives because the costs of taking derivatives positions have risen due to extra regulations and other factors.

    Despite the reduction in tax paid this year, the Super Fund has now paid about $4.4 billion of tax since it started investing in 2003. (See more on this in Terry Baucher's article here). In this Double Shot interview in August Super Fund CEO Adrian Orr suggested the Government could both resume contributions to the Super Fund, which were halted in 2009, and stop taxing it. Orr said future generations would benefit from these actions. Orr's unaware of another sovereign wealth fund that pays tax, and the Accident Compensation Corporation doesn't pay tax.

    'Higher nominal interest rates reflect better underlying economic fundamentals'

    In his CEO statement in the annual report Orr noted the slow move towards "normal" times in the world's major developed economies.

    "Part of this normalisation, however, will be the United States Federal Reserve returning its interest rate setting to something that better reflects reasonable growth and low inflation. This means the very low interest rates of recent years are unlikely to last in the United States, although they will linger for a while yet in Europe," Orr wrote.

    "I am pleased to see this return to normality if it reflects improved economic fundamentals and prosperity. If the market is, however, dominated by investors constantly relying on central bank ‘pump priming’ for ever, then beware. Higher nominal interest rates reflect better underlying economic fundamentals. But it is the path to getting there that can create the jitters. These short-term concerns are exactly why we focus on multiple years ahead when setting our strategy," added Orr.

    He also noted the other major driver of uncertainty in global markets is China. In particular China’s ability to, and the time it will take to, transition from a manufacturing and investment-based economy into one underpinned by domestic spending.

    "This is a necessary step for China to make to avoid the ‘middle income trap’ into which most emerging economies fall. The world will watch, assist, and benefit over time without doubt."

    *This article was first published in our email for paying subscribers on Thursday morning. See here for more details and how to subscribe.

  • Treasury report on bank competition used by Minister Goldsmith raises concerns about bank fees but sees 'no severe lack of competition'

    By Jenée Tibshraeny

    A Treasury report on competition in New Zealand banking, used by Minister of Commerce and Consumer Affairs Paul Goldsmith, concludes there's no severe lack of competition in the sector but that some bank fees are concerning.

    Goldsmith cited the report when raised concerns about high credit card interest rates with him last month.

    Ultimately, he said it was up to the banks themselves to explain the interest rates they charge. obtained Treasury's 12-page ‘Competition in the New Zealand Banking Sector’ report via the Official Information Act.

    A covering letter with the report from Jennie Kerr, team leader of Treasury's financial markets unit, points out the report is over two years old, (having been published in September 2013), and draws on data from 2013 or earlier. The report itself notes that it's "not a full-blown investigation into banking competition".

    “Our overall judgement is that competition in the New Zealand banking sector is not severely lacking," the Treasury report says.

    “The sector appears to be delivering outcomes that are generally consistent with those we would expect in a workably competitive market. This includes profit levels that are not obviously excessive.”

    'Possible they use the lower level of scrutiny surrounding fees to extract uncompetitive profits'

    However, the report describes some bank fees as "concerning."

    It notes fees appear to account for a relatively high portion of bank profits in New Zealand.

    In 2012 Westpac NZ's fee income accounted for 38.9% of pre-tax profit compared to 29.4% for the Westpac group overall. And ASB's fee income accounted for 36.7% of pre-tax profits compared to 30% at its parent Commonwealth Bank of Australia.

    "Comparisons of fees as a percentage of net interest margins yield similar results," Treasury says.

    The report goes on to say, "While banks compete relatively fiercely on headline interest rates, it is possible that they use the lower level of scrutiny surrounding fees to extract uncompetitive profits."

    Treasury notes the representative action by the Fair Play on Fees group, which argues customers of New Zealand's big banks are paying excessively high fees for unexpected overdrafts, exceeding credit card limits and late payments. The case is stayed pending the outcome of an appeal in a related Australian case.

    The report says, “Overall, some fees charged by banks may be consistent with a lack of competition. But this conduct does not go unopposed by regulators and customers”.

    Treasury highlights the way the Commerce Commission intervened when it found credit card late payment fees were unreasonable in 2009.

    However, when asked the Commerce Commission last month whether it would act on banks setting high interest rates (as the Reserve Bank of Australia has) it said, “There are no restrictions on interest rates so constraint is provided by the competitive market. 

    "It’s not an issue we would investigate unless evidence emerged of collusion between banks to set rates at a certain level.”  

    The Reserve Bank also has no mandate to follow the Reserve Bank of Australia's leadshould they wish to.

    Credit card interest rates haven't fallen as might have been expected against a backdrop of an Official Cash Rate that's now below 3%, down from a peak of 8.25% in 2008.

    Some credit card rates are still above 20%. The average cost of funds for New Zealand banks during the June quarter was 3.93%.

    The tables in this story show slightly higher interest rates are slapped on New Zealand credit cards than Australian ones.  

    Banks’ profitability 'not excessive'

    The report says banks make “healthy profits” that aren't excessive. While they are higher than the OECD and NZX50 averages, they are similar to that in Australia, the US, and Canada, and lower than some of New Zealand’s most profitable industries.

    Treasury also says profits are significantly lower than they were prior to the global financial crisis, and the larger banks don't have discernibly higher profits than the smaller ones.

    However the Labour Party’s Consumer Affairs Spokesperson David Shearer last month said “Aussie banks" were "making a mint out of New Zealanders". 

    For example, ANZ’s New Zealand business increased its cash profit by 22% in the 2014 financial year, while its Australian business increased its profit by only 7%. 

    The net profit across nine New Zealand banks has increased by 58%, from $798 million in 2012, to $1.259 billion in the June 2015 quarter.  

    Other ways Treasury deems banks competitive

    The report recognises market concentration in New Zealand is high by international standards, with the big-four banks holding a combined 88.5% share of net loans.

    However it maintains this doesn’t appear to translate into market power, as the four banks compete particularly fiercely in retail banking and the mortgage markets. It notes the likes of Kiwibank and TSB compete “aggressively” to gain scale in these markets.

    Treasury notes the regulatory barriers to entry are low by international standards, with the Cooperative Bank and Heartland Bank being registered as banks shortly before the report was written.

    Yet it says, “Evidence suggests that the New Zealand banking market is characterised by monopolistic competition where firms have some degree of choice over prices. While this differs from perfect competition, it is the case for most workably competitive New Zealand industries.”

    As for bank switching, Treasury says this is relatively high. With 10% of New Zealanders switching banks in 2012, it considers this to be an indicator of good competitiveness.

    No plans for Treasury to provide Govt. with updated report

    Treasury ends its report saying, "We intend to maintain a watching brief on competition in the bank sector – particularly given the improving macroeconomic conditions and growth in the housing market."

    Treasury confirmed to it’s keeping an eye on competition in the banking sector, but isn’t working on a follow-up report, “as resources are currently being prioritised elsewhere”.

    “In part, this is because the more structural features of the market that determine competition, such as market concentration, barriers to entry, ease of switching, bank conduct, have not fundamentally changed since the 2013 report," Treasury says.

    “The Treasury has noted the uptick in bank profitability that has occurred since the 2013 advice was provided. In general, cyclical increases in profitability may not warrant the same degree of concern as persistent increases in profitability driven by structural factors.

    “That being said, the Treasury will continue to monitor indicators of competition in the sector, and may look to revisit its previous advice on this matter in the future if warranted.”

    *This article was first published in our email for paying subscribers on Wednesday morning. See here for more details and how to subscribe.

  • A guide to deciphering whether you need the flashy new $1m a year of health insurance cover AIA is offering, or whether your more modest insurance policy will do the trick

    By Jenée Tibshraeny

    Here’s a situation I hate to wish upon anyone, but sadly isn’t uncommon: You draw the short straw and get diagnosed with cancer.

    You spend the next few months getting regular radiation treatment – the cancer keeps spreading. You go on an intensive course of chemotherapy – your body keeps killing itself and your days become numbered.

    Your specialist tells you there’s a new type of treatment available; a wonder remedy that has a high success rate overseas. You have nothing to lose.

    Only trouble is, you need to find $150,000 to pay for the unsubsidised, yet Government-approved treatment each year.

    Will your insurer help you cover the cost?

    Most basic health insurance policies don’t cover you for treatments the government agency, Pharmac, doesn’t fund.

    Some more sophisticated and expensive policies may however cover non-Pharmac funded treatments that are approved by Medsafe – the Government body that regulates medicines.

    The issue here is there are a number of “ifs” and “buts”, and a huge variation in the level of cover offered by different insurers.

    Under AIA’s newly launched Real Health policy, you may be eligible for a whopping $500,000 of cover for surgical and non-surgical treatments that include non-Pharmac funded, MedSafe approved chemotherapy medicines.

    However under Southern Cross Health Society’s UltraCare policy you may only be eligible for $10,000 of cover a year for non-Pharmac funded, MedSafe approved chemotherapy drugs. This is included in Southern Cross’s $60,000 cover for chemotherapy.

    Under nib’s Ultimate Health Max policy, you may be covered for up to $200,000 of medical costs, including non-Pharmac funded, MedSafe approved drugs, used in hospital or at home for up to six months after you’ve been in hospital.

    AIA’s hefty new offering

    While it’s impossible to compare these policies in their entirety in this article, their different levels of cover raise a few questions:

    Is AIA’s exceptionally high level of cover an innovative offering up to speed with medical developments, or a toothless marketing ploy the insurer knows no one will ever need to claim on?

    Is Southern Cross’s cover realistic, or simply too weak?

    AIA’s chief executive Natalie Cameron says, “In a global environment of rapidly escalating health costs, it is imperative that insurers address the affordability of new generation anti-cancer treatments and those on the near-term horizon.

    “New Zealanders ought to have access to cancer immunotherapy medicines if they want and need them, and AIA’s new Real Health product gives them this choice.”

    She says cancer immunotherapy drugs are being trialled globally, and the efficacy of the treatment is such that some drugs are already available – but at a cost.

    For example, the melanoma and lung cancer drug Opdiva costs $235,000 for a year of treatment; Yervoy (previously treated or newly diagnosed advanced melanoma) is $204,000 for a 12-week course; and advanced prostate cancer drug Provenge requires an outlay of $146,000 per patient. Opdiva and Provenge aren't MedSafe approved.

    Southern Cross: no one’s claimed more than $150,000 in last 12 months

    Commenting on AIA’s Real Health product, Southern Cross Health Society’s chief executive Peter Tynan says, “In the health insurance industry there is a lot of emphasis on the dollar amount that policies will cover up to…

    “But really this tells a very small part of the story. For example, in the last 12 months we haven’t had any members claim over $150,000.

    “We set our limits based on industry knowledge. We currently pay 73% of the country’s health insurance claims, so we have a significant amount of data on what healthcare actually costs and what the vast majority of our members actually claim for.”

    When asked whether Southern Cross would consider extending its maximum cover in light of costly new cancer treatments coming on the market, Tynan said, it regularly reviewed its policy benefits in line with new healthcare services and advancing medical technologies.

    Oncologist: $10,000 cover for unfunded cancer treatment “too little”

    Consultant oncologist Dr John Childs observes there’s a small, yet growing portion of patients who want to use unfunded treatments.

    While many may resort to these after using conventional treatments, he says some unfunded treatments may be best used in the first instance.

    “One does sense a bit of frustration from some patients who hold insurance, who then find it actually doesn’t cover things that are significantly different from what the public sector covers,” he says.

    Putting a dollar figure on the level of insurance cover, Childs says, “Well $10,000 you might say is too little, when I think of the cost of some of the unfunded drugs.”

    He says there could be treatments that reach $500,000, but believes the majority sit somewhere in the middle.

    “Depending on the rate of release of new drugs, it may be that going into the future, there will be an increasing portion of patients with that sort of insurance [that covers non-Pharmac funded treatment], who might stand to benefit from it,” he says.

    Overall, Childs notes people generally find their insurance covers them sufficiently for cancer surgery, but starts to run out as they get treatment.

    Does Govt. need to up its Pharmac funding?

    Taking a step back, AIA argues there’s a broader issue at play here.

    Cameron says the government hasn’t increased Pharmac’s funding in five years, so a greater burden is being put on the private sector.

    “Kiwis already cannot access a range of innovative medicines and treatment, compared to Australia, and funding constraints means national drug-buying agency Pharmac will not be able to afford the new range of anti-cancer drugs,” she says.

    AIA adds, “Spending on healthcare has more than doubled during the past 60 years and on the present trajectory would account for nearly a third of all Government spending by 2050, according to Treasury forecasts.

    “Research by the New Zealand Institute of Economic Research estimates that private health insurers could be funding up to three times the present level of healthcare if coverage extended to the same level as France, where 96% of the population have insurance.”

    Childs says it’s difficult to comment on whether the Government should spent more subsidising new cancer treatments, as these can be very costly and there’s always an opportunity cost.

    He raises questions over the way some pharmaceutical companies price their drugs, saying Pharmac keeps them honest to some extent.

    “I think it would be accepted by most health experts… that generally Pharmac does a good job in evaluating new drugs, so there’s equitable access for most people who have cancer.”

  • Elizabeth Kerr says having a sense of entitlement in the workforce is toxic and will rob you of the energy to achieve your financial goals

    By Elizabeth Kerr

    There is a brand new breed of entitlement doing the rounds at the moment. It’s supposedly something only gen-Y have but now everyone’s getting on the bus.

    Basically it boils down to this; people expect that they will be passionately in love with their job and if they aren’t then they quit. If a job doesn’t nurture all their needs and provide them with flexibility for their extra curricular hobbies, vacations and the RWC then they are miserable.  

    Well I’ve got news for these folks – there are no rainbows or unicorns in the workplace. Repeat after me: “Work is a verb, not a noun”! That means it is something you do, it is not just a place you go.

    It is called work for a reason and there will be days that you won’t want to go, and there will be days where you will dislike your job, but expecting all of your emotional needs to be met by work is just plain stupid and is going to end in disappointment.  

    The Perfect World Premise

    In a perfect world there would be a perfect job waiting for everyone the moment they left school. But it’s not a perfect world. The truth is you are going to love some jobs, love parts of other jobs, and hate a few as well. But regardless, a bit of gratitude for having a job and doing it well will take you much further than you might imagine today.

    Nowadays workers expect so much more than just having a job - but they are giving so much less of themselves for it. People arrive at work, promptly pop out to buy coffee, check emails, check their Facebook, do internet banking…10am reluctantly start doing some work. 

    There is no way that kind of carry on would have worked in my early working days but now it’s considered as “empowering” employees to manage their own workload and giving them the sense that they own their jobs. What a load of crock. Go to work, do the work, come home.  

    You see, boring jobs that you hate provide excellent incentives to reduce your expenses and build your money machines faster. Nothing is more satisfying then turning in your resignation and telling your boss you’re done with working and would like to spend your days doing what you want instead of meeting their needs.

    Reality checklist

    If you really don’t like your job there are a couple of helpful tips for you to remember:

    1. What you do is not who you are! Your job does not define you. Right now my day job is predominantly being a mum, but if someone dared to put me just in that box then they really don’t know me at all.

    2. Just because you don’t like what you are doing doesn’t mean you shouldn’t be doing it. Even though the job you do each day might bore you, not make use of your degree, or fail to cultivate your passion for English literature does not mean that you should throw it all in. If you have a job DO the job!!!

    3. Being lazy and not doing your job as best as you can will come back to haunt you. It’s not scientifically proved but I reckon there is such thing as career karma and if you want to stay on the right side of it then be nice and work hard. Many a consultant has ended up on the scrap heap by not respecting career karma.

    4. Bored people are boring people. Basically if you’re bored at work then you need to change the angle of your lens and find ways to make it interesting. If you are bored for too long you risk emotionally leaving the job before your body does and when this happens people will notice (see point 3). Anyways, why should your job provide all of your stimulation – you do have other hobbies in your life right?

    Fall in love with the process.   

    To succeed with your money machine you need to fall in love with things that you don’t necessarily like.  A great swimmer is not successful because they wins races; it’s that they can force themselves to get up really early every morning to swim laps up and down the pool over and over again. The laps are the process, the winning is the outcome of falling in love with the process.  

    So you need to decide to enjoy your job enough to go everyday and do it well, enjoy spending less, enjoy investing more and seeing your passive income come to fruition, enjoy the odd looks you might get from well-meaning friends and family questioning your frugal choices, enjoy the spreadsheets, the filing, the negotiating with various companies etc…you get what I mean.   


    Job entitlement is toxic and will rob us of valuable energy to push our money machines forward. In the meantime let’s return to having pride in doing a day's work well, and keep the rainbows and unicorns for after hours.  

  • Canterbury earthquake insurance lessons yet to be put into practice, as people continue to be stumped by their insurers

    Sad stories of Cantabrians denied insurance pay outs they thought they were entitled to after the 2010/11 earthquakes, haven’t opened up people’s eyes wide enough to spot the traps they can fall into when buying insurance.

    Those who’ve hit a wall trying to resolve disputes with their insurers and financial service providers, have generally not got their way when resorting to laying complaints with the Insurance and Savings Ombudsman (ISO).

    The ISO’s annual report released today shows only three (1%) of the 254 complaints it investigated over the past year, were upheld.

    A further 10 (4%) were partly upheld and 56 (22%) settled through negotiation, conciliation and mediation.

    This means 27% of complaints were settled favourably for consumers, while 72% were simply not upheld and 4% withdrawn.

    In the 2013/14 year, 65% of the 300 complaints the ISO investigated were not upheld.

    Just over half of the complaints the ISO investigated over the past year related to fire and general insurance, while 41% related to health, life and disability insurance, and small portions to credit contracts, financial advisers, superannuation and non-regulated financial services.

    Insurers pick up the ball

    The Insurance and Savings Ombudsman Karen Stevens says, “The complaints we are now investigating are more complex, and many of the straight-forward issues are being resolved earlier by our participants [insurers and financial service providers].

    “Industry practice is changing for the better, so complaints can be resolved within the insurance or financial service provider’s own complaints processes.”

    This (and the fact more Canterbury quake claims have been settled) has seen the number of complaints investigated by the ISO drop by 15% over the past year.

    Financial literacy remains a problem

    However the fact a greater portion of complaints have been denied by the ISO over the past year, indicates there’s still a large number of people incorrectly adamant they’ve been wronged by their insurers – fighting a losing battle if you like.

    Stevens puts it down to financial literacy.

    “Consumers aren’t really aware of the importance of the insurance documents they sign up to. They’re not fully aware of the consequences of failing to disclose material information, and of their obligations under the policy,” she says.

    “They sometimes think if they pay the premiums and sign the contract, that’s all that they have to do.”

    She maintains that our society’s demand for immediacy takes away from the reality that an insurance policy is a binding legal document.

    “We are a generation, or a nation, of people who don’t read as much. There would be very few people who ever read their contract… and so they don’t fully appreciate what their obligations are, and even what the cover is,” she says.

    Stevens maintains that as more insurers provide quick and easy ways for people to buy insurance online, the problems we’re seeing now will only be exacerbated.

    “They don’t’ full appreciate that even though it’s easy, it will have fishhooks”, she says.

    Stevens admits the insurance industry needs to take responsibility to make sure consumers know what they’re signing up to, when they buy insurance.

    “The information is there. It is clear enough if consumers read it. But it’s not something that is hammered home sufficiently. It’s the job of all of us in the [insurance] business to do it.”

    Read this story for more on making sure you have all the information you need when shopping for insurance.

    Disclose, disclose, disclose

    Stevens says non-disclosure is the most common barrier preventing people from having their claims paid out – a “silent killer”.

    So that is people failing to disclose everything they have to, to indicate how risky they will be to the insurer, when taking out a policy as well as throughout the policy’s life.

    Stevens says this is most often an issue with health, trauma, disability and life insurance, but is also an issue with the likes of motor insurance.

    A number of people don’t realise for example that you have to disclose any traffic convictions you’ve had (other than parking tickets) to your insurer every year, and if you’ve had any modifications made to your car.

    Stevens notes most insurers will remind you of this when your policy comes up for renewal, however this may not be something the insurer will absolutely drum into you, so you need to take responsibility yourself.

    Controversially, there is no law defining how clearly insurers need to spell out what their customers need to disclose.

    The ISO says, “Insurers’ responses to nondisclosure vary: some opt to exercise their legal right to avoid the policy in its entirety; and others adopt a more flexible response, based on what they would have done had the information been disclosed at inception.

    “While legislation is highly desirable, the ISO Scheme works within the current legal framework for non-disclosure, making decisions that are fair and reasonable in all the circumstances.”

  • Many investors believe Auckland house prices have peaked and are selling up to cash in their capital gains

    By Greg Ninness

    We may have seen the end of capital gains in the Auckland housing market’s current cycle, with the rapid price rises of the last few years coming to a halt over the last couple of months.

    The accompanying chart (below) shows the changes in the REINZ’s Auckland median selling price this year, starting off at $660,000 in January, then taking a breather in March and April when it hit $720,000 before it resumed its climb to $755,000 in June.

    It has come back a bit since then, back down to $735,000 in July and edged back up to $740,000 in August, but basically it has been bouncing around just below June’s peak.

    To me that suggests a classic peak and plateau, where prices hit a high and then stay around that level with relatively minor movements from month to month, with the overall trend being flat.

    However I also believe that you need three months of consistent figures before you can be confident there’s a trend in real estate, which means we’ll have to wait until next month to see whether prices have plateaued or not.

    If they have, you can kiss goodbye to capital gains from Auckland house prices for the time being and that would leave the market finely balanced and in a potentially precarious position.

    Listings surge

    One of the features of the Auckland market this winter was an unusual increase in properties being listed for sale.

    What I’m hearing from the market is that this surge of new listings was from two main sources.

    Firstly, investors who had seen the value of their portfolios increase significantly over the last couple of years and decided that the big rise in prices had run its course and were selling properties to lock in those capital gains and avoid the possibility of having to sell when prices were going backwards.

    The second group were home owners who had been thinking of moving but were hanging on while prices were still rising quickly to get the best price for their homes.

    They have obviously decided that a bird in the hand is now worth two in the bush.

    So there appears to be two groups of people who have already decided that the market has peaked and are confident enough in that belief to act on it.

    When there’s a big increase in the number of homes coming on to the market it can put downward pressure on prices but so far that hasn’t happened.

    Demand from buyers has been so strong that it has soaked up the extra supply and maintained prices at their near record levels.

    But I suspect the balance is a delicate one and it may not take much of a further increase in supply or a lessening of enthusiasm from buyers to see prices start to decline.

    The actions of ethnic Chinese investors over the next few months are likely to play a pivotal role in determining which way the market heads.

    Two drivers

    Over the last couple of years the rapid rise in Auckland house prices has been driven by two main fundamentals.

    The excess of demand over supply, driven largely the sharp increase in net migration, and the enthusiasm of investors who have been prepared to pay prices that provide exceptionally low, perhaps unsustainably low, rental yields.

    And over the last year or so ethnic Chinese buyers have been increasingly dominant in the residential investment market.

    It is not difficult to understand their enthusiasm.

    The transformation of China into an economic powerhouse has been one of the great wonders of the modern age and it has created a whole generation of people who have only known constantly improving prosperity.

    Many of them see rapidly rising markets as normal and if there is a problem, Big Brother in Beijing will intervene and prop the market up.

    When a market is seen as hot they pile in and lately Auckland property has been hot.

    Then when mums and dads start seeing the value of their homes rise, mortgage interest rates being cut to next to nothing and the quick and sometimes enormous capital gains that can be made from investing in property, they pile in as well.

    At that point the increase in prices that’s been caused by the underlying demand from owner occupiers exceeding supply becomes supercharged, as investors  chasing capital gains start paying inflated prices that can’t be justified by the income returns the properties are capable of providing.

    But what happens if prices stop rising and the ability to make quick capital gains disappears?

    Herd mentality

    I believe there’s something of a herd mentality among many of the investors who have been piling into the Auckland housing market with such enthusiasm lately.

    When the river of capital gains dries up, as it may have already, we could see many investors cutting their losses and exiting the market with the same enthusiasm they entered it.

    We are already seeing the first signs of that in the unseasonable rush of new listings coming on to the market over the last couple of months.

    If the current rising tide of new listings turns into a flood over spring and summer, it will push more properties on to the market while reducing buyer demand, and I doubt that prices will be able to withstand the downward pressure that would create.

    Although the currently low, and potentially even lower, mortgage interest rates and the fundamental imbalance between supply and demand of homes for owner-occupiers will provide a floor to any price falls, it’s a floor that could be a fair way down from the highs we’ve become used to lately.

    The market is teetering on the edge of a correction.

    It won’t take much to push it over.

    This article was first published as a Property Line Market Update on September 22.  Property Line reports are emailed directly to subscribers of's free email newsletters. The newsletters are sent out about 3-5 times a week and contain all of's property articles.The newsletters are free, does not share subscribers' details with third parties and you can unsubscribe at any time. To receive your free Property Newsletters and stay up to date with the latest property news, enter your details in the subscription box below:

    Our free Property email newsletter brings you all the stories about residential and commercial property and the forces that move these huge markets. Sign up here.

    To subscribe to our Property newsletter, enter your email address here. It's free.


  • Elizabeth Kerr has this exclusive broadcast from the North Pole where Elves have gone on strike claiming kids are too spoilt

    By Elizabeth Kerr

    News just in from the North Pole: Santa’s Elves have gone on strike. They don’t want to make any more toys, claiming kids are already spoilt brats. With only 13 weeks until Xmas - parents reaction, hysterical!

    Elizabeth Kerr was first on the ground and reported scenes of complete despair at the North Pole. One Elf we managed to speak to said: “Everyone has an interest in boosting Xmas consumerism but its too hard to keep up now. You won't believe what we have to make these days. We used to make real toys, out of real materials that kids treasured for their lifetimes; now we just make plastic junk that kids break and it ends up in landfills,” he said.   

    Clearly distraught at his current situation he went on to say that last week he received an order for 10,000 plastic birds that tweet like real birds. “Why don’t kids just look out of the window and see the birds in the tree anymore?”

    Jingle, Head of Toy Operations, wouldn’t appear on camera but said: “Kids used to have imagination and play with our toys for years, but the advertising is so good nowadays that they already want something new before it’s even June. We just can’t keep up with the demand.”

    To speed up production and improve efficiency Santa recently installed production machines that can cut and mould plastic, which is quicker than using more sustainable materials prepared by hand. While this improves the concept-to-dispatch time it takes away valuable Elf jobs, Jingle said. “If parents just toned it down a bit, reduced the amount of toys that kids were allowed, then we would be able to keep up with demand and bring back the quality ‘lifetime of playing guarantee,’” meaning toys are created so well they reduce Xmas consumerism by being passed down to younger generations, he said.

    Bauble said that he couldn’t believe the uselessness of some of the toys he was making. “Last week I made five different types of Thomas the Tank Engine railway tracks. This is so that parents have to keep buying more trains if they want to extend their sets. Why don’t they let us make wooden one-size fits all tracks?"

    Other toys that Bauble has created for Xmas this year include fake ATM machines for kids to practise withdrawing money they don’t have, an iPotty – a toilet training seat with an iPad holder attached, a plastic McDonalds server complete with plastic burgers and uniform, and battery powered hamsters. “Clearly parents don’t have high aspirations for their kids anymore, and kids don’t know how to use their imagination; even Lego comes with instructions these days,” said Silvie.

    Speaking to some parents the response to the strike was nothing short of hysteria. “We are so worried," said one parent. "All year we bribe our kids with the possibility they will get the latest and greatest presents for Xmas in exchange for good behaviour. There are 13 weeks to go – what are we going to do? The more presents under the tree the less guilt I feel about spending so much time at work.”

    Another parent said: “If my kids don’t see lots of presents under the tree, then I’m scared they won't like me anymore.”

    I asked Jingle: How did things get so bad? 

    Advertising got stronger and profits needed to be bigger she said.  

    “We used to make toys that made children think, but these days parents are told that toys which are bright, loud, vibrate, or are designed by a team of neurolinguistic programmers is what will make their child learn and standout from the other kids in school.    

    "Of course it’s not true, but no one wants cheap moulding clay or a tea set anymore. We’ve been designing toys for generations and we know that the basics don’t change. Toys should be things that encourage the child to use their imagination in a variety of ways, rather than just pressing buttons.   

    “Grandparents are to blame as well. The traditional book and hanky has been replaced by sacks of expensive plastic figurines, iPads and sugary sweets – no doubt facilitated by the equity in their properties.”  

    Santa said that come February parents realise that they have wasted there money on useless stuff that the kids don’t want to play with anymore…So then they go and buy more things to keep their kids entertained. "Our Elves never get to have mid-year holiday like we used to. Our factory has to be open 365 &24/7 just to keep up with demand.”.  

    Do the Elves have a point? Research proves that too many toys can actually have the opposite of parents' intentions and restrict their development. 

    “They get overwhelmed and over-stimulated and cannot concentrate on any one thing long enough to learn from it so they just shut down. Too many toys means they are not learning to play imaginatively either,” were the results of a US-government funded study.

    Elizabeth Kerr will continue to monitor the strike action over the coming months.

    But Elves in the meantime are asking parents to take back the control this Xmas by ignoring slick advertising and children’s demands for inappropriate plastic rubbish and instead reduce toy purchasing to just one or two presents each.  A little emphasis on the real biblical meaning of Christmas wouldn’t go astray either, added Santa.

    (For a list of entirely inappropriate toys that Elves have made please visit Elizabeth Kerr on Facebook).

Subscribe to Personal Finance