Finance minister Nicola Willis gave some businesses a pleasant surprise with the 20% deduction for new capital investment, and she didn’t scare wholesale markets with her tight rein on the government’s books keeping the local bond market in check, amid growing unease about rising US Treasury yields.
And while all eyes were on the budget in Wellington, the S&P/NZX 50 index was caught up in a soft day across Asia as investors took their downbeat cue from Wall Street, where US President Donald Trump’s tax legislation has bond markets nervous.
Retailers Warehouse Group and KMD Brands were among the day’s laggards, while Meridian Energy weighed on the benchmark index.
Meanwhile, shoulder earnings season continued with some positive responses for today’s list, as AFT Pharmaceuticals, Savor Group and My Food Bag all gained.
A little uneasy
The NZX50 fell 40.85 points, or 0.3%, to 12,662.25, with 31 decliners, nine stocks gaining, and 10 unchanged. Turnover was relatively quiet with $109.3 million across the main board.
The local market fared better than many across Asia, with Australia’s S&P/ASX 200 index down 0.6% in late trading, while Japan’s Nikkei 225 fell 1.1% and Hong Kong’s Hang Seng was down 0.7%.
Investors took a weak lead from Wall Street when a US government bond auction attracted soft demand, raising fears about whether rising bond yields will cause the White House to rethink its major tax programme.
Meanwhile, New Zealand’s finance minister Nicola Willis attracted most of the domestic attention today, delivering her second budget and projecting a wafer-thin return to surplus by the June 2029 year with the government shifting its spending priorities in a softening economic environment.
The budget included a new ‘Investment Boost’ policy aimed at stoking capital investment by businesses, letting them claim 20% of an asset’s value from that year’s taxable income on top of normal depreciation, which is hoped to add an 1% to gross domestic product over the next 20 years.
Willis also announced plans to stagger an increase in employer and employee contributions to KiwiSaver, while halving the government’s own subsidy.
“All in all, Budget 2025 is unlikely to be the last ‘tight’ budget we’ll see in pursuit of the long-overdue fiscal consolidation,” ANZ Bank New Zealand economists Miles Workman, Matt Galt and David Croy said in a note. “Getting the books back into the black is important if we want to preserve the fiscal headroom to respond to future shocks and other long-term challenges.”
Holding up
The yield on New Zealand’s 10-year government bond decreased 1 basis point to 4.69%, while the kiwi dollar traded at 59.32 US cents at 5pm in Auckland from 59.49 cents yesterday.
The government’s bond issuance increased by a cumulative $4 billion over the forecast period, and primarily at the end.
Westpac NZ economist Darren Gibbs said he didn’t expect the government’s budget to weigh too heavily on the Reserve Bank when it reviews monetary policy next week.
“We expect that the MPC (monetary policy committee) will continue to regard the stance of fiscal policy as imposing a contractionary influence on the economy across the forecast period provided that the government delivers the spending restraint indicated in the budget,” Gibbs said in a note. “It is possible that the RBNZ may regard the government’s ‘Investment Boost’ policy as having a moderately favourable impact on the economy’s potential growth rate, although it will also boost investment spending.”
Making choices
Property companies and utilities were among those weighing on the benchmark index, with higher global bond yields reducing the attraction of their reliable dividend payments.
Meridian Energy fell 1.5% to $5.81 in the biggest drag on the index, while Kiwi Property Group declined 2.2% to 88 cents, Property for Industry slipped 2.1% to $2.125, Goodman Property Trust decreased 1.8% to $1.915, and Vector sank 1.4% to $4.10.
The Smart NZ Property exchange traded fund was the most heavily traded security on the exchange, with almost 8 million units changing hands. It fell 1.2% to $1.052.
Warehouse Group led the market lower, falling 3.4% to 85 cents and KMD Brands dropped 3% to 32.5 cents.
Sky Network Television posted the biggest gain on the day, up 2.8% at $2.58.
Among companies reporting today, Oceania Healthcare was unchanged at 64 cents after lifting annual earnings 4.1%, while AFT Pharmaceuticals gained 3.9% to $2.70 on a 6% lift in revenue, with earnings falling in line with guidance.
Restaurateur Savor Group gained 0.5% to 19.5 cents as it maintained operating earnings in the face of shrinking sales.
And My Food Bag jumped 7% to 19.9 cents after the meal-kit firm lifted full-year profit 5% and introduced a dividend reinvestment programme.
Reporting by Paul McBeth. Image from Towfiqu barbhuiya on Unsplash.
