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W & K

Investment Performance

Low Interest Rates – the new Reality

 

Interest rates in New Zealand are at record lows. This week the Governor of the Reserve Bank, will most likely maintain the official cash rate at 2.5%. It is considered unlikely that this rate will increase for another year. If the economy slows further, the RBNZ could still decrease it to stimulate growth.

Gold – Is the Bubble Bursting?

Gold prices have soared during the past couple of years as investors seek a safe haven to invest in. The gold price however, has fallen recently almost 25% off its peak. So what attracts people to invest in gold?

Interesting Times

This past week has seen the spectre of a capital gains tax re-enter the political ring. A Capital Gains Tax (CGT) may serve to broaden the taxation base; however it is likely to add a significant compliance cost. The prospects of this dramatic change to the tax base will be giving rise to smiles throughout all those businesses that advise on taxation and investments.

Offshore Fixed Interest

Currency is just one of the risks many investors take on.   We need to be aware of the actual investment risks involved.  Some people are wondering if there are non-New Zealand fixed interest offerings. They see that our interest rates are low relative to rates available in Australia.

Australian banks have been paying around 7% for five year money. Not bad in a relatively low interest rate environment, especially when the money (for an Australian) is almost implicitly guaranteed by the Australian Government.

Dealing with Risk

All investments carry a degree of risk. Many investors in overseas countries considered their bank investments to be safe, only to lose big time when their banks collapsed. In New Zealand this is unlikely to happen for a couple of reasons. Firstly, our Reserve Bank has a very strong and powerful supervisory role. Secondly our government has indicated that they will effectively underwrite bank deposits with a crown guarantee if it is deemed that there is a need to do so. This maintains a high degree of stability in the financial system. 

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