Lower interest rates screw the scrum towards putting money to work.<\/p>\n
When term deposit rates were around 5%, term deposits rose sharply, peaking at around 49% of total deposits. It dropped below 40% when rates were low around 2021 and 2022.<\/p>\n
Bank interest expense on deposits peaked at $5 billion in September 2024. A year later it\u2019s down to $3.4 billion. Bank interest income has fallen from $11.1 billion to $9.3 billion \u2013 that\u2019s $1.7 billion in people\u2019s pockets versus $1.6 billion out. They effectively cancel each other out, though bank net interest margins actually rose.<\/p>\n
Despite falling term deposit rates, people have been slow to reallocate balances elsewhere. Term deposits are still up 1.9% on a year ago, even as overall bank deposits have risen 5.2% \u2013 above the 4.5% rise in bank lending.<\/p>\n
I\u2019m all for saving as an investment in tomorrow<\/a>, but we need to get real about what\u2019s changing.<\/p>\n Housing is not the investment it has been. Lower interest rates have failed to really fire up the property market. Valuations, the supply\/demand situation, costs (rates\/insurance), and easing rents are leaning against lower interest rates. Money remains parked in term deposits, savings and transaction accounts.<\/p>\n People are also getting savvy with managing their money<\/a>. Rather than just enjoying lower interest rates, many are directing savings towards paying down principal. According to ANZ\u2019s latest financial results, \u201cmore than 40% of home loan customers are now ahead on payments by six months or more\u201d.<\/p>\n That sacred cow \u2013 NZ Superannuation<\/a> as an entitlement and not means tested \u2013 is going to be debated.<\/p>\n It\u2019s encouraging to see the National Party proposal to increase the default KiwiSaver contribution, raising default rates to 6% for the employee and the employer, making it 12% overall, by 2032 if re-elected next year. Winston Peters and NZ First also tabled a compulsory retirement savings scheme, reminiscent of the one proposed in 1997.<\/p>\n Saving involves a sacrifice. Consumption for today is sacrificed for investment and consumption down the track.<\/p>\n New Zealand needs to be on a better growth and productivity trajectory if employees and employers will be able to fund required contributions. An A for admirable on what is trying to be achieved but D for dunno where the money is coming from.<\/p>\n Here\u2019s the thing: you can be a high-savings country and completely misallocate the resources. Wealthy countries such as the United States run persistent current account deficits. You can argue it\u2019s a problem, but it\u2019s an equal problem for the lenders on the other side.<\/p>\n Even if New Zealand saves more, we won\u2019t get wealthier if bank lending continues flowing primarily into housing. Banks have an essential role taking pooled savings and allocating it into the real productive part of the economy, not just property.<\/p>\n There are many keys to saving in my mind.<\/p>\n Start early. We need more financial literacy in schools.<\/a><\/p>\n But here\u2019s what really matters: regularity. The challenge is that traditional saving requires active decisions \u2013 transferring money, resisting temptation, remembering to contribute. It\u2019s cognitive load most people don\u2019t have bandwidth for.<\/p>\n This is where technology can help. Saving doesn\u2019t have to come only from wage deductions. Small, invisible sacrifices can be redirected automatically \u2013 rounding up when you swipe a card, diverting spare change before you even see it. New tools and apps like Feijoa make this feel almost invisible, turning everyday spending into a mechanism for building KiwiSaver balances without the mental overhead.<\/a><\/p>\n The beauty is that these micro-contributions add up. You\u2019re not consciously sacrificing your flat white; you\u2019re just rounding it to the nearest dollar and banking the difference. Over time, compounding does its work.<\/p>\n Saving has many creative vehicles beyond a deduction from wages, and that\u2019s exactly the kind of innovation we need to see more of.<\/p>\n The mood of the nation is turning on many levels.<\/p>\nA slowing property market prompts renewed scrutiny of the role housing plays in New Zealand\u2019s wealth and savings system. Photo \/ Getty Images<\/p>\n
New Zealand faces growing pressure to boost long-term savings as economic headwinds challenge traditional financial habits. Photo \/ Jason Oxenham <\/p>\n
Proposed reforms to KiwiSaver and retirement policy highlight shifting expectations around how New Zealanders fund their futures. Photo \/ Getty Images<\/p>\n
New digital saving tools offer automated, small-scale contributions as Kiwis look for effortless ways to build financial resilience. Photo \/ 123rf<\/p>\n