Hello 2020. What are you likely to bring to our back pockets? Will there be a house price crash? Another global meltdown? Will your KiwiSaver tank? Or all manner of financial doom and gloom?
Could the new decade herald better things financially? More people earning a living wage, better tax breaks for KiwiSaver, lower loan to value ratios on homes, better house prices? Who knows? Being aware of what's on the horizon helps as well if you want to make the most of your money.
Some predictions are easy. At some point during the year, you'll receive a bill you weren't expecting. And unless you're superhuman some of your income will be misspent.
The bigger picture is altogether more difficult. Economists are paid to crystal ball gaze and take a crack at predicting whether 2020 will be boom, bust or somewhere in the middle. Most get the general direction right and their employers can then plan based on those predictions.
• Westpac: The worst is over, economy headed for rebound
• GDP data shows NZ economy continued to slow in June quarter
• NZIER says economy slows but risk of recession in 2020 low
• US slowdown spurs concern economy is near stalling
When you ask economists for their forecasts for the year, one of the first words that comes out of their mouths is the big R word: recession. That's no exception for ANZ Bank's chief economist Sharon Zollner. Not that she's predicting one. Nor will she rule the possibility out as they do tend to come along every 10 years or so, sparked by things we can't predict.
Even if it were to happen, we're not likely to fall as hard as we did in 2008, thanks to the rule of economics that "the harder you party the bigger the hangover", says Zollner. "Things haven't become silly. That's a win. But household debt is still very high," she says, "and that makes us less resilient."
Whether or not we head into recession we should still expect a volatile year, says Jarrod Kerr, chief economist at Kiwibank, although he predicts we will end up in a better place than we started.
Economic growth, he says, is likely to be anything from a disappointing 2 per cent to a disappointing 2.5 per cent when the final figures come out for 2019. Even if the economy picked up to 3 per cent over the next year or so, as he forecasts, that's hardly anything to do victory laps over.
Keeping many economists, politicians, financiers and others on tenterhooks is the tinder-dry relationship between the US and China. It wouldn't take much to trigger a global crisis with ramifications for little ole New Zealand.
One piece of good news is the two superpowers are likely to sign the first phase of a much-needed trade agreement, says Kerr. "But we will realise they haven't signed a proper trade agreement at all and there will be facing off," he predicts. "This unwinding of globalisation is scary for small economies like ours," says Kerr.
It's not just the US and China to worry about. Some of the largest markets that affect our economy don't look altogether too healthy either. "Brexit is still there and unresolved, and Europe is still a basket case and will be for the rest of our lives. If you are using that as your canvas to paint your picture you have a few holes in it already."
On the positive side, says Kerr, New Zealand has been getting good prices for commodities overseas. But don't get complacent. There are risks on this front, however, adds Zollner. "While the returns on sheep and beef are spectacular and dairy pretty darned good there is a mood of uncertainty, thanks to those unusually high prices when the countries we export to aren't actually doing that well economically. And as always, exporters are vulnerable to what happens to the New Zealand dollar, though it's been behaving itself pretty well this year. "
In some countries governments can't spend to stimulate their economies because their debt is already so high, says Zollner. That's not the case in New Zealand, but self-imposed limits on government debt have limited its actions.
That's not all, says Kerr. New Zealand is going through some awkward processes. For example, the banks have been told to hold more money in-house (capital). The costs of doing this get passed on, which in turn could stymie investment in agriculture and business, driving their confidence lower. That feeds into the job market.
"Ask any farmer," says Kerr. "They wouldn't mind paying an extra half a per cent or an extra 1 per cent if they could get a loan."
The $64,000 question for property-obsessed Kiwis is will the current pickup in house prices continue.
The property market's in okay shape, says Kiwibank's economics team and house prices in New Zealand should rise about 4 to 5 per cent in 2020. We're short 130,000 homes and counting. That lack of homes should keep our prices growing and avert any Australian-style house price fall, says Kerr.
Low interest rates and strong population growth provide powerful tailwinds for the property market, says Zollner. Another positive for Kiwis paying or wanting to take out mortgages is that interest rates should stay low for a long time, she adds. But this is economics and there are always two sides to that coin. Keeping interest rates that low to hit the Reserve Bank's inflation and employment targets can cause distortions to the economy.
The wild card for property prices, says Zollner, could be the forces that economists can't model, including the Healthy Homes Bill, ring-fencing of capital gains, the removal of letting fees and increasing tenants' rights, which may drive some investors from the market.
Keeping economists up at night
We asked the economists what some of the outliers could be that could affect Kiwis' back pockets in 2020. For Kerr, one of the biggies after the issues outlined above is inequality, which overseas has led to demands for change and the election of more extreme governments. "You don't vote for Labour or National you vote for someone further right or way out left." Just look at Chile and Brazil.
It's credit markets that worry Zollner. Global interest rates are super low and have been for a long time. That sends anyone looking for a return on their savings on a desperate search for higher interest rates. But they don't always understand the risks and if it all turns to custard there could be contagion across different asset and financial markets – which brings us back in a full circle to the risk of recession.
KiwiSavers awoke on January 1, 2019, believing they were in for a rough ride. Their balances had been bouncing up and down in late 2018 and more of the same was predicted. That didn't prove to be the case and KiwiSaver ended the year on a positive note with more of the same predicted for 2020.
Savers do need to be aware that unless they're withdrawing money for a first home, retirement or hardship, the ups and downs mean nothing in the medium term, and bring growth over time.
For those who may need to withdraw, it's worth noting that we've had a stellar decade for returns on the shares, property and bonds that make up much of their KiwiSaver funds.
However, past returns may not be a guide to future returns, says Zollner. "History shows if you have a brilliant decade, the next decade is unlikely to match it because it all tends to come out in the wash in the long term."
10 things to do immediately
2020 heralds the Chinese Year of the Rat. Rats are clever, quick thinkers, but live a quiet life. It's an approach that could help many a Kiwi's finances.
1. Secure your job. Wages and salaries are our biggest source of wealth. Most Kiwis are just weeks from financial meltdown if they lose their jobs. Look for ways to make yourself invaluable at work and boost your employability. Take on projects, hone your skills, move sideways, study, and check out the career advice on Yudu.
2. Insure your income. Take out income or mortgage protection insurance, which pay a regular sum, or total permanent disability cover for a lump sum should you be unable to work again. Most of these policies don't cover redundancy so shop around if you need that. Insurance is complex so consider getting advice.
3. Build up a three-month emergency fund. With three months of living expenses under your belt for a rainy day you're likely to be back up and running after redundancy or illness by the time your fund runs out. It also means you can lower your insurance premiums by taking a longer stand-down period.
4. Budget. Whatever you earn, budgeting makes it go further. It truly is magic.
5. Streamline your KiwiSaver. Are you saving the $1042 a year for the 50 per cent return from the government contribution? Are you getting employer contributions? Have you reviewed your fund? Do you even know if it's conservative, balanced or growth? At the very least get yourself into a life stages fund that ages with you.
6. Write a will. If you're in the half of adult Kiwis, according to the Commission for Financial Capability, who don't have a will, write one. If not, you're probably leaving your beneficiaries a bun fight.
7. Comparison shop. Check out if you can get cheaper phone packages, banking, utilities, insurance and more. If you're lazy or busy, phone your existing provider and ask if they have better deals. Most do.
8. Learn one thing. Get a book or sign up to a personal finance group on social media and start learning more about money.
9. Set goals and plan. Decide where you're headed and set a plan in place to get there.
10. Write a list of 12 things to do this year to improve your finances. Resolve to tick off one a month.