Market Update

The past quarter (January - March 2025) presented a mixed landscape for KiwiSaver investors, largely influenced by global economic shifts and, notably, the impact of new US tariff policies. While the short-term saw some contractions, the longer-term outlook remains generally positive, and significant policy changes are on the horizon.

According to recent surveys, including those from Morningstar, most multi-sector KiwiSaver funds experienced losses in the March quarter. This downturn was attributed to widespread share market fluctuations globally as markets reacted to the announcement of Donald Trump's trade tariffs.

Quarterly Performance (Jan-Mar 2025):

• Aggressive funds: Average loss of 3.7%

• Growth funds: Average loss of 2.7%

• Balanced funds: Average loss of 1.7%

• Moderate funds: Average loss of 0.6%

• Conservative funds: Average loss of 0.2%

• Default funds: Average loss of 1.7%

Despite these quarterly dips, it's crucial to "zoom out" and consider the broader picture. On an annual basis (to April/May 2025), all fund categories were still up, with average returns of about 5% to 5.5%. For instance, the average 12-month return across the top 10 funds by member numbers was 4.2%, with growth funds averaging 4.3%. This demonstrates the resilience of diversified portfolios over the longer term.

Economic Factors and the OCR

The Reserve Bank of New Zealand (RBNZ) recently lowered the Official Cash Rate (OCR) to 3.25% in May 2025. This marks a continued easing of monetary policy, with the OCR having reduced from its peak of 5.5% last August. Lower interest rates are generally intended to support economic activity by encouraging household spending and business investment.

However, the RBNZ also noted that higher global tariffs and increased policy uncertainty are expected to weigh on global growth and could impact New Zealand's exports and domestic investment. The RBNZ will continue to monitor economic data closely, with future OCR decisions being "all effectively live" depending on how global trade tensions evolve and domestic inflation behaves