2024 in review: Key economic lessons to take into 2025
2024 was a tumultuous year for many people.
While there were bright spots – such as inflation falling back within the Reserve Bank’s target band, and interest rates coming down – tough economic times persisted.
Unemployment steadily rose through the year, retail spending took a hit but lifted 0.6 percent in October, and there were periods of market volatility.
Here are four key lessons that 2024 could teach us, to get ready for 2025.
Expect the unexpected
In May, the Reserve Bank was talking about interest cuts being up to a year away. But by August it had made the first of its official cash rate cut reductions, dropping by 25 basis points. The experience highlighted that economic circumstances can change quickly, and it pays not to get complacent.
Diversification
Cryptocurrency has been the big performer of this year, thanks in part to US President Donald Trump’s impending return to the White House. People who had a bit of money invested in crypto will have done well – but even crypto fund managers say it should only be a small part of a portfolio. Weakness in Asian sharemarkets in the middle of the year may have shown some investors that it pays to diversify geographically as well as with different investment classes.
Past returns are no guarantee of the future
While the housing market has been a strong performer over the past decade, it’s had a tough couple of years. A pick-up at the end of 2023 turned out to be a “dead cat bounce” this year. Now many forecasters are picking an increase in earnest in 2025. For many New Zealanders, that’s been a useful reminder that the housing market isn’t a one-way bet and the same careful approach to investment is needed as in any other asset class.
Protecting yourself matters
Many businesspeople and households have struggled to keep up with the bills this year. This highlights the importance of having things such as an emergency fund help if you encounter unexpected tough financial times.
Insurance is likely to be another key aspect of your financial protection. Income protection policies, for example, could help if you have to stop work due to illness.
What’s ahead in the new year?
“Survive til 25” has been a motto for many economists this year. Most expect the economy to start to pick up from the end of 2024, although the recovery may still be slow. Unemployment is predicted to continue to rise through the start of the new year before hitting a plateau. The official cash rate is forecast to fall to somewhere around 3 percent, which could take fixed home loan rates to 5 percent to 5.5 percent. ANZ says the recovery next year could happen more quickly than expected, on the back of those lower interest rates.
Trump’s trade policies could have impacts for New Zealand but ANZ said it was likely that an indirect impact would be felt more than any direct one.
Time for a checkup?
If you’d like to make sure you’re putting your best financial foot forward in 2025, get in touch with us. A financial checkup can help ensure your plans are on track to meet your goals. Let’s work together to set you up for the year ahead.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
