Even if the storm never arrives, it’s a good time to batten down the hatches on your finances

Tuesday, 28 April 2026

An Iranian Revolutionary Guard speedboat moves in to seize a cargo ship on the Strait of Hormuz, another sign of stormy waters for the world’s economy.

Martin Hawes is a financial writer and presenter, and has written 25 personal finance books. He writes a weekly column.

OPINION: Even if the war with Iran ended today, it will be months before the oil market gets back to normality, according to some experts. The Economist newspaper says that three things are pushing the world towards a cliff edge: there is much less crude in boats available to buy now than there was a month ago, refineries are cutting output, and demand for fuel remains high.

The global economy may be in for a tough time and New Zealand along with it.

New Zealand seems especially vulnerable: the much-fabled delicate green shoots of our economic recovery could easily shrivel and die. This oil supply shock has come at a critical time.

On the other hand, optimists say, financial markets seem to believe that the war with Iran is a storm in a teacup - oil futures markets show cheaper oil in a year; global share markets continue to break records. That seems strange - perhaps they know the mind of President Trump better than some analysts.

Although not everyone believes in a doomsday scenario, it is very reasonable to plan for inflation and for higher interest rates. No-one can be sure how great the storm will be, but this seems a good time to ensure you are ready to batten down the hatches.

Anyone who lived through the high inflation of the 1970s and 80s knows what a curse inflation is. We watched the oil shock of 1973 and then again in 1979 - and we saw the way the oil price boosted inflation. Worse, we suffered stagflation - when you have inflation at the same time as a stagnating economy.

There is a risk today that although an increase in interest rates will eventually control inflation, an increase in interest rates may keep our economy sluggish and fragile.

A woman takes a photo of the price she’s just paid for fuelling up her car. The soaring price of oil is widely expected to stoke inflation world-wide.

There seems no way to rid ourselves of inflation without some pain.

Although there is no neat little manual that sets out the things that we can each do to manage our finances to get through a bad economy, here are some things to consider.

First, check out your budget. Now seems like a good time to cut any superfluous expenditures and to make sure that you have good deals on all your utilities and subscriptions. Be prepared to switch internet, phone, power providers if you are not on a good deal.

Second, try to fix your mortgage, perhaps for two or three years. There is no guarantee that this will cost less, but fixing does manage the risk of a big rise in interest rates that might make the mortgage completely unaffordable.

Third, bring forward any major purchases that you may have coming up. For example, if you had been thinking about it for a while, now would seem like a good time to buy that EV (although you may need to join a queue). If inflation gets away, those big purchases can get out of reach.

Fourth, consider your savings and investments. KiwiSavers need to keep contributing. It may seem counter-intuitive, but it is people who buy investments or contribute to KiwiSaver when markets are down who grow their funds best. These people are effectively buying cheap - for anyone holding some excess cash, market slumps should not be seen as threats but opportunities to buy.

Savings and investments are important for everyone, but especially so for retired people who are using bank deposits for retirement income. Interest rates may rise in nominal terms, but after adjusting for inflation interest rates could be lower or even negative in real terms. Higher interest rates may seem good, but in reality they are not – those who rely on bank deposits for income in retirement could easily lose significant spending power.

In inflationary times with low or negative real interest rates, you are much better to be an owner than a lender. Retirees therefore need exposure to shares and listed property. Both of these asset classes have a better chance of outperforming inflation.

While all people need some bank deposits (access to ready cash for emergencies and upcoming expenditures), most of your money should be in funds and portfolios that give appropriate exposure to shares and property.

Of course, it may be that the Strait of Hormuz reopens soon and inflation remains relatively mild and interest rates are not hiked. I think that unlikely, but even if the best happens, hardly any of the above adjustments that you might make come with a cost – we should be doing most of them anyway.

It is always a good idea to have the hatches battened down, even if the weather remains sunny and a storm does not hit.

Martin Hawes is not a financial adviser and the information and opinions here should not be taken as financial advice.