New Zealand’s February earnings season revealed optimism in the economy, despite lowlights such as Air New Zealand. Milford Portfolio Manager Sam Trethewey talks to Ryan Bridge about the green shoots appearing as we head into FY27, and the potential impact of the conflict in Iran on oil prices and markets.

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Bridge talks Business: 10 March 2026
Episode Transcript

Ryan Bridge
Kia ora and welcome to episode 66 of Bridge talks Business with Milford. Conflict in Iran and the resulting oil price spike are dominating the news cycle this week. We’ll talk about that in the podcast, but also take a deeper look at the underlying condition of the economy after reporting season on the NZX.

First, here’s your top five business bits:

    1. Oil Price Spike: The price of oil spiked, reaching highs of $118 a barrel as the Iran conflict intensified and oil fields came under attack. It remains highly volatile, and swings on word from the White House, as much as Tehran, and Tel Aviv.
    2. Market Hits: Share markets were hit hard in regions most exposed to a negative energy price shock, namely Europe and Japan. There was also a rapid repricing of short-term interest rates across regions, although some of this actually reflects crowded positioning among investors, rather than any fundamental impact of potential inflation.
    3. US Economic Data: Between all these geopolitical headlines, we got a number of important data points on the US economy. The ISM survey was released, outlying very strong increases in the headline readings for both manufacturing (30% of the economy) and services (70%). Bit of a worry. The detail of the manufacturing report not only showed a jump in realised and expected activity, but also a jump in the prices component.
    4. Non-farm Payrolls: Non-Farm payrolls were the other key release last week, which missed market expectations quite drastically. The detail suggests some one-off impacts – strikes, weather – but markets will be watching future reports closely to confirm.
    5. The Week Ahead: The focus of the week ahead will be how the conflict in Iran progresses. We have seen reports of G7 countries being ready to release strategic oil reserves to manage oil price, but nothing is being confirmed there. We also get US inflation data for February which could compound inflation concerns, if the numbers prior to this increase in oil, are already unfavourable.

Every week on the podcast, when something big happens, we get in one of our experts. Today we’re speaking to Sam Trethewey, Portfolio Manager at Milford. Just a reminder, this segment is informational only and should not be considered financial advice. There is a lot going on in the world, so let’s bring in Sam. Sam, welcome back.

Sam Trethewey
Hi, Ryan.

Ryan Bridge
Good to see you. So, I thought what we’d do is leave the global situation for a second – we’ll come and revisit that. But we’ll start with reporting season in New Zealand. What are some of the themes that you saw coming through?

Sam Trethewey
I think, for the first time basically since we had the pandemic, this was the most positive reporting season that we’ve had. Most positive in the sense that for once it was clear that domestic-facing businesses are coming off the bottom in terms of their activity levels, and the exporters are thriving. Lower exchange rates and high commodity prices are benefiting them. The domestic-facing businesses, it was really about a bottom being put in; companies were seeing slow pickups in activity levels – they weren’t jumping for joy but it was getting better.
And on top of that, a lot of market analysts for once, didn’t downgrade their profit forecasts for the year ahead, which has been a trend basically since the Covid hit. Underlying that, there was a signal that New Zealanders did have a good time over summer, spending – some of the retailers have reported – they did some pretty good numbers which showed, yes we did spend up a lot versus last year. So that is a tickup in activity levels which is also pleasing to see.

Ryan Bridge
Okay, so again with the caveat that the world is changing quickly, but this should surely signal good things for our economic outlook as a country.

Sam Trethewey
I think it’s a step in the right direction. I think it’s not jumping for joy yet because of that grind that is still there in those domestic-facing businesses. They are still slowly, slowly coming off the bottom. There’s not a big step change in activity out there. And look if you ask the CEO, for instance, of Fletcher Building that question, he’d say 2027 – we can see our order book filling up, our pipeline of work filling up. But still we’re pretty subdued for the year ahead. So, just being balanced around that Ryan. There is hope there but it’s not away to the races yet.

Ryan Bridge
What do we need to see to change that – what do we need to see to get some more optimism in your outlook?

Sam Trethewey
Yeah, look the big three drivers are the economy, the housing market, and migration has been very strong historically. And the labour market is the third one. It was interesting when the RBNZ spoke in February, they were talking about a labour-led recovery, which is something we haven’t seen in a couple of decades really. The New Zealand economy has been very much about the housing market, creating wealth and on the back of that creating consumer spend. So, that’s a different sort of recovery to what we have seen in the past, but those three drivers, broadly, have been on the floor for the last couple of years. There are signs of life, like we are seeing in company results, but still pretty subdued. So, we are watching those closely. If we did see them start to tickup, that would be a real sign to get more positive.

Ryan Bridge
Because that’s one of the big differences between us and Australia, isn’t it? Post-Covid, their house prices have basically just kept going. Ours came right off the boil and that’s affected our ability to snap back.

Sam Trethewey
Hugely. No, it has. Some of the Australian cities – Brisbane, Perth, Adelaide for instance – they are growing at double digits at the moment compared to what we’re seeing here. So strong, strong housing markets there. They’ve also had, I think, stronger migration as well compared to us. So two factors there at play.

Ryan Bridge
Sam, let’s do a quick highlights and lowlights from reporting season for you.

Sam Trethewey
I think, taking the exporters first, a2 Milk was a standout there. So that was a former market darling, it’s been through some issues for three or four years. The new CEO David Bortolussi, who’s been in place for that period, has put in a turnaround plan. It’s starting to pay off. They are growing revenue nicely and competing well against some of the large multi-national businesses that they are up against up in China. The lowlight, unfortunately, was Air New Zealand. They really didn’t need this war that’s occurred in the last week or so on top of all – a number of issues – that are impacting their business.

Ryan Bridge
Yeah. Let’s talk about Air New Zealand a little bit more. How serious is this for them and what they’ve been talking about in the last 24-48 hours. About the price of oil and the effect that might have on their prices – which we already think they charge too much.

Sam Trethewey
Yeah, that’s totally right. I think basically they have a huge cost base – labour, fuel, maintenance costs, landing charges. All these costs are going up and have been going up more than what they have been able to put up ticket prices over the last couple of years. And that has really impacted profitability and it’s made the business loss-making. If you overlay that, the oil price going up near on 50% in the last week or so. And they can hedge part of that, but they also can’t hedge another component of it called the crack spread, which has gone through the roof. And that’s really, really hurting their bottom line at the moment. So, it’s a tough situation to be in. The new CEO has announced a full strategic review to try and sort out their profitability, but it’s pretty heavy going and it’s not a business you can turn around quickly.

Ryan Bridge
Let’s talk about the Iran war. Caveat that everything is quite fluid here, because we’re sort of hanging on a whim of what the White House is saying, they’re just elected a new leader in Tehran. But from a sort of helicopter perspective, looking down, how does this affect everything you’ve just talked about with those New Zealand companies?

Sam Trethewey
I think luckily, we are a long way from the conflict, which is pleasing, but the biggest question is really around the oil price and how long will it stay elevated for. That’s really a question around how long will the Strait of Hormuz be closed for, will the oil price be around $90 to $100 a barrel? It’s a very short-term, hopefully, tax on filling up at the pump. And then the longer it goes on, the more it’s going to spread into goods and services that we purchase and buy. So we are watching that and the impact it has on slowing ultimately economic growth in the country, which unfortunately is not the thing we want right now, but it is a risk. I think reading the headlines like you Ryan, trying to judge the duration of the war, and how long that oil price will stay elevated for.

Ryan Bridge
Do we have an idea of how long is long enough to impact – you know – to affect the recovery or what price is high enough to affect the recovery.

Sam Trethewey
That’s a great question. I think there’s two elements to that. The scariest scenario is a prolonged war where the Strait stays closed for quite an extended period, and it starts to impact the fuel stocks that we have here in New Zealand. You hear the politicians down in Wellington talking about this. So, we have about 50 days of supply in the country and on the water on its way to us. If that was to run down, I think that would cause a further spike higher. But in the short term, outside of that, the downside scenario it’s about managing the costs in the short term. It’s difficult to say exactly how much is someone going to put up their prices because of the higher oil price, there’s competition elements to that. But it certainly will have an impact to inflation over that period.

Ryan Bridge
Okay, so that’s sort of an overview of what’s happening in Iran. What about back home, looking to the year that is before us, are there other risks to the economy in terms of slow down and that sort of thing?

Sam Trethewey
I think outside of the war in Iran, it is normal for activity – particularly large investment decisions – to slow down ahead of an election, so clearly we do have on later this year. We are sort of monitoring the policy that comes out of political parties around that and would expect to see the potential for activity to pause or slow down a bit in those two or three months leading up to the election – depending on what comes out. That’s not unusual – it happens for most elections. You see it in Australia. It has happened here in New Zealand multiple times before, so watch that.

Ryan Bridge
We certainly will. Gosh, so we’ve got some promising news, we’ve got some uncertainty, and then a little more potential uncertainty with an election as well. It’s a good thing you’re keeping across it Sam. Appreciate you filling us in this morning.

Sam Trethewey
Thank you, Ryan.

Ryan Bridge
That was Sam Trethewey, Portfolio Manager at Milford talking to us about reporting season here in New Zealand, with some good news, some promising news and also some uncertainty looking ahead in terms of what’s happening in the Middle East and what’s coming out of the White House. We’ll keep you across those developments of course next week. Until then, don’t forget to invest in yourselves.

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