March 11, 2026 • 5 mins
Rabobank’s Sydney-based Senior Economist looks at how the NZ economic recovery is undermined by the conflict in the Middle East. And how does war affect interest rates and inflation?
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Speaker 1 (00:00):
Let's kick off the country with the smart bloke. His
name is Ben Pickton. He's the senior economist for Rabobank.
Ben the New Zealand Economic Recovery. How is the conflict
in the Middle East likely to impact slash undermine this?
Not really good news, is.
Speaker 2 (00:16):
That, Jamie. Yeah, it's not good news. It's one of
those things that we would certainly prefer hadn't happened. Obviously,
when we talk about conflict in the Middle East, we
straight away think of oil prices, and we have seen
a substantial rise in oil prices. But we've also got
the issue around I guess people getting a little bit
(00:36):
worried about the supply of refined fuels coming out of Asia.
And when you've got those sorts of worries, you would
expect that it does a few things. One is it
might lead to a little bit of panic buying and
fuel hoarding, which you get a temporary increase in economic
activity from that. But then on the other side of it,
people sort of batten down the hatches and go into
(00:59):
siege mode a little bit like during COVID, and that
can give a big hit to the demand side of
the economy. So when we talk about economic growth. What
we're actually talking about is growth in demand. So yeah,
this certainly does pose a risk of derailing this recovery
that is underway.
Speaker 1 (01:18):
We are so vulnerable here in New Zealand. We're getting
a lot of our fuel from places like our refined fuel.
I might add because we mothboard our refining plant from
the likes of Singapore South Korea. I see South Koreas
pulling back and the export of fuel. Do you think,
for instance, that fuel rationing, Heaven help us, we're going
to go back to Carlos days of the nineteen seventies.
(01:40):
Could fuel rationing be a thing in Australia and New Zealand.
Speaker 2 (01:44):
Yeah, I think that if the issue in the Middle
East doesn't resolved soon, we could see things like that
coming back. In work from home mandates. We've seen a
number of Asian countries have already put in place work
from home mandates. So policy measures to try to curb
demand a certainly potentially on the cards. So we want
(02:05):
to see a resolution pretty quickly. Just on the refinery thing.
New Zealand's not alone in shutting down refineries. In Australia.
We used to have eight oil refineries now we've only
got two and they exist on subsidies. So across the
developed world sort of during that thirty year period of
trade liberalization, globalization, there was this trend towards, I guess,
(02:30):
doing away with ideas of being self sufficient and relying
on the global market, and to some extent that's come
back to.
Speaker 1 (02:36):
Bitis I see Brent krob and I had a look
earlier this morning, was sitting at US ninety three or barrel.
It peaked at about one hundred and twenty. Remembering when
the war started, I think it was setting at about seventy.
Is it surprising that it hasn't gone beyond the late
eighties early nineties.
Speaker 2 (02:55):
Yeah, maybe it is a little bit surprising given the
hit to global supply from the Straight of Horror moves
being closed. So around about twenty to twenty five percent
of global crew comes through that part of the world,
and similar volumes of refined products, but there's also a
bunch of other things that higher proportions of various commodities
(03:15):
come through that waterway as well. Fertilizers obviously is one
that gets talked about, but also helium and NAPSA and
methanol and all sorts of things, so it probably is
a little bit of a surprise to me that the
move hasn't been maintained. The reason why we've seen a
big pullback recently is a couple of things. One we
(03:36):
had some comments from Donald Trump saying that he thinks
that the war is very complete, so markets maybe latched
onto that a little bit very optimistically. And the other
thing is a coordinated release of reserves by the G seven.
So they're looking at releasing I think it's around about
four hundred million barrels into the market. Now, that's certainly helpful,
(03:58):
but the issue with that is that that is an
issue of stock, and the problem that we have is
an issue of flow, not stock. So it helps, but
it's only a temporary fix.
Speaker 1 (04:11):
Let's have a look at the effect war has on,
for instance, economies and more particularly interest rates, because history
would suggest, unlike what the President is suggesting, that this
thing could drag on.
Speaker 2 (04:24):
Yeah, it certainly has that potential. We just don't know
until we know there's At the moment, reading the headlines
this morning, it does seem like the Iranians escalating rather
than de escalating. So at the moment, I'm not super
optimistic that we're about to see a resolution in short order.
The impacts of oil shocks on economies, they can vary
(04:47):
a little bit, but we can look back to times
like the nineteen seventies in the early nineteen eighties to
get a little bit of an idea of the sorts
of things that happen. Now. Oil is energy. It's the
most important energy source in the world by far, and
energy is an input to all production. So anything that
(05:08):
you want to make, you need energy. So when you
have an oil shock, it kind of reverberates through supply chains,
even in ways that we don't really think about. So
all of the intermediate goods that are made from petrochemicals
and plastics and all that sort of stuff, higher oil
prices or lack of availability has an effect on those,
(05:29):
and then you've got to overlay the higher energy cost
aspect as well. So we certainly expect it to be inflationary,
and as a result, we've seen market expectations of rate
hikes in New Zealand being brought forward even though the
economy is not firing on all cylinders yet.
Speaker 1 (05:46):
And that is the last thing we need being picked
on out of rabobanks Sydney Office. Thanks for some of
your wisdom today on the country. Appreciate it.
Speaker 2 (05:54):
Jeers Jamie, thanks for having me
Let's kick off the country with the smart bloke. His
name is Ben Pickton. He's the senior economist for Rabobank.
Ben the New Zealand Economic Recovery. How is the conflict
in the Middle East likely to impact slash undermine this?
Not really good news, is.
Speaker 2 (00:16):
That, Jamie. Yeah, it's not good news. It's one of
those things that we would certainly prefer hadn't happened. Obviously,
when we talk about conflict in the Middle East, we
straight away think of oil prices, and we have seen
a substantial rise in oil prices. But we've also got
the issue around I guess people getting a little bit
(00:36):
worried about the supply of refined fuels coming out of Asia.
And when you've got those sorts of worries, you would
expect that it does a few things. One is it
might lead to a little bit of panic buying and
fuel hoarding, which you get a temporary increase in economic
activity from that. But then on the other side of it,
people sort of batten down the hatches and go into
(00:59):
siege mode a little bit like during COVID, and that
can give a big hit to the demand side of
the economy. So when we talk about economic growth. What
we're actually talking about is growth in demand. So yeah,
this certainly does pose a risk of derailing this recovery
that is underway.
Speaker 1 (01:18):
We are so vulnerable here in New Zealand. We're getting
a lot of our fuel from places like our refined fuel.
I might add because we mothboard our refining plant from
the likes of Singapore South Korea. I see South Koreas
pulling back and the export of fuel. Do you think,
for instance, that fuel rationing, Heaven help us, we're going
to go back to Carlos days of the nineteen seventies.
(01:40):
Could fuel rationing be a thing in Australia and New Zealand.
Speaker 2 (01:44):
Yeah, I think that if the issue in the Middle
East doesn't resolved soon, we could see things like that
coming back. In work from home mandates. We've seen a
number of Asian countries have already put in place work
from home mandates. So policy measures to try to curb
demand a certainly potentially on the cards. So we want
(02:05):
to see a resolution pretty quickly. Just on the refinery thing.
New Zealand's not alone in shutting down refineries. In Australia.
We used to have eight oil refineries now we've only
got two and they exist on subsidies. So across the
developed world sort of during that thirty year period of
trade liberalization, globalization, there was this trend towards, I guess,
(02:30):
doing away with ideas of being self sufficient and relying
on the global market, and to some extent that's come
back to.
Speaker 1 (02:36):
Bitis I see Brent krob and I had a look
earlier this morning, was sitting at US ninety three or barrel.
It peaked at about one hundred and twenty. Remembering when
the war started, I think it was setting at about seventy.
Is it surprising that it hasn't gone beyond the late
eighties early nineties.
Speaker 2 (02:55):
Yeah, maybe it is a little bit surprising given the
hit to global supply from the Straight of Horror moves
being closed. So around about twenty to twenty five percent
of global crew comes through that part of the world,
and similar volumes of refined products, but there's also a
bunch of other things that higher proportions of various commodities
(03:15):
come through that waterway as well. Fertilizers obviously is one
that gets talked about, but also helium and NAPSA and
methanol and all sorts of things, so it probably is
a little bit of a surprise to me that the
move hasn't been maintained. The reason why we've seen a
big pullback recently is a couple of things. One we
(03:36):
had some comments from Donald Trump saying that he thinks
that the war is very complete, so markets maybe latched
onto that a little bit very optimistically. And the other
thing is a coordinated release of reserves by the G seven.
So they're looking at releasing I think it's around about
four hundred million barrels into the market. Now, that's certainly helpful,
(03:58):
but the issue with that is that that is an
issue of stock, and the problem that we have is
an issue of flow, not stock. So it helps, but
it's only a temporary fix.
Speaker 1 (04:11):
Let's have a look at the effect war has on,
for instance, economies and more particularly interest rates, because history
would suggest, unlike what the President is suggesting, that this
thing could drag on.
Speaker 2 (04:24):
Yeah, it certainly has that potential. We just don't know
until we know there's At the moment, reading the headlines
this morning, it does seem like the Iranians escalating rather
than de escalating. So at the moment, I'm not super
optimistic that we're about to see a resolution in short order.
The impacts of oil shocks on economies, they can vary
(04:47):
a little bit, but we can look back to times
like the nineteen seventies in the early nineteen eighties to
get a little bit of an idea of the sorts
of things that happen. Now. Oil is energy. It's the
most important energy source in the world by far, and
energy is an input to all production. So anything that
(05:08):
you want to make, you need energy. So when you
have an oil shock, it kind of reverberates through supply chains,
even in ways that we don't really think about. So
all of the intermediate goods that are made from petrochemicals
and plastics and all that sort of stuff, higher oil
prices or lack of availability has an effect on those,
(05:29):
and then you've got to overlay the higher energy cost
aspect as well. So we certainly expect it to be inflationary,
and as a result, we've seen market expectations of rate
hikes in New Zealand being brought forward even though the
economy is not firing on all cylinders yet.
Speaker 1 (05:46):
And that is the last thing we need being picked
on out of rabobanks Sydney Office. Thanks for some of
your wisdom today on the country. Appreciate it.
Speaker 2 (05:54):
Jeers Jamie, thanks for having me
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