March 16, 2026 • 21 mins
Inflation could hit 3.7% under Treasury’s ‘worst-case’ inflation scenario.
It’s while petrol prices have risen about 45 to 50 cents a litre, adding about $23 to the price of filling an average car.
Finance Minister Nicola Willis has outlined the government's priorities - First a focus on supply chains, then potential and anticipated freight disruptions, and lastly our economic response.
Ministers are meeting daily, written situation updates twice-daily, they’re working closely with importers – we're being told not to panic.
But, after criticising the last government to no end about its economic decisions during the pandemic - what tools does this government have to ease cost-of living pressures?
Today on The Front Page, NZ Herald business editor at large Liam Dann is with us to talk through what we could do next.
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You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.
Host: Chelsea Daniels
Editor/Producer: Richard Martin
Producer: Jane Yee
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Speaker 1 (00:05):
Kiyota.
Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald. Inflation could
hit three point seven percent under Treasury's worst case inflation scenario.
It's while petrol prices have risen about forty five to
(00:27):
fifty cents a leader, adding about twenty three dollars to
the price of filling an average car. Finance Minister Nikola
Willis has outlined the government's priorities, first of focus on
supply chains, then potential and anticipated freight disruptions, and lastly
are economic response. Ministers are meeting daily. Written situation updates
(00:50):
are twice daily. They're working closely with importers. We're being
told not to panic. But after criticizing the last government
to no end about its economic decisions during the pandemic,
what tools does this government have.
Speaker 3 (01:05):
To ease cost of living pressures?
Speaker 2 (01:08):
Today? On the front page ends at Herald Business Editor
at Large Liam dan Is with us to talk through
what we could do next. So, Liam, fuel prices are
obviously continuously rising. They're still slightly below their twenty twenty
two peak, but it's reasonable to assume that they will
get higher than the twenty twenty two price point, right,
(01:29):
so the government's rightly going to have to do something,
but Willis has said that they won't be splashing the cash.
Speaker 3 (01:36):
Tell me why.
Speaker 4 (01:36):
Yeah, I think when you look at it, the government's
trying to say that they're taking some lessons from the
COVID inquiry that we've just had, you know, for Tuitor's
timing for them in that sense, but they want to
make sure that anything is really targeted. They feel like
the previous government was sort of you know, it was
a genuine crisis, so they made it easy. They subsidized,
(02:00):
subsidized consumers, they put money into the economy. But of
course in hindsight we can see that the economy actually
coped quite well and that added to inflation. So that
the problem here is if you have an inflation problem
and you push more money supply into the economy, that
actually exacerbates inflation. So something like cutting the excise tax
(02:22):
on fuel would lower the cost of fuel, but would
increase demand for petrol at a time when you're trying
to restrict demand you actually want to use less petrol.
So yeah, those are some of the issues that would
count against sort of a broad subsidy for consumers.
Speaker 2 (02:41):
Right, so why can't the government just give everybody two
hundred bucks and be done with that.
Speaker 4 (02:46):
Yeah, well, that's where it's that money supply equation with inflation.
So there's two aspects to inflation, even though some people
will say, you know, the money supply is the number one,
but so is the issue of is going up globally
which we can't control.
Speaker 3 (03:03):
It's going to happen, and then you can't pushes the
price up.
Speaker 4 (03:05):
But then when you add money to the economy, when
you just it's that classic you know, dilemma with kids,
you know, when they say, why can't we just print money?
And then we do print money anyway. But the reason
we tell the kids why we can't is that the
more money, the more dollars there are in an economy.
If we just add dollars without adding actual wealth, then
those dollars are worth worth less. And so when a
(03:30):
dollar is worth less, that's effectively inflation. That's that's push
means that it takes more dollars to buy things, and
it's an inflation re spiral. And I think there is
an argument there that you know, we got into that
situation after that initial supply shop in twenty twenty two,
you know, global events push prices up, but because we
(03:50):
had super low interest rates and you know, subsidies going
to consumers and taxpayers, that really expanded the money supply.
The economy overheated, and we had more inflation than we
might have otherwise. And so that's the rationale we're hearing
from Finance Minister Nicola Willis, who who is just you know,
(04:13):
making wants to make sure that anything they do to
ease the pain here doesn't make things worse, say another
five months down the track or something. So even say,
you know, if the war was to go on for
a couple more months and that would create some real
pain points for consumers, it still could be the case
that six months down the track, we've created an inflationary
(04:35):
bubble that takes ages to unwind. And we saw that,
you know, the Reserve Bank has to then push up
interest rates and take money out of people's pockets to
sort of get inflation back under control. And you can
pay for that over months and years, much longer than
the initial crisis. So they're weighing all that up. It's
not an easy position to be in because there will
be a lot of consumers who are voters feeling it
(04:58):
in their pocket.
Speaker 2 (04:59):
Yeah, she said that the advice that economists give about
these situations, if you're going to provide any support, that
it has to be temporary, timely, and targeted to those
most in need.
Speaker 3 (05:11):
So what are the government's options here, Yeah.
Speaker 4 (05:14):
They are limited, but you know, something like working for families,
which you know, you only get if you're up to
a threshold a certain income threshold could be adjusted and
there's tax credits there that they could adjust to basically
put a few more dollars in the pockets of the
people who probably I don't know if it's a politically
correct term still or not, but you know, the working poor,
(05:37):
the people who are maybe you know two people are
working in low minimum wage type jobs and have to
work full time just to sort of just to sort
of keep the household rolling. That's where a price shock
like this if they have to drive to work. And
Nicola Willis keeps using the example of a shift worker
(05:58):
going to the airport and you know who can't catch
the bus and has to drive, you know, throwing an
extra fifty dollars or eighty dollars a week in petrol
costs on someone like that can be quite disastrous, so
it could really see some people falling into a financial trap.
And so those are the people that you need to
look after. The higher income the smaller fuel is as
(06:20):
a percentage of your total income, so you can handle
a shock. I mean, you might be talking about eating
out less or something like that, and that's a different
kind of situation and one where it probably isn't worthwhile
the government subsidizing those people. I mean, it still creates
a hit to the economy when you choose not to
eat out because you've got to pay more petrol costs,
(06:40):
So there is still going to be flow on from that.
But I think they're talking about dealing with the really
acute pain. There was a view around COVID because the
crisis was so serious and so unprecedented that you know,
particularly for businesses, but getting money to people quickly was
(07:00):
seen as a really valuable thing, and I think it
was especially in the first instance for businesses. Getting support
to those businesses so they didn't just collapse was important.
So the government at that time was all about getting
the money out the door. But I think there is
a view and certainly that the reviews that we've seen
(07:21):
the inquiries suggest that that just went on too long.
It wasn't rained in as the economy started to heat up.
So they have to keep a very close eye on
what the real effects are in the economy because you
will have noticed there's a lot of speculation at the
moment and we don't know what the actual net outcome
will be on the economy.
Speaker 5 (07:38):
Yeah.
Speaker 2 (07:38):
So Willis has said that the treasury scenarios show higher
inflation than anticipated. That's where we get the three point
seven percent figure. She said that that's too high for
my liking, but points out that it's actually lower than
Australia's They're currently at three point eight percent, and while
we're entering unavoidable international cost pressure her words, we are
(08:02):
in a better position than other countries. Now, we are
in a better position than other countries.
Speaker 3 (08:07):
But is it right to compare ourselves to Australia for instance.
Speaker 4 (08:11):
Well, it's slightly different in that Australia's economy was growing
at capacity above capacity, so they were sort of already
seeing strong economic growth which had started to drive inflation.
You could say we were lucky, we were lucky we
had all these recessions because that meant our economy was
so in such terrible shape that there was less inflation
(08:34):
in the core of the economy, and so, you know,
economists had been expecting to see inflation come back a bit.
We may still see it in the first quarter inflation
figures because they weren't really affected so much by the
war that that core inflation in the economy is still
sort of tracking downwards at a time when we were
(08:58):
suddenly going to get this you know, the shop from
the external things like the petrol and food prices. But yeah, so,
I mean, you know, we're in better shape because we're
in worse shape. As there's a bit of an oxymoron,
but that's pretty much where we were in terms of inflation.
Speaker 2 (09:13):
It's like Trump coming out this week and saying it's
good that oil prices are going up because Americans produce
a lot of oil.
Speaker 3 (09:19):
A lot of people are getting rich.
Speaker 4 (09:20):
Right, Yeah, well, I guess if you've got shares and
oil companies, it's pretty good.
Speaker 5 (09:30):
If what the government does is it just spends the bazookas,
then that can add fuel to the inflation fire and
lead to broader price increases across the economy, affecting everyone
and getting into quite a dangerous spiral. But the simple
truth is that I can't stop the international oil price
going up right now. That's outside of my control and
(09:52):
that's not something that I can control. And I hope
that New Zealanders understand that. But it doesn't mean I'm
not acutely conscious of what's going on household budget.
Speaker 2 (10:03):
Willis has said that she is not going to completely
loosen the fiscal belt. Obvious reason number one would be
the grief that this government has given the last government
during the pandemic, of course, and after the pandemic. What
would happen down the line, I suppose if they did
loosen the financial belt.
Speaker 4 (10:22):
Yeah, well, anything they do to subsidize unless they cut
services from somewhere else. Their budget is already in deficit
and you know, trying to get back to a surplus
and whatever it was three or four years or something,
So you know, that would effectively mean you're borrowing to
subsidize in the short term. So you'd have to say,
(10:42):
the pain's got to be so bad in the short
term that we're going to load extra debt on people
in the future, and that extra debt can translate to
higher interest rates, it can you know, it's obviously means
that we have to deal with it at some point,
and that can mean having to cut versus something else.
So there's trade offs all the way through. So you've
(11:02):
got that immediate thing of if the government pours too
much money into the economy at a time when an
economy is near capacity, then you create more inflation. So
they have to worry about that and they have to
weigh up how bad it is. Is it really worth
borrowing more money from around the world to fund whatever
(11:24):
subsidies they think are required. So you know, that's another
reason to stay quite targeted and make sure that you're
getting your bang for your buck in terms of helping
the people most in need.
Speaker 2 (11:33):
Because is it either borrowing a whole bunch more money
or having another look at budget twenty twenty six and
cutting thing, you know, cutting money from educational health and
either scenario, isn't it really good?
Speaker 4 (11:44):
In not know, those scenarios are good. Yeah, So I mean,
I don't know, they're running pretty pretty thin. You know,
they've done a lot of cutting already, so yeah, I
don't think they'd be looking forward to that. I mean,
there is capacity to you know, in terms you know,
there's a lot of debate about how much debt New
Zealand can afford to take on, but quite you know,
(12:06):
literally in practical sense. In a practical sense, we can
still get we can still borrow more money. We're still
considered a good enough bet to raise more money if required.
It's just those longer term issues that flow from it.
Speaker 2 (12:19):
What sort of impact do you think that this will have,
being that it is an election year as I said before,
obviously there's been a lot of factors out of their control,
and voters seem to understand that Nikola Willis herself does
not have anything to do with the international price of oil.
Speaker 3 (12:36):
But is that rich.
Speaker 2 (12:37):
Coming from a government who seem to blame COVID on
the last government. Yeah.
Speaker 4 (12:43):
I mean, look, it's politics, isn't it, you know, And
it's much easier in opposition to you know, put all
the blame for inflation, and in fact, sometimes when you know,
the inflation comes down or various things have happened in
the economy that have been to do with the good
things happen, take the government sometimes take the credit when
it actually it's it's a global trend. Yeah, I think
(13:08):
a lot's going to depend on how they sell it
and the leadership you know. So you know, people kind
of understand, you know, or do should understand that this
is a global problem. But when you go to the
supermarket and you're paying more when you go to the
petrol pump, inflation really does make voters grumpy.
Speaker 5 (13:27):
You know.
Speaker 4 (13:28):
We've seen it in elections all over the world. The
cost of living crisis is one of the probably the
number one issue for most voters, and that seems to
rub off on governments even if you you know, sort
of at the back of your mind still understand that
it's not really their fault. Well, they're going to they're
going to cop it, so that that puts the onus
on I guess the Prime Minister and the Finance Minister
(13:50):
and the rest of that coalition to really do a good,
you know job of explaining and showing some leadership through
what you know is looking like, if not a crisis,
a very serious and worrying situation for the coming weeks
and months as we head into the election campaign.
Speaker 1 (14:15):
So we will be looking at it through the lens
of any If we were to do it, it would be
timely or be targeted, and it would be you know,
for a set period of time, you know, you can
do things that are lots of short term gain, but
perhaps lots of long term paign. And that's really the
lesson out of the COVID spending, where half of the
sixty billion dollars didn't go anywhere near COVID and didn't
(14:35):
really lead to any better schools, hospitals or roads across
the country at all. And so you know, we just
want to make sure that we'll work our way through
that very systematically, and I think very coolly, very calmly,
very responsibly. As we've been doing.
Speaker 2 (14:49):
Well speaking of voters being grumpy, especially at the supermarket,
we've got food prices increased four point five percent in
the last twelve months.
Speaker 4 (14:58):
Yeah, is that good? It's not been great going in So,
you know, on one hand, the economy has been improving
and we're getting all this data for you know, up
up until the time the war started, and it's mostly
showing that the economy kept improving up to that point.
But inflation actually was still pretty strong, and you know,
(15:20):
and it's inflation in areas that people feel most acutely,
being food prices really at the grocery store. Over the
last year, petrol prices had actually come down and we're
down about six percent. So we went into this shock
actually in a pretty good place with petrol prices and
global oil prices, so perhaps it's not as bad as
(15:41):
it could have been. But you know, you're seeing it
with things like that we export and do really well
from in a sort of a net equation. It's great
that beef prices are really high because that's more money
coming into New Zealand.
Speaker 2 (15:55):
But I also don't like paying I mean, what is it,
beef mints is up twenty three three point two percent annually.
I thought beef mint this was the cheap one that
you could get and put on time.
Speaker 4 (16:06):
I think you just be happy for the farmers with money.
That's that's the difficult sales job, right, because it feels like, well,
hang on, so the rural communities are doing really well,
but in the city's people are but a yeah, yeah,
that is that is tough. Beef prices a tough one
and unfortunately for the government. But Ageddon, which I remember
(16:28):
from about eighteen months ago or whatever, I think what
we've seen on global dairy markets has been really good
for Fonterra and the dairy farmers at easy to sort
of a lowish sort of level about four or five
months ago, and prices have shot up since then. So
we're going to see that flow through in the next
few months, and probably sometime around May or June, we're
(16:52):
going to see those consumer prices for butter and cheese
back at levels that make people very unhappy. And that's
a real a cultural hot spot and an issue for
the government too, even though yeah, it's it's the net equation,
more money coming into the country, probably keeping the economy afloat,
but you know, you've got to sell that to voters
(17:14):
who might not be feeling it when they're actually picking
up their their cag of cheese every week if they
can still afford that.
Speaker 3 (17:21):
Yeah, I quite like butter get in. Is that something
that we're I think, I think, I think that's what
I'm going to.
Speaker 4 (17:27):
That's where we wind about eighteen months or two years
ago at the last big, big price spike, and you know,
everything's different. But commodity markets have this sort of flow through,
and so petrol prices are a lot quicker. It takes
longer for the retail price of butter and cheese to
flow through from the commodity price spikes, we've seen petrol
prices move pretty quickly, actually because.
Speaker 3 (17:50):
Real quickly, but they paint advance though, right.
Speaker 4 (17:53):
Yeah, they're looking forward, so there's there's a futures market involved.
Speaker 5 (17:58):
You know.
Speaker 4 (17:58):
In some ways I find that heart as well, though,
because you know, we've seen warnings of you know, people say, oh,
could petrol go to four dollars a liter, Well maybe
if it went to two hundred dollars a barrel. Right
now it's sitting at at one hundred dollars a barrel.
The people who trade oil can see that the Strait
of Hormoz has closed, they can see that the war
(18:19):
doesn't have a defined ending on it, so they can
see a lot of the risk there already, and they're
trading into the future. That's not two hundred. It's not
spiking up in a panic at the moment, and I
think it would take something pretty disastrous to put it
up to those levels. So yeah, look that you might
see the petrol price go a bit more because it
hasn't necessarily all flowed through the increases we've seen on
(18:43):
the commodity markets. It takes a little while. There'll be
some movements around the dollar. People in a war situation,
a international crisis situation, the US dollar becomes a safe
haven and that tends to go up, which means our
Kiwi dollar comes down, and that adds to the cost
of imported goods for US. So those things could happen.
But look, I would be you know, touch would I'm
(19:07):
hopeful that we sort of see some stability around this
hundred one hundred and a bit sort of barrel price,
which means that petrol shouldn't go up too much more
before we hit a plateau. And hopefully, you know, that's
when markets and you know, consumers and things we find
ways around. Longer term, you know, markets would would would
(19:29):
find a solution for this. It's not like COVID, where
something is sort of we're not in the war, so
it's not something you know, where we're at risk of dying. Here.
It's a product. There's actually enough of it in the world.
The problem is moving it around the world, and you
know that would be resolved in the long term and
(19:50):
the short term. We've got enough petrol in the country.
I see a potential issue in the medium term if
you know, supplies start to run in three or four
weeks and that's where the government has to look to
possibly you know, taking some action around you know, worst
case would be, you know, looking at some sort of
(20:11):
rationing where you have to ensure that your essential services
get first, go at the petrol and that sort of thing.
Carlos Days, well, people have talked about Carlus.
Speaker 3 (20:20):
Stays basically didn't work.
Speaker 4 (20:23):
Terrible solution exactly, and I would think that there'd be
there'd be plenty of things that do before then. You know,
we know from COVID that we can work from home
and the economy doesn't collapse, So you know, encouraging non
essential workers to work from home, subsidies for public transport,
that sort of thing might be a lot more effective.
(20:44):
There was a lot of work to organize Carlos Days,
get your sticker and all that sort of stuff for
not much gain.
Speaker 3 (20:51):
Thanks for joining us, LAMB cheers, Chelsea. That's it for
this episode of the Front Page.
Speaker 2 (20:59):
You can read more about today's stories and extensive news
coverage at enziherld dot co dot enz. The Front Page
is hosted and produced by me Chelsea Daniels Kine. Dickie
is our studio operator, Richard Martin, our producer and editor.
Speaker 3 (21:14):
And our executive producer.
Speaker 5 (21:16):
Is Jane Ye.
Speaker 2 (21:17):
Follow the front page on the iheartapp or wherever you
get your podcasts, and join us next time for another
look beyond the headlines.
Kiyota.
Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald. Inflation could
hit three point seven percent under Treasury's worst case inflation scenario.
It's while petrol prices have risen about forty five to
(00:27):
fifty cents a leader, adding about twenty three dollars to
the price of filling an average car. Finance Minister Nikola
Willis has outlined the government's priorities, first of focus on
supply chains, then potential and anticipated freight disruptions, and lastly
are economic response. Ministers are meeting daily. Written situation updates
(00:50):
are twice daily. They're working closely with importers. We're being
told not to panic. But after criticizing the last government
to no end about its economic decisions during the pandemic,
what tools does this government have.
Speaker 3 (01:05):
To ease cost of living pressures?
Speaker 2 (01:08):
Today? On the front page ends at Herald Business Editor
at Large Liam dan Is with us to talk through
what we could do next. So, Liam, fuel prices are
obviously continuously rising. They're still slightly below their twenty twenty
two peak, but it's reasonable to assume that they will
get higher than the twenty twenty two price point, right,
(01:29):
so the government's rightly going to have to do something,
but Willis has said that they won't be splashing the cash.
Speaker 3 (01:36):
Tell me why.
Speaker 4 (01:36):
Yeah, I think when you look at it, the government's
trying to say that they're taking some lessons from the
COVID inquiry that we've just had, you know, for Tuitor's
timing for them in that sense, but they want to
make sure that anything is really targeted. They feel like
the previous government was sort of you know, it was
a genuine crisis, so they made it easy. They subsidized,
(02:00):
subsidized consumers, they put money into the economy. But of
course in hindsight we can see that the economy actually
coped quite well and that added to inflation. So that
the problem here is if you have an inflation problem
and you push more money supply into the economy, that
actually exacerbates inflation. So something like cutting the excise tax
(02:22):
on fuel would lower the cost of fuel, but would
increase demand for petrol at a time when you're trying
to restrict demand you actually want to use less petrol.
So yeah, those are some of the issues that would
count against sort of a broad subsidy for consumers.
Speaker 2 (02:41):
Right, so why can't the government just give everybody two
hundred bucks and be done with that.
Speaker 4 (02:46):
Yeah, well, that's where it's that money supply equation with inflation.
So there's two aspects to inflation, even though some people
will say, you know, the money supply is the number one,
but so is the issue of is going up globally
which we can't control.
Speaker 3 (03:03):
It's going to happen, and then you can't pushes the
price up.
Speaker 4 (03:05):
But then when you add money to the economy, when
you just it's that classic you know, dilemma with kids,
you know, when they say, why can't we just print money?
And then we do print money anyway. But the reason
we tell the kids why we can't is that the
more money, the more dollars there are in an economy.
If we just add dollars without adding actual wealth, then
those dollars are worth worth less. And so when a
(03:30):
dollar is worth less, that's effectively inflation. That's that's push
means that it takes more dollars to buy things, and
it's an inflation re spiral. And I think there is
an argument there that you know, we got into that
situation after that initial supply shop in twenty twenty two,
you know, global events push prices up, but because we
(03:50):
had super low interest rates and you know, subsidies going
to consumers and taxpayers, that really expanded the money supply.
The economy overheated, and we had more inflation than we
might have otherwise. And so that's the rationale we're hearing
from Finance Minister Nicola Willis, who who is just you know,
(04:13):
making wants to make sure that anything they do to
ease the pain here doesn't make things worse, say another
five months down the track or something. So even say,
you know, if the war was to go on for
a couple more months and that would create some real
pain points for consumers, it still could be the case
that six months down the track, we've created an inflationary
(04:35):
bubble that takes ages to unwind. And we saw that,
you know, the Reserve Bank has to then push up
interest rates and take money out of people's pockets to
sort of get inflation back under control. And you can
pay for that over months and years, much longer than
the initial crisis. So they're weighing all that up. It's
not an easy position to be in because there will
be a lot of consumers who are voters feeling it
(04:58):
in their pocket.
Speaker 2 (04:59):
Yeah, she said that the advice that economists give about
these situations, if you're going to provide any support, that
it has to be temporary, timely, and targeted to those
most in need.
Speaker 3 (05:11):
So what are the government's options here, Yeah.
Speaker 4 (05:14):
They are limited, but you know, something like working for families,
which you know, you only get if you're up to
a threshold a certain income threshold could be adjusted and
there's tax credits there that they could adjust to basically
put a few more dollars in the pockets of the
people who probably I don't know if it's a politically
correct term still or not, but you know, the working poor,
(05:37):
the people who are maybe you know two people are
working in low minimum wage type jobs and have to
work full time just to sort of just to sort
of keep the household rolling. That's where a price shock
like this if they have to drive to work. And
Nicola Willis keeps using the example of a shift worker
(05:58):
going to the airport and you know who can't catch
the bus and has to drive, you know, throwing an
extra fifty dollars or eighty dollars a week in petrol
costs on someone like that can be quite disastrous, so
it could really see some people falling into a financial trap.
And so those are the people that you need to
look after. The higher income the smaller fuel is as
(06:20):
a percentage of your total income, so you can handle
a shock. I mean, you might be talking about eating
out less or something like that, and that's a different
kind of situation and one where it probably isn't worthwhile
the government subsidizing those people. I mean, it still creates
a hit to the economy when you choose not to
eat out because you've got to pay more petrol costs,
(06:40):
So there is still going to be flow on from that.
But I think they're talking about dealing with the really
acute pain. There was a view around COVID because the
crisis was so serious and so unprecedented that you know,
particularly for businesses, but getting money to people quickly was
(07:00):
seen as a really valuable thing, and I think it
was especially in the first instance for businesses. Getting support
to those businesses so they didn't just collapse was important.
So the government at that time was all about getting
the money out the door. But I think there is
a view and certainly that the reviews that we've seen
(07:21):
the inquiries suggest that that just went on too long.
It wasn't rained in as the economy started to heat up.
So they have to keep a very close eye on
what the real effects are in the economy because you
will have noticed there's a lot of speculation at the
moment and we don't know what the actual net outcome
will be on the economy.
Speaker 5 (07:38):
Yeah.
Speaker 2 (07:38):
So Willis has said that the treasury scenarios show higher
inflation than anticipated. That's where we get the three point
seven percent figure. She said that that's too high for
my liking, but points out that it's actually lower than
Australia's They're currently at three point eight percent, and while
we're entering unavoidable international cost pressure her words, we are
(08:02):
in a better position than other countries. Now, we are
in a better position than other countries.
Speaker 3 (08:07):
But is it right to compare ourselves to Australia for instance.
Speaker 4 (08:11):
Well, it's slightly different in that Australia's economy was growing
at capacity above capacity, so they were sort of already
seeing strong economic growth which had started to drive inflation.
You could say we were lucky, we were lucky we
had all these recessions because that meant our economy was
so in such terrible shape that there was less inflation
(08:34):
in the core of the economy, and so, you know,
economists had been expecting to see inflation come back a bit.
We may still see it in the first quarter inflation
figures because they weren't really affected so much by the
war that that core inflation in the economy is still
sort of tracking downwards at a time when we were
(08:58):
suddenly going to get this you know, the shop from
the external things like the petrol and food prices. But yeah, so,
I mean, you know, we're in better shape because we're
in worse shape. As there's a bit of an oxymoron,
but that's pretty much where we were in terms of inflation.
Speaker 2 (09:13):
It's like Trump coming out this week and saying it's
good that oil prices are going up because Americans produce
a lot of oil.
Speaker 3 (09:19):
A lot of people are getting rich.
Speaker 4 (09:20):
Right, Yeah, well, I guess if you've got shares and
oil companies, it's pretty good.
Speaker 5 (09:30):
If what the government does is it just spends the bazookas,
then that can add fuel to the inflation fire and
lead to broader price increases across the economy, affecting everyone
and getting into quite a dangerous spiral. But the simple
truth is that I can't stop the international oil price
going up right now. That's outside of my control and
(09:52):
that's not something that I can control. And I hope
that New Zealanders understand that. But it doesn't mean I'm
not acutely conscious of what's going on household budget.
Speaker 2 (10:03):
Willis has said that she is not going to completely
loosen the fiscal belt. Obvious reason number one would be
the grief that this government has given the last government
during the pandemic, of course, and after the pandemic. What
would happen down the line, I suppose if they did
loosen the financial belt.
Speaker 4 (10:22):
Yeah, well, anything they do to subsidize unless they cut
services from somewhere else. Their budget is already in deficit
and you know, trying to get back to a surplus
and whatever it was three or four years or something,
So you know, that would effectively mean you're borrowing to
subsidize in the short term. So you'd have to say,
(10:42):
the pain's got to be so bad in the short
term that we're going to load extra debt on people
in the future, and that extra debt can translate to
higher interest rates, it can you know, it's obviously means
that we have to deal with it at some point,
and that can mean having to cut versus something else.
So there's trade offs all the way through. So you've
(11:02):
got that immediate thing of if the government pours too
much money into the economy at a time when an
economy is near capacity, then you create more inflation. So
they have to worry about that and they have to
weigh up how bad it is. Is it really worth
borrowing more money from around the world to fund whatever
(11:24):
subsidies they think are required. So you know, that's another
reason to stay quite targeted and make sure that you're
getting your bang for your buck in terms of helping
the people most in need.
Speaker 2 (11:33):
Because is it either borrowing a whole bunch more money
or having another look at budget twenty twenty six and
cutting thing, you know, cutting money from educational health and
either scenario, isn't it really good?
Speaker 4 (11:44):
In not know, those scenarios are good. Yeah, So I mean,
I don't know, they're running pretty pretty thin. You know,
they've done a lot of cutting already, so yeah, I
don't think they'd be looking forward to that. I mean,
there is capacity to you know, in terms you know,
there's a lot of debate about how much debt New
Zealand can afford to take on, but quite you know,
(12:06):
literally in practical sense. In a practical sense, we can
still get we can still borrow more money. We're still
considered a good enough bet to raise more money if required.
It's just those longer term issues that flow from it.
Speaker 2 (12:19):
What sort of impact do you think that this will have,
being that it is an election year as I said before,
obviously there's been a lot of factors out of their control,
and voters seem to understand that Nikola Willis herself does
not have anything to do with the international price of oil.
Speaker 3 (12:36):
But is that rich.
Speaker 2 (12:37):
Coming from a government who seem to blame COVID on
the last government. Yeah.
Speaker 4 (12:43):
I mean, look, it's politics, isn't it, you know, And
it's much easier in opposition to you know, put all
the blame for inflation, and in fact, sometimes when you know,
the inflation comes down or various things have happened in
the economy that have been to do with the good
things happen, take the government sometimes take the credit when
it actually it's it's a global trend. Yeah, I think
(13:08):
a lot's going to depend on how they sell it
and the leadership you know. So you know, people kind
of understand, you know, or do should understand that this
is a global problem. But when you go to the
supermarket and you're paying more when you go to the
petrol pump, inflation really does make voters grumpy.
Speaker 5 (13:27):
You know.
Speaker 4 (13:28):
We've seen it in elections all over the world. The
cost of living crisis is one of the probably the
number one issue for most voters, and that seems to
rub off on governments even if you you know, sort
of at the back of your mind still understand that
it's not really their fault. Well, they're going to they're
going to cop it, so that that puts the onus
on I guess the Prime Minister and the Finance Minister
(13:50):
and the rest of that coalition to really do a good,
you know job of explaining and showing some leadership through
what you know is looking like, if not a crisis,
a very serious and worrying situation for the coming weeks
and months as we head into the election campaign.
Speaker 1 (14:15):
So we will be looking at it through the lens
of any If we were to do it, it would be
timely or be targeted, and it would be you know,
for a set period of time, you know, you can
do things that are lots of short term gain, but
perhaps lots of long term paign. And that's really the
lesson out of the COVID spending, where half of the
sixty billion dollars didn't go anywhere near COVID and didn't
(14:35):
really lead to any better schools, hospitals or roads across
the country at all. And so you know, we just
want to make sure that we'll work our way through
that very systematically, and I think very coolly, very calmly,
very responsibly. As we've been doing.
Speaker 2 (14:49):
Well speaking of voters being grumpy, especially at the supermarket,
we've got food prices increased four point five percent in
the last twelve months.
Speaker 4 (14:58):
Yeah, is that good? It's not been great going in So,
you know, on one hand, the economy has been improving
and we're getting all this data for you know, up
up until the time the war started, and it's mostly
showing that the economy kept improving up to that point.
But inflation actually was still pretty strong, and you know,
(15:20):
and it's inflation in areas that people feel most acutely,
being food prices really at the grocery store. Over the
last year, petrol prices had actually come down and we're
down about six percent. So we went into this shock
actually in a pretty good place with petrol prices and
global oil prices, so perhaps it's not as bad as
(15:41):
it could have been. But you know, you're seeing it
with things like that we export and do really well
from in a sort of a net equation. It's great
that beef prices are really high because that's more money
coming into New Zealand.
Speaker 2 (15:55):
But I also don't like paying I mean, what is it,
beef mints is up twenty three three point two percent annually.
I thought beef mint this was the cheap one that
you could get and put on time.
Speaker 4 (16:06):
I think you just be happy for the farmers with money.
That's that's the difficult sales job, right, because it feels like, well,
hang on, so the rural communities are doing really well,
but in the city's people are but a yeah, yeah,
that is that is tough. Beef prices a tough one
and unfortunately for the government. But Ageddon, which I remember
(16:28):
from about eighteen months ago or whatever, I think what
we've seen on global dairy markets has been really good
for Fonterra and the dairy farmers at easy to sort
of a lowish sort of level about four or five
months ago, and prices have shot up since then. So
we're going to see that flow through in the next
few months, and probably sometime around May or June, we're
(16:52):
going to see those consumer prices for butter and cheese
back at levels that make people very unhappy. And that's
a real a cultural hot spot and an issue for
the government too, even though yeah, it's it's the net equation,
more money coming into the country, probably keeping the economy afloat,
but you know, you've got to sell that to voters
(17:14):
who might not be feeling it when they're actually picking
up their their cag of cheese every week if they
can still afford that.
Speaker 3 (17:21):
Yeah, I quite like butter get in. Is that something
that we're I think, I think, I think that's what
I'm going to.
Speaker 4 (17:27):
That's where we wind about eighteen months or two years
ago at the last big, big price spike, and you know,
everything's different. But commodity markets have this sort of flow through,
and so petrol prices are a lot quicker. It takes
longer for the retail price of butter and cheese to
flow through from the commodity price spikes, we've seen petrol
prices move pretty quickly, actually because.
Speaker 3 (17:50):
Real quickly, but they paint advance though, right.
Speaker 4 (17:53):
Yeah, they're looking forward, so there's there's a futures market involved.
Speaker 5 (17:58):
You know.
Speaker 4 (17:58):
In some ways I find that heart as well, though,
because you know, we've seen warnings of you know, people say, oh,
could petrol go to four dollars a liter, Well maybe
if it went to two hundred dollars a barrel. Right
now it's sitting at at one hundred dollars a barrel.
The people who trade oil can see that the Strait
of Hormoz has closed, they can see that the war
(18:19):
doesn't have a defined ending on it, so they can
see a lot of the risk there already, and they're
trading into the future. That's not two hundred. It's not
spiking up in a panic at the moment, and I
think it would take something pretty disastrous to put it
up to those levels. So yeah, look that you might
see the petrol price go a bit more because it
hasn't necessarily all flowed through the increases we've seen on
(18:43):
the commodity markets. It takes a little while. There'll be
some movements around the dollar. People in a war situation,
a international crisis situation, the US dollar becomes a safe
haven and that tends to go up, which means our
Kiwi dollar comes down, and that adds to the cost
of imported goods for US. So those things could happen.
But look, I would be you know, touch would I'm
(19:07):
hopeful that we sort of see some stability around this
hundred one hundred and a bit sort of barrel price,
which means that petrol shouldn't go up too much more
before we hit a plateau. And hopefully, you know, that's
when markets and you know, consumers and things we find
ways around. Longer term, you know, markets would would would
(19:29):
find a solution for this. It's not like COVID, where
something is sort of we're not in the war, so
it's not something you know, where we're at risk of dying. Here.
It's a product. There's actually enough of it in the world.
The problem is moving it around the world, and you
know that would be resolved in the long term and
(19:50):
the short term. We've got enough petrol in the country.
I see a potential issue in the medium term if
you know, supplies start to run in three or four
weeks and that's where the government has to look to
possibly you know, taking some action around you know, worst
case would be, you know, looking at some sort of
(20:11):
rationing where you have to ensure that your essential services
get first, go at the petrol and that sort of thing.
Carlos Days, well, people have talked about Carlus.
Speaker 3 (20:20):
Stays basically didn't work.
Speaker 4 (20:23):
Terrible solution exactly, and I would think that there'd be
there'd be plenty of things that do before then. You know,
we know from COVID that we can work from home
and the economy doesn't collapse, So you know, encouraging non
essential workers to work from home, subsidies for public transport,
that sort of thing might be a lot more effective.
(20:44):
There was a lot of work to organize Carlos Days,
get your sticker and all that sort of stuff for
not much gain.
Speaker 3 (20:51):
Thanks for joining us, LAMB cheers, Chelsea. That's it for
this episode of the Front Page.
Speaker 2 (20:59):
You can read more about today's stories and extensive news
coverage at enziherld dot co dot enz. The Front Page
is hosted and produced by me Chelsea Daniels Kine. Dickie
is our studio operator, Richard Martin, our producer and editor.
Speaker 3 (21:14):
And our executive producer.
Speaker 5 (21:16):
Is Jane Ye.
Speaker 2 (21:17):
Follow the front page on the iheartapp or wherever you
get your podcasts, and join us next time for another
look beyond the headlines.
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