Newstalk ZB
Finance Minister Nicola Willis will provide an economic update from Parliament this afternoon amid warnings from the Reserve Bank that ongoing geopolitical instability is expected to increase inflation and weaken economic recovery. Willis’ update comes just over a month before the Budget, to be delivered on May 28. In the latest OCR monetary policy update, the Reserve Bank opted to keep the Official Cash Rate (OCR) on hold, saying that it balanced the benefits of responding pre-emptively with the cost of unnecessarily stifling the economic recovery. “In the near term, inflation is expected to increase and the economic recovery to weaken,” the Reserve Bank said. Conflict in Iran had disrupted global supply chains, prompting oil and fuel prices to increase significantly. In addition, New Zealand’s Consumers Price Index increased 3.1% in the 12 months to the March 2026 quarter, according to figures released by Stats NZ on Tuesday. This was higher than most economists’ estimates and has, according to market pricing, lifted the odds of an Official Cash Rate hike in May. Yesterday, rating agency Moody’s downgraded New Zealand’s financial outlook to negative, although affirmed New Zealand’s AAA credit rating. Infometrics’ principal economist, Brad Olsen, warned that Willis’ Budget next month was not “going to look great” and believed the country’s much-promised return to surplus could be pushed out by another year. “Inflation pressures also persist, including fuel price increases, stubborn non-tradeable housing costs and utility prices, and higher electricity costs,” the agency said in its report late yesterday. In March ratings agency Fitch also downgraded New Zealand’s outlook from stable to negative, citing debt reduction concerns. Willis has already said this year’s Budget would be “responsible” where there would be “no splashing of cash”. Julia Gabel is a Wellington-based political reporter. She joined the Herald in 2020 and has most recently focused on data journalism.
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