Inflation pressures ‘peaking now’

New Zealand is not so much on the precipice of recession, but is in a scramble to keep from falling off the edge, an ANZ economist has told business leaders .

ANZ chief economist Sharon Zollner addressed a Wellington crowd yesterday before Finance Minister Grant Robertson went on stage to discuss New Zealand’s economy and Budget 2022.

Thursday’s Budget announcement delivered a huge funding injection for health, with $11 billion over four years to clear DHB deficits and tackle cost pressures ahead of health reforms.

At a business lunch briefing, Zollner said there was no sign yet of inflation pressures waning in New Zealand.

“Is it imported inflation or is it domestic inflation?” she said.

“The answer is, it is both.”

She said wage inflation was accelerating, which was a relief for consumers but would cause alarm for some businesses.

Non-wage cost inflation pressures were significant, but Zollner said there was little sign of recession-type problems. “It’s more of a scramble to keep up.” Inflation pressures were intense but probably peaking right now, she added.

Medium-term fiscal challenges included an ageing population, long Covid, climate change and even earthquakes.

On house prices, Zollner said a 10 to 15 per cent price drop would actually be a relatively soft landing at this point.

A member of the audience asked Robertson why New Zealand was not giving more support to Ukraine.

Robertson said New Zealand was primarily focusing its foreign policy on the Pacific, where it frequently worked with Australia.