Wesley Tanuvasa, ASB economist, notes that “high fuel prices continue to sting NZ consumers”, and that its new oil‑shock forecasts point to higher inflation and lower growth over 2026, making the Reserve Bank’s (RBNZ) job more complicated.
The bank’s modelling indicates retail spending will weaken through most of 2026 as higher energy costs and tighter financial conditions erode households’ disposable income, with consumers retreating from durables and discretionary items back towards essentials such as fuel and groceries.
Other bank economists are drawing similar conclusions, with Kiwibank economists highlighting that “The Kiwi economy runs on diesel” and warn that threats to supply are already lifting prices and forcing an urgent focus on securing fuel and limiting demand.
RBNZ cautious as inflation stays elevated
ASB expects RBNZ to leave the official cash rate at 2.25% at this week’s review, with markets already paring back expectations for near‑term hikes as growth concerns build. While wholesale interest rates have eased from late‑March peaks, ASB still sees a prolonged period of above‑target inflation, limiting scope for early rate cuts.
Kiwibank notes that Governor Anna Breman has been sending “strong signals that the RBNZ will not be rushed into reacting to fuel costs and the (temporary?) spike in inflation.” That stance suggests a period of relative stability in mortgage rates in the near term, even as borrowers remain exposed to renewed market volatility if the conflict in the Middle East escalates.