Eckhold warned of a “really large hit to confidence in the next few months, both for businesses and consumers”.
“That does pose quite a lot of risk for growth in the second quarter of the year, and probably some flow-through to the later part of this year,” he said.
Westpac revised full-year growth down to 1.9% but does not expect a recession, picking 0.5% growth for the third quarter.
Prior to the war, it had been among the more upbeat forecasters, with expectations of 3.3% growth for the year.
The labour market would now remain weak through the middle of the year, with unemployment peaking at 5.6% and ending 2026 at 5.4%, Eckhold said.
“This will crimp the recovery in household spending and the housing market.”
House prices are now expected to fall by around 0.9% over 2026.
Sharply weaker confidence, employment and GDP growth would drive that weakness.
Westpac now expects that inflation will peak at 4.1% in mid-2026, and that it will remain above 3% through the first quarter of 2027.
The Treasury had previously forecast inflation at 3.7% as a worst-case scenario.
Eckhold has also been watching oil supply lines closely and warned of “a very short horizon” before we enter unknown territory.
There was no reason not to believe the Government’s fuel stock updates, he said.
“But what they do show is that we have a relatively short horizon over which we can see what will happen next.”
The Government’s latest fuel update this afternoon showed that as of midnight on Sunday, New Zealand had 48.7 days’ cover of petrol, down from 49.9 days last Wednesday.
We had 46.5 days’ cover of diesel, up from 45.5 last Wednesday and 43.4 days’ jet fuel, down from 44.7 days last Wednesday.
The figures include stocks both in New Zealand and on the water and destined for ports here.
The data did not include shipments more than two weeks away, but fuel companies had indicated that there were “a healthy number of ships on water or planned for later in April”, MBIE said.
The total stock estimates were contingent on boats arriving this week, Eckhold said.
Westpac chief economist Kelly Eckhold.
“The estimated arrival of ships is to March 25, which is today. For the next week, until April 1, you can see there’s much less in the forecast.
“After that, if you look at the port websites, which is where this information is available, there’s no visibility after that. That’s only a couple of weeks away.”
Efforts to mitigate the closure of the Strait of Hormuz are underway, but the options are limited in the short term, Eckhold said.
There had been an increase in shipments coming through the Red Sea.
“It’s not sufficient to replace what’s been lost through the Persian Gulf.
“There were reports that suggested that perhaps a third to a half of the lost capacity had been replaced.
“But in general, those pipelines have limited capacity, and they probably can’t run at those levels on an ongoing basis,” Eckhold said.
“So the most authoritative estimates I’ve seen suggest that perhaps only in the region of a quarter of the normal daily throughput through the Persian Gulf can be replaced.
“Obviously, the longer you go, the more different structural changes happen in the fuel market. But that’s years away.”
The Asian refiners that supply New Zealand were also attempting to source additional supplies from the US and Canada.
“I assume they’ll have some success at that, but of course that just increases prices.”
Whatever happened with regard to the conflict, the supply chain disruption would linger for several months.
Refiners already had a big gap in their feedstock.
Kuwait has said it would be another four or five months before it resumes normal production, because of damage to facilities.
“So regardless of whether we get some sort of resolution soon, there’s going to be flow-on effects through the refined products market,” Eckhold said.
Ultimately, though, unlike the Covid crisis, the problems were with the short- to medium-term outlook, he said.
“The problem is a three-month problem, not a three-year problem,” he said. “But the three-month problem is very hard to solve.”
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined theHeraldin 2003.
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