New Zealand forecasts inflation at 3.7% if Iran war lasts through the year

NEW Zealand Finance Minister Nicola Willis said on Monday the country’s treasury department has forecast that inflation will rise to 3.7 per cent if the Iran war lasts through the year.

New Zealand’s inflation rose 3.1 per cent in the 12 months to the December quarter, above the central bank’s target rate and previous forecasts.

Willis said Treasury modelling done for a “worst-case scenario” with a prolonged conflict in Iran and oil prices rising to US$135 a barrel forecast inflation to rise to 3.7 per cent.

“What I am looking towards is the fact that generalised inflation may be higher this year than I would have anticipated and that I’m comfortable with for New Zealanders,” she told reporters.

Oil prices extended gains on Monday as the US-Israeli war against Iran entered a third week, putting oil infrastructure at risk and keeping the Strait of Hormuz shut in the biggest disruption to global supplies ever.

Willis said the government would consider a “timely and targeted” response if fuel prices continued to climb and raised living costs for households.

“Obviously, there has been an impact on price. Petrol prices have risen ... We are acutely conscious of the impact this will be having for many New Zealanders.”

Willis added New Zealand currently had 57 days of petrol, 49 days of diesel and 47 days of jet fuel in reserve.

“Current orders are secure and we had normal levels of stock in the country and on the water,” she said.

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Channel Infrastructure, which operates the country’s largest fuel import terminal, has also advised that ships carrying fuel were continuing to depart for New Zealand and arriving as scheduled. REUTERS