New Zealand says oil shock delays economy’s recovery but does not derail it
Annual inflation rate is currently at 3.1%
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[WELLINGTON] New Zealand’s economic recovery has been delayed but not derailed, Finance Minister Nicola Willis said on Thursday (Apr 23) after the Iran conflict lifted fuel costs and dented business and consumer sentiment.
Willis said that Treasury’s best-case scenario has inflation at 3.9 per cent in the current fiscal year ending June 30 if oil averages US$110 a barrel.
A worst-case path of oil at US$180 could push inflation to 7.4 per cent, though she called that highly unlikely.
Annual inflation rate is currently at 3.1 per cent, above the central bank’s 1 to 3 per cent target band, increasing the likelihood of further interest-rate hikes later this year.
“The (best-case) scenario looks the most likely. If that does remain the case, it means we face some significant short-term challenges and heightened medium-to-long-term risks,” Willis told reporters while presenting an economic update.
“What we are presenting to you is a picture of an economy that has been disrupted but not derailed and will continue to grow this year.”
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New Zealand’s economy returned to growth in the second half of last year but growth remains weak.
Credit rating agency Moody’s downgraded New Zealand’s rating outlook to “negative” from “stable” on Wednesday, citing increased risks to its fiscal trajectory amid global uncertainties but affirmed the nation’s top-tier ‘Aaa’ rating.
The New Zealand government will release updated forecasts for GDP, inflation and unemployment when it presents its budget on May 28. REUTERS
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