Briefly in the news in Aotearoa’s political economy around housing, climate and poverty on Thursday, April 9:
Donald Trump’s capitulation to allowing Iran to keep control of the Strait of Hormuz yesterday means oil, gas and fertiliser won’t flow easily and cheaply into the Asian refineries and shipping lanes New Zealand now relies on.
The fuel price shock flowing through to our service stations and into our supply chains has only just begun. The fall in oil futures prices yesterday don’t reflect the actual prices of refined diesel, petrol and jet fuel that importers here are now having to pay, or reflect the likely length and depth of the inflationary shock from higher fuel, gas, fertiliser and food costs now ripping around global supply chains.
Those costs for refined fuel in Asia are now much closer to US$200/barrel, implying diesel prices closer to NZ$5 a litre once our weaker currency, record-high refining margins and higher shipping costs are taken into account.
Those fears about this initial inflation jolt in March and the potential for second and third round effects over the next year or two were evident in the Reserve Bank of New Zealand’s warnings yesterday that it would not hesitate to put up the Official Cash Rate in a decisive and timely way to dampen inflationary expectations.
Now most bank economists have joined financial markets in expecting at least two OCR hikes this year, potentially before the November 7 election. This stagflationary shock will be in full swing by our election, along with the US mid-term elections due earlier that week in November. Paying subscribers can see more below the paywall fold & in the podcast and video above. The PDF of the presentation above is attached below too.
