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Summarised by Centrist
Economist Shamubeel Eaqub said the economy was currently “on a precipice”, with rising oil prices already feeding into higher fuel costs and broader inflation pressures.
Oil prices have almost doubled since the start of the year, increasing costs across transport, logistics and energy-intensive industries.
However, prices later fell sharply after US President Donald Trump said the Iran war may be nearing completion, easing fears of prolonged disruption to Middle East supply routes.
Eaqub said New Zealand is particularly exposed because most crude oil processed by refineries supplying the country comes from the Middle East via Singapore and South Korea.
Construction could be among the first affected industries because products such as paint, plastics and chemicals are derived from oil.
Agriculture may also face rising costs due to diesel and fertiliser prices, particularly in dairy and horticulture.
ANZ chief economist Sharon Zollner said the increase in oil prices had been “quite exponential” and described it as “a pretty substantial shock that is negative for activity and growth.” She said higher fuel costs affect nearly all goods and services because transport is a key input across the economy.
The weakening New Zealand dollar has added to the pressure, making imported goods and fuel more expensive.
If oil prices remain elevated, demand for New Zealand exports could weaken, affecting jobs and economic activity.
Finance Minister Nicola Willis said the government was monitoring the situation and had asked the Commerce Commission to increase fuel price monitoring. She said the conflict could affect supply chains, inflation and trade.
Economists said it remained uncertain how the Reserve Bank would respond. Higher oil prices could push inflation up, but they could also slow economic growth.
Westpac chief economist Kelly Eckhold said petrol prices were likely to return to levels seen during the Ukraine war. He said the economic recovery could pause for three to six months as higher fuel costs weigh on consumer confidence and household spending.
