New numbers reveal an updated outlook on New Zealand's economic recovery

Right, what does this all mean for us in New Zealand?

Let's bring in Kelly Ecol Westpacche for Economist Kelly. Good morning.

Good morning.

Now, I've had a look at your forecast, your most recent forecast.

So we'll start with inflation.

What are you expecting this is going to do to our inflation?

Well, we're going to get a lift in the inflation rate.

So the current level of inflation is about 3.1.

And we were expecting it to drop back down to below two and a half percent

as we went through the next two or three quarters.

But that looks like it's gone now.

I'd say we're probably looking at inflation in the low threes now.

And perhaps if things blow over in the next couple of months or so,

which is basically what we're assuming right now,

then we'll be just below 3 percent.

Right, so we're going to be at three for the rest of the year.

Pretty much. Yeah, pretty much.

Does that mean we'll have to do something with interest rates

or do you think they'll keep holding?

Well, I don't think so.

I mean, this is a really nasty negative supply shock.

So at the same time as this happening,

the growth fundamentals of the economy are being undermined as well.

And we've reduced our growth forecast, reflecting that.

I see that. So you've come down from GDP growth to 2026

from 3.3 percent to 2.8 percent.

That's right. It's the first cut half of the percent off what we had before.

I would say that you should think of that as a start of a 10

because it's very uncertain here about how long this is going to last.

But I think it's pretty reasonable to assume that we'll see a big drop off

in business and consumer confidence in the next six weeks or so.

Because of all of the news out there.

For consumers, it's the higher petrol price.

That almost always leads to decent falls and consumer confidence.

And for businesses, I mean, they're looking at the news as well.

And we'll be wondering about fuel availability,

costs, and ultimately demand.

So GDP, you're saying, don't think about,

we don't need to talk about recession

because we've got quite a bit of growth patted in there

about half a percent off for starters.

For starters, yeah.

I mean, basically, a growth in the fourth quarter,

that data we're going to get this week.

Yes.

First quarter.

Well, that's pretty much...

Well, we've still got 0.4 for this quarter.

It's still moving forward in our view.

But the first quarter is basically baked in as well.

It's about what happens in the June quarter

and the rest of the year when these oil impacts

are going to have their big impact.

But what I'm saying is like the fourth quarter for last year,

we're getting numbers, obviously, this week,

but you're picking about half a percent.

So that's the equivalent of a whole quarter's...

Growth, potentially, you know,

that we're going to have come off this year as a result.

Pretty much, yeah.

Yeah, that's what's happened in the June quarter

and the unemployment rate is expected to be up

higher accordingly as well.

What happens to the price of petrol?

Petrol prices.

I mean, they still look like they're on track

to head to a nationwide average just over three bucks.

Diesel prices likely to continue to rise.

Looks like into that kind of $2.80 tight range, I think.

Very uncertain these things, though,

because, okay, oil is settling around at 100 bucks at the moment.

But the crack spreads.

The refined spreads in Asia.

These are the things that are blowing out.

And that's because the refineries in Singapore

can see that their supply of crude oil

is going to dry up pretty soon

unless things start happening at the other end of the chain.

Kelly, what does this mean for average punters?

Does it mean...

I mean, do we have a number on potential job losses?

Well, for the unemployment rate,

we've got an ending the year at 5%,

which is still lower than where it is today,

because, and that's entirely contingent on things

sorting themselves out realistically

in the next six weeks or so.

That's why I say these adjustments are a start of a 10.

We can't know exactly what's going to happen here.

Things could be great in two weeks

and I could be back revising those forecasts up

or we might have to do some further adjustments.

Fingers crossed for the former.

Appreciate your time this morning.

There's always Kelly Ikold,

West Peck Chief Economist with us.