Fiscal discipline critical during global volatility

Today’s inflation figures show the impact of the global oil price shock, while reinforcing the Government’s prudent response to global volatility, Finance Minister Nicola Willis says.

Stats NZ’s Consumers Price Index showed inflation was 4.1 per cent in the 12 months to the end of June. By far the biggest contributor was the increases to petrol and diesel, at 27.5 per cent and 71 per cent respectively.

Stats NZ reports that without changes in petrol and diesel prices, annual inflation would have been 2.9 per cent, within the Reserve Bank's target range for inflation.

“Families have felt the impact of the conflict in the Middle East when filling up their cars. Higher global oil prices drove much of this quarter’s inflation increase, rather than a broad surge in prices across the whole economy,” Nicola Willis says.

“There are encouraging numbers in this release, with annual food price inflation falling from 4 per cent to 2.8 per cent. Annual rent increases were only 0.5 per cent across the year, the lowest for almost 25 years.

“What today’s data underscores is the need for continued fiscal discipline. New Zealand is not immune to global shocks but as a Government we must focus on controlling what is within our control. 

“For our Government, that means making careful choices, restraining government spending, and avoiding decisions that would add significant pressure to inflation.

“Rather than a blanket, costly response that risks fuelling further inflation, we have delivered targeted, temporary, and timely support for the New Zealanders under the most pressure from higher fuel price.

“Taking this approach means that we have been able to support people through a short-term shock without undermining the progress we've made on New Zealand’s economic recovery.

“Despite the conflict in the Middle East, New Zealand’s economy is set to grow 2.7 per cent on average every year for the next four years, creating 220,000 jobs.

“Wages are expected to grow faster than prices over that period, which is ultimately how we can make life more affordable for New Zealanders long-term.

“This Government is building New Zealand’s future and ensuring we can withstand any future shocks.” ...