Inflation has not peaked yet, says Finance Minister Grant Robertson

By RNZ

Finance Minister Grant Robertson expects the official inflation figure to rise when it is released later this week.

The Reserve Bank this month stepped up the battle against inflation with an increase of half of a percentage point in the Official Cash Rate to 1.5 per cent, with a warning that further rises are coming.

Food prices were 7.6 per cent higher in March than the year before - the biggest annual increase in more than a decade.

With the inflation figure for the first quarter due to be announced on Thursday, Robertson was unwilling to speculate on what the figure might be but said inflation has not peaked yet.

Robertson told Morning Report all commentators are predicting an increase in the inflation figure this quarter, and potentially the second quarter as well.

"I expect that it will be rising as it is right around the world.

"The amount that it rises by is obviously what everyone is debating."

He said the cut in the fuel excise duty and road user charges may keep inflation in check but it was a global phenomenon driven by supply chain constraints, the impacts of Covid-19 and the war in Ukraine.

In the US and UK the inflation rate has now topped 8 per cent.

He agreed some households were facing a crisis with the rise in prices for food and petrol.

A substantial package from the Government that took effect on April 1 to help low and middle income households, plus the cut in the fuel excise duty, was relieving some of the pressure, he said.

The package provided significant increases for those on Income Support and people receiving the Family Tax credit, with the fuel initiative adding some more relief.

Winter energy payments begin on May 1 for those on the lowest incomes plus superannuitants, he said.

He ruled out removing GST from some food items.

"I acknowledge this is a challenging time for many people but it's hard to come through a 100-year economic shock caused by Covid without some impacts."

Robertson said Prime Minister Jacinda Ardern's first overseas trip in two years is very significant.

Nicola Willis wants the Government to stop adding more costs on to businesses which she says is helping to fuel inflation. Photo / File

Singapore and Japan are New Zealand's fourth and fifth biggest trading partners, so the trip is a chance to talk trade and tourism with the prime minister accompanied by representatives of the dairy, energy, food and technology sectors.

"It's a great opportunity to get out there and sell New Zealand."

In Japan there was a chance to explore opportunities around renewable energy, building on cooperation between companies in the two countries on hydrogen.

"We think there's a real opportunity for us to partner with a very large market there on how those technologies develop."

It was the beginning of several trips that Ardern and ministers will make as the country reconnects with the world.

He disputed Export New Zealand's view that the country had become a hermit kingdom, and said the export sector had played its part with some support from the Government in helping New Zealand to prosper through the pandemic.

National's inflation proposals

National's finance spokeswoman Nicola Willis said there were three things that the Government could do to ease the inflationary pressure.

Firstly, stop adding extra costs for businesses that are being passed on to consumers; secondly, stop wasteful spending, and thirdly, review the issue of skilled workers, using the example of fruit rotting on trees because of a lack of labour.

Willis said National supported the Commerce Commission's recommendations to enhance competition between the two main supermarket owners.

However, it was part of a bigger inflationary picture with food prices rising faster than they had for a decade.

Fruit and vegetable prices had increased the most - up 18 per cent in the past year.

"This isn't just about the cost of things we're importing from overseas, this is very much a homegrown problem."

The Government had a role to play and should not be adding additional costs "to an already overheated economy".

On the Prime Minister's trip to Singapore and Japan, Willis said it was exciting that the country was sending a message that it was open again to the world.

It was important that New Zealand promoted itself as an open trading nation that is globally oriented and has a free exchange of people and goods, she said.