Major contributions to inflation in New Zealand – NCEA Level 2 External

Finishing off the Inflation external standard with my NCEA Level 2 class and came across an ASB Bank publication which outlines what the main drivers of inflationary pressure are in New Zealand. They list 5 categories which are shown below and note that housing and commodity prices are quite prevalent. This would suggest that the government are trying to get the RBNZ to target house prices.

Source: ASB Bank Economic Note

Outlook
It is forecast (ASB) that the CPI will rise to around 2.5% – cost-push and demand-pull factors with strong NZ$ being superseded by higher external costs and prices. The inflation target for the RBNZ is 1-3% with a target of 2% but the inflation figure above the midpoint should be treated the same as when inflation is below the midpoint. Therefore this does not mean that the RBNZ will necessarily raise interest rates.

Source: ASB Bank. Economic Note – 5th March 2021

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