Tuesday, February 27, 2024

No end in sight for rising costs

Neal Wallace
IT APPEARS we have not seen the end of inflation, which has just hit a 30-year high.
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IT APPEARS we have not seen the end of inflation, which has just hit a 30-year high.

Commentators are warning that the country is entering a phase of interest rate hikes as the Reserve Bank tackles rising costs.

Most of those rising costs are being generated internationally by global demand, tight labour markets, high transport costs and countries like China and Belarus ceasing fertiliser exports.

This is causing some eye-watering cost increases in the past year: a 40% lift in the price of diesel; 200% for fertiliser, 50% for chemicals and 500% for sea freight. 

A 1.4% increase in costs in the December quarter took annual inflation to 5.9%, the highest since 1990.

ASB senior economist Mike Jones warns of additional pressure from wage inflation, expected to reach a 10-year high on the back of low unemployment.

“We don’t think we’re at the peak of the inflation-labour market cycles yet,” Jones said.

Westpac senior economist Satish Ranchhod says price rises are being driven by a broad mixture of strong demand and cost pressure, which points to continued inflationary pressure lingering through 2022.

The bank expects a series of official cash rate (OCR) hikes by the Reserve Bank during the year will peak at over 3% in 2023.

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