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Speaker 1: So the war scenarios treasury reckons are a worst case scenario,

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Speaker 1: which is the conflict lasting until the end of the year.

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Speaker 1: With elevated oil prices, inflation could three point seven percent

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Speaker 1: currently three point one. Nikola Willis though doesn't think that's

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Speaker 1: too bad.

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Speaker 2: That's too high for my liking, but it's lower than

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Speaker 2: Australia has today currently at three point eight. The reason

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Speaker 2: I share this point with you is to emphasize that

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Speaker 2: New Zealand does enter this period of unavoidable international cost

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Speaker 2: pressures from a stronger position than some other countries.

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Speaker 1: There's also no actual fuel shortaget Nick Toughly aspe Chief

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Speaker 1: Economists with us Nick, good morning, good mining. So what

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Speaker 1: did you make of the plan? I mean inflation, Yeah,

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Speaker 1: it looks bad, but as the Minister says, still less

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Speaker 1: than Australia and we would presumably see some demand come

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Speaker 1: off if price oil prices rose, would we not?

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Speaker 3: Well, you likely would with a sharp lift in prices

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Speaker 3: like this, and look to put it in context, a

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Speaker 3: few did have will remaining high for the rest of

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Speaker 3: the year. As the financement is the said lot, you're

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Speaker 3: going to have inflation in the high threes and it

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Speaker 3: would remain into at three percent something into next year.

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Speaker 3: But look we saw in twenty twenty two inflation pretty

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Speaker 3: quickly hit six percent when we had a pretty sharp

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Speaker 3: lift and oil prices back back then much sharper lift.

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Speaker 3: And we had five percent inflation back in two thousand

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Speaker 3: and eight when we had a lift in oil prices,

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Speaker 3: which also coincided with a lift in food prices as well.

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Speaker 1: Very hard to get rid of once it kicks in,

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Speaker 1: isn't it.

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Speaker 3: That's the challenge for the Reserve Bank be is what

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Speaker 3: it will be watching for. Is not just the sort

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Speaker 3: of short term immediate lift that we see at the pump,

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Speaker 3: it's also the flow on through the transportation sector, and

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Speaker 3: then if the costs get embedded, and really importantly it's

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Speaker 3: the reserve bank will worry if our behavior changes, if

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Speaker 3: we start going or here we go again seven percent

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Speaker 3: inflation and our behavior starts to shift in a way

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Speaker 3: that that trench is inflation just makes it a bit

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Speaker 3: more difficult to bring it down.

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Speaker 1: So what does the government do, Because politically, if they

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Speaker 1: went out and relieved a whole bunch of people at

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Speaker 1: the pump and spent a bunch of money at a

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Speaker 1: time when inflation's going up, it would be pretty dumb

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Speaker 1: for them, But economically would that be a smart thing

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Speaker 1: to do or not?

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Speaker 3: Well, it's pretty hard to avoid a shot like this,

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Speaker 3: so there's a big shock. It's affecting a lot of countries.

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Speaker 3: It does mean that you get a combination of higher prices,

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Speaker 3: but also it's slower consumer spending than otherwise because that

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Speaker 3: gets crowded out as well. So you can't wave a

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Speaker 3: magic wand the best thing the government can do is

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Speaker 3: either a lot to offset the impact on lower income

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Speaker 3: households who are going to feel more of a squeeze

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Speaker 3: from it, and also just try and see what it

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Speaker 3: can do to help the industry to smooth out any

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Speaker 3: sort of supply disruption. And the biggest impact threat potentially

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Speaker 3: is actually running out of fuel and needing to either

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Speaker 3: ration it or see the economy hit harder than just

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Speaker 3: merely having to deal with higher prices.

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Speaker 1: Which we're told is at least weeks away from happening. Nick,

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Speaker 1: appreciate your time this morning. As always, Nick Toufly aspe

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Speaker 1: chief economist.

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Speaker 3: It is for more from early edition with Ryan Bridge.

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Speaker 1: Listen live to news talks. It'd be from five am weekdays,

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