Source: Radio New Zealand
Prime Minister Christopher Luxon has welcomed news of a ceasefire between the US, Israel and Iran – but is warning New Zealanders of ongoing economic effects.
Speaking to reporters after the Reserve Bank on Wednesday confirmed a decision to keep the official cash rate steady, Luxon said the news of a ceasefire was “a really promising and really encouraging move, I mean it’s the most encouraging news I think we’ve had in this conflict, absolutely”.
But he repeatedly warned against people getting too comfortable, and said the best case scenario for fuel prices coming down was probably “a matter of weeks”.
“This as a complex conflict, it’s been unpredictable, it’s been volatile, and we’re going to do everything we can to actually exhort the parties to actually use the two weeks to get to what we need to see which is an enduring solution here.”
It was “too early to comment” on the specifics of the ceasefire, he said, and while it could see a reopening of the Strait of Hormuz to shipping – including fuel tankers – the economic impacts were likely to continue for some time.
“It was running at 125 [ships through the Strait] a day, we’ve been running about four a day… but I just want to be really honest there’s a long way to go here.
“There’s no escaping the fact there will be a hit to inflation and economic growth, and that means real impacts for Kiwis beyond the price of petrol. As we’ve repeatedly said, New Zealand has learned the lessons from Covid the hard way and we will not repeat the mistakes made at that time.”
He said the government’s domestic focus remained on the risks to inflation and growth in the economy, which meant securing fuel to protect jobs, livelihoods and the wider economy.
Fuel suppliers had not reported any issues with future orders or shipments, and New Zealand remained at phase 1 of the fuel response plan, he said.
Finance Minister Nicola Willis said markets had reacted positively to the ceasefire news, with crude oil prices falling and global equities up.
“As of 1pm – by one measure, West Texas, crude oil is down around 16 percent – and Brent crude down 12.5 percent to $USD95 a barrel.
“SMP futures are also up and the New Zealand stock exchange is up, gaining 1.7 percent. The New Zealand dollar has also appreciated against the Greenback (USD).”
Finance Minister Nicola Willis said markets had reacted positively to the ceasefire news. RNZ / Samuel Rillstone
She said despite the ceasefire development, it remained unclear how fast cargo would begin to move through the Strait of Hormuz should the ceasefire hold.
“Oil and gas facilities have also been damaged or shut down across the region and these will take time to bring back online. New Zealand is also a long way from our fuel suppliers, but prices here typically respond quickly to oil market moves – usually within a week or so but this may take longer in this instance given the heightened volatility in markets and residual uncertainty about the geopolitical situation.”
She noted the price of oil was not the same as that of refined fuels, and refineries had an extended disruption to crude supplies – so it could take extra time to flow through to lower prices for petrol and diesel.
Luxon said questions about potential tolling of the Strait were “way too premature”.
He said Trump’s earlier comments that a civilisation could die were “incredibly unhelpful” and “unprecedented for a US president period”.
“But I don’t think reiterating that rhetoric is helpful either, but equally we’ve got to deal with what we’re dealing with now, and what we’re dealing with now is an opportunity and the question is whether the parties will actually step up to the plate and realise it.”
Pressed on the matter, he refused to use stronger language than that Trump’s comments were “unhelpful”.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
