Source: Radio New Zealand
RNZ / Samuel Rillstone
Finance Minister Nicola Willis says the economic impact of the war in the Middle East still isn’t clear.
Energy prices have spiked because of supply concerns, while financial markets have been spooked by the conflict.
The shipping lane in the Strait of Hormuz, a vital channel for energy trade, effectively closed due to the ongoing conflict between the US, Israel and Iran in the Middle East.
Modelling by Westpac suggests a disruption to Iranian production only could see the price of oil rise another US$25 per barrel to around US$100 (NZ$168).
It’s warning that could push our inflation rate up by around one percent.
Further shipping disruptions through the Strait could see Brent crude spike further, and as a result, inflation could climb.
Willis told Checkpoint she was receiving briefings every day from the Treasury, which was closely co-ordinating with the Reserve Bank (RBNZ).
“What they’re telling me is that, of course, as a small trading nation, New Zealand will be impacted by these global events, but how we are affected will depend on what happens with the data,” Willis said.
Willis said she hasn’t received formal Treasury scenarios on the impacts of the Middle East conflict yet.
However, she said markets aren’t predicting oil to rise as high as they did after Russia’s invasion of the Ukraine.
“Markets don’t know yet how long this conflict will be or how severe this conflict will be, in fact, none of us know that,” Willis said.
“The best-case scenario I think for all of us is that the conflict ends. This is not New Zealand’s, but this is a conflict that is affecting human beings in a profound way and also has the potential to affect the global economy, and, therefore, New Zealand’s economy in a profound way.”
Willis said the Treasury and Reserve Bank are geared up to monitor the effects of the war closely.
She said it was too soon to tell how the conflict will impact her 2026 Budget, but she expects to stick to the operating allowance she gave off $2.4 billion.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
