Sarah McMillan/cvnznews.com
Just when motorists thought they might be getting a break, petrol prices are climbing again, and economists warn the pressure may not ease anytime soon.
According to Kiwibank economists, New Zealand is being squeezed by a combination of rising global oil prices, a weaker Kiwi dollar and higher international interest rates, creating a costly mix for households already battling living expenses.
The bank says the latest fuel surge is being driven by elevated refined fuel prices in Singapore, a key benchmark for New Zealand’s imported fuel supplies. The result is likely to be felt at service stations across the country in the months ahead.
For motorists, it’s another hit to the wallet. For the Reserve Bank, it could become a headache in the fight against inflation.
“Fuel prices are one of the fastest ways global economic shocks show up in household budgets,” Kiwibank noted, warning that the lingering effects of the international oil shock remain highly relevant to New Zealand.
The situation is being made worse by developments overseas. While central banks are grappling with inflation concerns, billions of dollars continue to flow into artificial intelligence infrastructure projects, particularly massive data centre developments in the United States.
That investment boom is keeping global economic activity humming, even as inflation concerns remain elevated.
At the same time, investors seeking safer assets have pushed up demand for the US dollar and gold. A stronger US dollar hurts countries such as New Zealand, which imports large volumes of fuel priced in US currency.
The dilemma for New Zealand is that rising interest rates overseas, particularly in the United States and Australia, can weaken the New Zealand dollar if our own rates don’t keep pace. That means Kiwi consumers can end up paying more for imported goods, including petrol.
Kiwibank says the combination of expensive oil, a softer currency and higher overseas interest rates amounts to a “double whammy” for New Zealand.
The warning comes as families continue to face pressure from housing costs, groceries and utilities, leaving many households with little room to absorb another jump in fuel prices.
For now, motorists may be hoping this latest fuel shock is temporary. Kiwibank’s assessment suggests they shouldn’t count on it.
