Inflation to go ‘much higher’ but Finance Minister refuses to share worst-case scenario

Monday, 30 March 2026

Tensions in the Middle East and threats to shipping lanes like the Strait of Hormuz are driving up Brent crude. The Government is now considering underwriting shipments to secure New Zealand's 50-day fuel buffer.

Finance Minister Nicola Willis has revealed inflation is set to go “much higher” this year and sit outside the Reserve Bank’s target band of 1-3%.

Earlier this month, Willis shared that Treasury’s ‘worst-case’ scenario was inflation peaking at 3.7%. On Monday, when Stuff asked for any updated advice she had received on inflation, the minister said she was not willing to share any further forecasting from Treasury until May’s Budget.

Elevated fuel prices are already eating away at family and business budgets, with 91 unleaded and diesel heading towards $3.50 a litre, and no one has a clue when the fuel crisis may end.

“Look, Treasury, like just about every economist in the world right now caveats every piece of advice they give me by saying it depends how long this conflict lasts,” she said.

Treasury is predicting inflation will peak higher than their previous forecasts, but Willis is refusing to say what the new worst-case scenario she’s been presented with is.

“In the latest scenarios – in which they take into account a longer conflict with deeper disruption to supply chains – they have inflation peaking higher than I've previously presented to you.”

Nicola Willis and Shane Jones field questions during a post-Cabinet press conference on Monday, March 30.

Pushed again as to how high it may go, Willis said she wasn’t comfortable sharing the advice forecasters were giving her because the situation was changing rapidly.

'Treasury has given me a range of numbers,” she said, adding that all scenarios officials were presenting were highly caveated.

“What I can be open with you about is that they think inflation will go much higher this year, and it will stay out of our target band.”

In the peak of the cost of living crisis that followed the Covid era, inflation surged to 7.3 per cent by late 2022.

Finance Minister Nicola Willis explains why the Government is seeking a 'fuel insurance policy' and moving to weekly allocations to manage regional stock imbalances.

That is what the government keeps referencing as the figure to avoid when it considers any financial relief in the face of the fuel crisis.

“Kiwis well understand that we cannot repeat the Covid mistakes where excessive spending drove inflation to 32-year highs,” Prime Minister Christopher Luxon said.

“We know that this conflict will likely push up inflation and slow growth, so we cannot afford to do anything that will make it even worse.”

But when Willis was asked whether her officials were advising inflation could peak higher than 7.3%, she would not answer.

“I've seen a range of scenarios, and as I say, it is all very heavily caveated.”

Willis clarified that the advice she was getting was not fulsome updated economic and fiscal forecasts but rather high-level scenarios which Treasury officials need to refine before reflecting in formal forecasting.

National campaigned heavily on bringing inflation back within the target range. It fell to 2.2% in the December 2024 quarter before inching out of the target band to 3.1% in the December 2025 quarter.

The next inflation figures are set to be released in late April.