NZ inflation preview: March quarter dips, but Iran war will fuel a sharp rise in June
Monday, 20 April 2026
Inflation is expected to dip slightly or track sideways from its last recorded level of 3.1% when Stats NZ releases figures on Tuesday for the first three months of the year.
However, the respite is expected to be brief given that the lion’s share of the direct and indirect effects of higher fuel prices won’t show up in the figures until the June quarter.
ANZ and ASB tipped Stats NZ would report inflation dropped to 2.9% in the March quarter and Westpac forecast it would fall to 2.8%, while BNZ is predicting 3% and Kiwibank is forecasting it will hold steady at 3.1%.
Prior to the Middle East conflict, the Reserve Bank had been expecting annual inflation to fall to 2.8%.
Read more:
Official cash rate on hold despite its 4.2% inflation forecast
Economy approaching fuel squeeze against backdrop of lower-than-expected growth
Nicola Willis and Barbara Edmonds clash over inflation vs jobs focus for RBNZ
The inflation figures Stats NZ produces are designed to measure the average change in prices through each quarter, rather than prices at the end of each quarter.
Fuel prices only started rising in response to the Middle East conflict at the start of March and had not reached their current level by the end of the quarter.
Stats NZ reported on Friday that petrol and diesel prices increased 19% and 43%, respectively, in March, from February, whereas petrol is now up 33% and diesel up 103%.
Prices for many items including food, rent and airfares are measured more than once by Stats NZ through the quarter, and averaged out.
But it collects many other prices only once, during the middle of the second month of each quarter, which in the case of Tuesday’s figures will be mid-February — prior to the strikes on Iran.
In combination, that means only about a sixth of the current rise in fuel prices will have been directly recorded in Tuesday’s figures, along with an even smaller proportion of any knock-on effects.
The Reserve Bank has tentatively tipped annual inflation to reach 4.2% in the June quarter as more of the effects of the fuel crunch cascade through the economy.
It is understood different scenarios for the Middle East conflict presented to Finance Minister Nicola Willis include one that Treasury officials warned might see annual inflation climb to 7.5% by the end of the year — above its previous post-Covid high.
ASB joined ANZ in revising its Official Cash Rate forecast on Friday to predict three rate rises this year, which would take the OCR to 3% by Christmas.
“Over 2026, we expect inflation to increase significantly and uncomfortably,” senior economist Mark Smith said.
“The pace at which this can leak into lifting medium-term inflation will dominate the monetary policy response.”
Westpac senior economist Satish Ranchhod forecast inflation would peak at 4.3% in the June quarter before dropping back to 3.9% by the end of the year, while BNZ is picking it to reach 4.5% in the June quarter.
Kiwibank economist Alexandra Turcu said what was important was not the temporary spike, but “the outlook for inflation this time next year”.
“We’re hearing more and more stories of Kiwi businesses struggling under the strain of increased fuel prices, especially diesel,” she said.
“The cost of harvesting crops and feeding livestock has jumped to unsustainable levels.”
There was a smaller glimmer of hope for fuel-buyers on Friday when the average price of petrol and diesel dipped slightly at the pump, with diesel inching down 10 cents and petrol down seven cents from their post-conflict highs.
ASB reported on Friday that spending on items other than fuel and vehicles, using bank cards, dipped slightly in March as consumers splashed out 17% more on fuel due to higher prices.
Spending on clothing, down 4%, and hospitality, down 2%, took the heaviest hits.