The US has increased tariffs on their imports from most countries. US tariffs on New Zealand goods have increased from 10% to 15%. This tariff may hurt our exporters, particularly those who are reliant on the US.
Higher tariffs will reduce global trade and economic activity. Inflation will be higher in the US as their imports will now cost more. However, if the US buys fewer international goods, it could lower prices for other countries including New Zealand.
High uncertainty about tariffs is causing some businesses to delay investment and hiring plans, both in New Zealand and overseas.
Tariffs are bad enough by themselves, but tariff rates that literally can change every few weeks are far worse in terms of business confidence and planning.
Inflation is near the top of our 1 to 3% target range. We expect inflation to decrease next year. For example, prices for electricity and dairy are unlikely to continue increasing as much as they have recently.
I hope they are right. I am not sure with electricity prices because the simple reality is we have a shortage of supply, and until you fix that pressure will be upwards on pricing.
Interestingly the Reserve Bank is forecasting the OCR will drop a further 0.5% and stay below 3% though to 2028. That would be good if it eventuates.
Here’s what different level of interest rates mean for a $500,000 25 year mortgage on a two year rate.
- Aug 23 – 7.4%, monthly repayments $3,663
- Aug 24 – 6.7%, monthly repayments of 3,439
- Aug 25 – 4.9%, monthly repayments of $2,894
David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders
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