Category: Business

Source: Radio New Zealand

• Reserve Bank warns of heightened uncertainty due to Iran war
• Economic recovery expected to be “somewhat slower”
• Financial institutions well-placed to support economy

Risks to financial stability have increased due to the Middle East conflict, with a bleaker outlook for the economy, potentially making it harder for borrowers to service debt.

In its half-yearly Financial Stability Report, the Reserve Bank (RBNZ) stressed the country’s financial system remained resilient, and the banking system was well-placed to support customers even if conditions worsened.

The RBNZ said the longer the Iran war continued, the greater the risks to global financial stability, with New Zealand already feeling “significant economic effects”.

Governor Anna Breman said high diesel prices were having the biggest effect on the transport and logistics sectors, as well as primary industries, including forestry and fishing.

“While economic growth had been recovering prior to the conflict, we are now likely to see a somewhat slower recovery, affecting job growth and debt servicing,” Dr Breman said.

The RBNZ said banks had strong capital and funding buffers, meaning they were not only “well-placed” to help struggling customers, but also manage stresses in offshore funding markets.

It said stress testing results showed banks’ ability to withstand significant economic shocks, including geopolitical events like the Middle East conflict.

The RBNZ expected the impact on insurers to be limited, noting health insurers have raised premiums and adjusted policies following several years of high claims costs.

The RBNZ said it was working on a stress test of life and health insurers.

Fuel prices close to their highest levels in 50 years

Unsurprisingly, the RBNZ said higher oil prices will increase costs for firms, including those already facing weak demand.

“Prices for these important inputs are now close to their highest levels in the past 50 years after adjusting for inflation,” the RBNZ said in its report.

It warned that in addition to increased costs for firms, higher oil prices will reduce consumers’ spending power.

“Higher near-term CPI [consumer price index] inflation due to the conflict will reduce real wages,” the RBNZ said.

“While it seems unlikely at this stage that the impact on real wages will be as large as it was over 2021/22, even a small decline in spending power could create financial hardship for some households given the existing cost-of-living pressures.”

Meanwhile, low profitability in recent years meant firms were in a “more vulnerable position”.

“Business deposits were elevated after the pandemic, given fiscal support and the strong economic recovery,” it said.

“However, over the past three years, business deposits, particularly for smaller firms, have declined as a share of GDP [gross domestic product].”

The RBNZ said mortgage arrears have also declined from the recent peak as the economy improved, with non-performing loans at around 0.6 percent of lending.

However, it said arrears and non-performing loans remain higher than pre-pandemic levels.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

Small and medium-sized businesses are becoming increasingly dissatisfied with the government ahead of this month’s budget as rising costs and a weak economic outlook eat away at confidence.

MYOB’s Annual Business Monitor indicates 35 percent of more than 1000 SME owners and operators surveyed were dissatisfied with the coalition government, outnumbering those who were satisfied (33 percent), with 31 percent remaining neutral.

The survey indicated businesses were under pressure from increasing overhead costs, which were up an average of $1200 per month, while insurance premiums rose an average of $1800 in the past year or by $3200 for an average medium-sized businesses.

“At the beginning of this year, our insights suggested most SMEs were starting 2026 more hopeful about their prospects and backed by relatively stable revenue and cashflow, but rising costs and recent increasing uncertainty may have clouded over some of the growth ambitions we saw coming through,” MYOB chief executive Paul Robson said.

“These factors, as well as a slower-than-anticipated economic recovery, can often shape some of the sentiment by businesses around the support available to them.”

SMEs voting intentions

Despite satisfaction dipping, the coalition parties maintained a clear majority of support from SME operators.

By political party, National was still the first choice among business owners, with 37 percent of those polled expecting to vote for the party at this year’s general election, while coalition partners – NZ First and ACT – each had 11 percent support.

Support for opposition parties had seen some grown, with 20 percent of SME decision-makers intending to vote for Labour (up 5 percent), while the Greens improved slightly to 4 percent.

Support for the Opportunities Party was two percent, while Te Pāti Māori had one percent support.

“We have seen some movement in voting intentions compared to the run up to the last election, and just over one-in-10 SME decision-makers are undecided about their vote,” Robson said.

“Given the size of the SME community in New Zealand, that is still a significant number of votes to compete for and overall, business owners will be looking for practical policy platforms that deliver targeted support where it is most impactful.”

SMEs said the top three actions the government could take to better support business this year were reducing compliance burdens, alleviating cost pressures, and supporting investment.

What SMEs want

• Reinstating the ACC No Claims Discount for small businesses (32%)
• Greater efforts to simplify health and safety compliance requirements (28%)
• Changing the current low value asset write-off of $1000 to be a permanent instant asset write-off of $10,000 (26%)
• Increase the provisional tax threshold (24%)
• Action to address insurance affordability for SMEs (23%)
• Energy bill relief via tax rebates (23%).

“While there is little doubt about the balancing act the current government faces in investing in the future of New Zealand business and managing existing debt levels, there is clear opportunity for practical support for local SMEs that will ease some of the load they are carrying day-to-day,” Robson said.

“Business owners will be monitoring outcomes of the upcoming budget keenly to see what’s in it for them, but looking further ahead to the election on the horizon, the parties that put forward credible, targeted policies for SMEs will strengthen their appeal to a segment that represents a significant share of the voting public.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

• Unemployment eases to 5.3pct from 10-year high of 5.4pct
• 4000 jobs added in quarter, but number opting out grows
• Underutilisation rate steady at 12.9 pct; Youth unemployment rises
• Auckland, Bay of Plenty, Wellington highest unemployment rates
• Annual wage growth remains five-year low of 2pct
• Data a touch better than expected, Middle East conflict expected to dampen labour market

Unemployment has eased from a decade-high through a mix of more jobs being added and a rise in the number of people not chasing work, with the Middle East conflict yet to have any significant impact.

Stats NZ numbers showed the unemployment rate easing to 5.3 percent in the three months ended March, from 5.4 percent in the previous quarter.

A total of 163,000 people were unemployed, a fall of 2000 on the previous quarter but 7000 higher than a year ago.

The data was a shade better than most forecasts, and close to the Reserve Bank’s forecasts from February.

Unemployment has been steadily rising as businesses either sacked staff or stopped hiring because of the weak economy, while the workforce has increased despite a slowdown in migration.

The level of underutilisation, including the unemployed and under-employed, used as a measure of slack in the jobs market, held at 12.9 percent, the highest rate since late 2020.

The number employed increased by about 4000 in the quarter, however, the economy still had more than 12,000 fewer jobs than a year ago.

Youth unemployment up

The number of people between 15 and 24 years who were unemployed, not in education or training, increased to 14.4 percent from 13.3 percent.

Stats NZ said there was a noticeable increase in the number of young women without work and not in training or education, with one-in-five aged between 20 and 24 in that category.

The regions with the highest unemployment were Auckland, Wellington and Bay of Plenty with rates between 6 and 7 percent, with most South Island regions below 5 percent.

The broad measure of wages showed overall growth remaining at a five year low of 2 percent, compared with a 3.1 percent rise in consumer prices.

The data, was collected largely before the Middle East conflict, and was broadly in line with Reserve Bank forecasts with economists mostly expecting the central bank to hold the official cash rate at 2.25 percent later this month.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

A leading economist says businesses could exploit the war in the Middle East to raise prices even when not directly related to the fuel crisis.

Petrol price surges have seen 91 routinely above $3 a litre and KiwiRail this week announced an increase on the fuel surcharge for freight on the Interislander ferry. Internationally, shipping company Maersk announced its own 27 percent fuel surcharge.

The Reserve Bank has warned that the fuel and transport costs would likely push inflation above 4 percent in the June quarter.

Westpac economist Kelly Eckhold told Nine to Noon on Wednesday businesses find it easier to lift prices when inflation is becoming widespread.

“[Many price hikes] you can shape back to fuel quite quickly. And in those cases, firms are taking their approach of imposing surcharges. So they’re saying, ‘Well, we’re going to put the price up by this amount’. It’s reflecting this increase in the oil or the refined fuels price.

“And then they say, ‘When those prices come down, we’ll remove that’. So that’s pretty transparent, isn’t it? And then that’s the sort of pricing behaviour that I don’t think the Reserve Bank or anyone would be very surprised by.”

But in other cases, Eckhold explained, prices are unlikely to drop when the price of fuel normalises – particularly if they cannot be linked directly back to the cost of fuel.

“When the services prices start to increase, for example, my Spotify subscription or your Sky subscription, et cetera, you’re very unlikely to see those prices fall back.

“What’s more likely is that is the price, that’s the base price that you’ll pay in the future. And the best you might hope for is that if costs rise less quickly in the future, then maybe the next increase that you see could be delayed for a period of time.

“That sort of inflation, I think, is less comfortable for central banks and the sort of inflation that they’re really all looking out for to gauge just how much… they have to increase interest rates by.”

The next official cash rate (OCR) update from the Reserve Bank is due on 27 May. The bank uses the OCR to increase or decrease the cost of borrowing – the former decreases spending and aims to curb inflation, while the latter does the opposite.

Eckhold did not believe the OCR would need to rise as much as it did following Covid-19, when it peaked at 5.5 percent in 2023.

“The conditions are a bit different. I mean, there we had a big supply shock coming from the Covid disruptions themselves, and then the onset of the Russian war, combined with very expensive fiscal and military policy. And that second set of factors isn’t really present right now, at least not in New Zealand.”

It could take a few more months to see the full impact of the Iran war on the economy here, Eckhold said.

“Fertiliser is a good example where we produce some fertiliser here, but a lot of it is actually imported. We got a little bit lucky in the fertiliser game because we had imported a lot of our needs for the next six months before the shock hit.

“The questions are going to arise about what happens after that period, and prices are lifting because global prices have gone up over 100 percent. An imbalance increased their prices yesterday by about 10 or 15 percent, starting to reflect that.

“But all through the rest of the supply chain, particularly think about plastics. So pretty much everything you buy comes in some kind of plastic container. That stuff is directly an offshoot of the naphtha market, which is a part of the oil distillation process. And those are the sort of price increases that are going to become really prominent, broad, but also come at quite a bit of a lag as that filters through the global supply chains.”

That delay could prompt the Reserve Bank to get ahead of any possible inflation, he said. The OCR was currently at 2.25 percent.

“They will probably realise that with this increase in headline inflation, that inflation expectations are likely to rise. And they’ll be trying to gauge how long this increase in inflation is going to last. And there, the news hasn’t been very good, because forecasts of the gulf war ending within a few weeks have consistently been disappointed.”

Whatever happens, it was likely New Zealand’s economy was in for a “tough time”, particularly through winter, with increased petrol costs slashing spending in retail and hospitality.

“I think the housing market is one that just won’t do very well in this environment, because we’re probably looking at a rising unemployment rate. Disposable incomes are being cut here by the cost shock. Confidence is also really low, and confidence is quite important for that.

“The other thing is to think about is the tourism market as well, because the costs of coming to New Zealand are probably getting more expensive and uncertain…

“New Zealand Incorporated has taken a big income loss here because we’re basically paying an extra, say, $6 or $7 or $8 billion a year for our refined fuels than we did in the previous year. When I look at that, that’s two-thirds of the dairy industry that we just lost in terms of income. And the government, the Reserve Bank, no one can give that back to us.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

CDC Data Centres (CDC) has signed a deal to build to build a 555-megawatt (MW) data centre, with the ability to scale-up to more than one gigawatt (GW) – enough to power up to 1 million homes.

CDC, which was nearly 50 percent (49.7 percent) owned by infrastructure investor Infratil had secured a 30-year contract with an unnamed United States-based high-end investment grade customer, with renewal options of up to 20 years.

The centre would be Australia’s largest, with 555MW equal to about 40 percent of the total operating capacity across all Australian data centres in 2025, and will bring CDC’s total contracted capacity to more than 1GW.

The increased capacity would be delivered across CDC campuses that were already under development and expected to operational over FY28 and FY29.

The contract was expected to generate more than A$1billion in underlying profit for CDC by FY28, with annualised underlying profit of A$2b once the contracted capacity was fully operational.

But for now, CDC’s FY27 underlying guidance of between A$680m to A$720m remained unchanged.

CDC expected FY27’s capital expenditure to be between A$3.8b and A$4.2b, excluding land, as it invested more to meet market demand.

The development will be funded through cash-on-hand and committed debt facilities, along with further debt and hybrid funding.

CDC’s shareholders contributed A$500 million in equity in February to support the acceleration of CDC’s construction programme, and the current growth plan wouldn’t require further shareholder capital.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

A drop in milk volumes sold saw prices rise at the Global Dairy Trade auction overnight, stopping the slide seen at the previous two events.

The average price rose 1.5 percent overnight to US$4127 (NZ$5035) a tonne.

It followed a 2.7 percent fall at the previous auction a fortnight ago, and a 3.4 percent drop at the start of April.

NZX dairy analyst Rosalind Crickett said the volume sold dropped about 9 percent as the current dairy season winds down, which coupled with strong buying activity from Southeast Asia and Oceania – accounting for 41 percent of the total volume sold – drove the price increase.

She said the region was the main buyer for most products – counterbalancing a pullback from both North Asia and the Middle East, where the war continues to also influence activity.

“Despite global milk supply remaining strong, ongoing geopolitical tensions in the Middle East seemingly have no end in sight, as the cost of fuel, fertiliser and feed inputs add to logistical challenges while also driving up the cost of food production.

“With previous hand-to-mouth buying patterns being exhibited in recent events, the current market activity suggests buyers are looking to lock in future orders before costs get unmanageable.”

Whole-milk powder prices were up 2.2 percent to US$3741 (NZ$6352) a tonne, while skim milk powder also rose 3 percent and butter milk powder was up 9 percent.

Butter itself saw a 2.6 percent price drop though.

“Ample cream availability – especially with the northern hemisphere production season getting into full swing – continues to weigh on butter pricing,” Crickett said.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

How can food products that travel into New Zealand from other countries end up being cheaper than those produced locally?

It’s a question some shoppers have been asking because US butter Burtfield’s & Co is being sold at Pak’n Save supermarkets for $6.99 a block, compared to $8.39 for the Pam’s product.

But it’s not the only imported product that is available more cheaply than locally produced options.

The cheapest frozen spinach this week, for example, was packed in Belgium from local and imported spinach. Frozen baby carrots were also imported.

Simplicity chief economist Shamubeel Eaqub said imported butter had been cheaper than export prices for the past two years.

“The main thing is the US has a record dairy herd. They’ve had some problems in terms of exporting to China because of the trade wars, they have a bit of a glut locally. It’s not normal for us to have import prices that are less than export prices.”

But he said the amount of butter being imported was “tiny”.

“Four percent of our consumption in the last 12 months, so a really small amount. It comes with all the issues of logistics, of transporting a bulk commodity around the world.”

‘… some things we don’t have a competitive advantage in’

Westpac chief economist Kelly Eckhold said people often thought of transport as being the main factor in the cost of a food product but it was not always. Things like the cost of energy could affect the price of products that were energy-intensive to make, like fruit juice, he said.

The cheapest one-litre bottle of fruit juice at Woolworths on Tuesday was a Keri juice product made from imported ingredients.

He said about a third of fruit and vegetables were imported. “That reflects the fact that fruit and vegetable supply is seasonal.”

ANZ agricultural economist Matt Dilly said there had been an increase in frozen vegetable imports that was creating competition for the local growers.

“New Zealand doesn’t really have the cost-of-labour advantage or the cost-of-energy advantage. There’s also a lot of tropical fruits and whatnot that we don’t do a very good job of growing ourselves.

“That’s the counterpoint to all the great agricultural exports we have – some things we don’t have a competitive advantage in and we do import them.”

Dilly said the US butter being cheaper would be a short-lived phenomenon.

“It’s pretty unusual right now, where butter prices in the US are at a significant discount to butter prices in New Zealand and Europe. All those things do have a tendency to even out over time.

“While it seems unusual on its face, it is something that can be good for consumers to give them that choice of a lower-priced product, especially when there’s cost of living concerns for a lot of New Zealanders at this point in time.”

Price of agricultural land a factor

Otago University senior lecturer Robert Hamlin said food had become progressively more expensive over the past 30 or 40 years.

“And the primary driver of that has been the building up within this country of the value of agricultural land. Now, the trouble with that is if you end up paying 10 times as much for your land as you used to 30 years ago, it puts the land under pressure. It obviously puts the farm operation under pressure because that’s not actually doing anything to help you produce the product. It’s simply making it more expensive.”

He said while New Zealanders were often told that the price they had to pay was influenced by global price of food, in most places the majority of food was produced and consumed within the region.

“So although we describe Fonterra as a titan of the international dairy trade, which it is, the fact is that the international dairy trade is a very small pond and Fonterra is a big fish in that pond, but it is a very small fish in global terms.

“And this means that you’ve got the majority of food being bought and sold in individual jurisdictions, you’ve got a small percentage of food swilling around internationally.

“New Zealand is really rather unusual in that it has such a very large proportion of its agricultural production is going into this international market for food, which is highly volatile because you’ve got people coming into the market to sell food that they’ve got too much of and then coming into the market to buy food because they haven’t got enough and that food, that means the international price gyrates around more or less continuously.

“But what it boils down to is that we are a high cost producer and we are a higher cost producer than an awful lot of the major producers around the world and therefore you will find out from time to time that food that is produced in this country can be accessed for a considerably lower price overseas than it can be accessed here. And that’s pretty much what’s happened here.”

He said it potentially made New Zealanders vulnerable to the moves of other countries.

“The supply and demand for food across the world is very tight. The amount produced is very close to the amount demanded and this means that it would only take a fairly minor problem within other people’s domestic food market for them to generate a demand in the international market that would make the food in that international market unaffordable for a country that was paying that for all of their food.

“So if we take for example the People’s Republic of China and let’s say that they have a problem with their agricultural production, they could then decide, well we’re going to pay $60 a kilo for milk solids to acquire that small amount of our domestic demand that we need from overseas.

“That will increase the price overall of milk products in China by a relatively small amount, but it would put the price in New Zealand up to $60. So you would essentially be paying $80 a kilo, probably nearly $100 for tasty cheddar and pretty much $100 for butter.

“It’s certainly quite possible given that this country and its exporters believe that they should be allowed to export to global markets for the highest price can achieve and to hell with the consequences for the local population, I’m a little bit concerned about a situation like that could arise very, very quickly.”

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

The fuel crisis has brought with it a spike to many household expenses and one economist says we could be headed into “choppy waters”.

Prime Minister Christoper Luxon recently said even if a resolution were to happen today regarding the Strait of Hormuz, there would be at least six months of “bumpiness” ahead.

“Just in terms of the lag effect of the supply chain and how it all hangs together,” Luxon said speaking from Singapore.

ANZ Spending data out on Tuesday showed an unusually large drop of 1.4 percent in grocery spending for the month of April, with spending at the petrol pump up 22 percent since February.

Economist Cameron Bagrie told Checkpoint it’s reasonable to think there is at least six months of bumpiness awaiting kiwis.

“We’re obviously heading into choppy waters, and it’s very obvious inflation is heading up.

“The economy is likely to have gone backwards in the June quarter. We kind of hope this is a temporary diversion for the economy.”

With prices up for fuel, he said it’s no question that people will be substituting in other areas.

Bagrie said households were not simply being hit with a fuel or energy shock.

“General inflation across New Zealand was heading up prior to getting whacked with high fuel prices.”

“Electricity bills up 12 percent on a year ago. Your rates, well they’re hitting up at sort of double-digit numbers. Your medical insurance is 20 percent plus.”

He said the country was experiencing an “underlying inflationary undercurrent” which had been eating into people’s “disposable spending power”.

This existing issue now had the added layer of a fuel shock.

He said even prior to the current crisis the Ipsos monitor had indicated the biggest concern for households was inflation and the cost of living.

“Headline inflation was already 3.1 percent, the core inflation was two and a half to three.

The average individual in the street doesn’t certainly believe that inflation is around 3.1 percent, they will likely to say it’s around 4 to 5.”

He said now with the crisis people’s perception of inflation will likely change and it would be interesting to see the composition of people’s spending, particularly in grocery stores.

“Unfortunately, a lot of stuff we substitute away is from things such as fruit and vegetables, which are pretty essential to everybody’s diet.”

He noted that there had been a big surge in fertiliser prices around the world which would inevitably have an impact on food production system internationally.

Bagrie said international food prices were up 2.4 percent in the month of March and with the April number coming soon another increase is likely to be reflected.

On a more positive note, he said equities had been “pretty cheerful” over the last few weeks.

“Now, whether that’s more hope than substance, maybe people are thinking that the boost from AI is going to outweigh the negativity from what we’re seeing within the Middle East.”

Employment numbers were also more positive in February and March, but Bagrie said this was an indication that the economy was picking up before the current crisis.

With new numbers coming out soon, they may reveal something different.

“That story is now dated. It’s gone. We need to deal with a completely different economic scenario.”

Bagrie said while hopes were that this crisis comes to an end by this year, there was no certain timeline.

“And as the Prime Minister points out, it might be a six-month diversion. But the truth is that nobody really knows.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

• Unemployment expected to remain steady at 5.4 pct – data due 6 May, 10.45am
• Middle East conflict likely to dampen previous tentative recovery signs
• Labour market recovery now likely a 2027 story
• Wage growth to remain subdued at 2 percent, lagging inflation
• Stagflation risks grow – high inflation, low growth, rising unemployment
• Data not likely to change RBNZ rates on hold policy – for now

Unemployment looks set to linger around a near-decade high as the Middle East conflict dampens tentative signs of a recovery this year.

Major bank economists expect the unemployment rate to stay unchanged at 5.4 percent or nudge slightly higher for the three months ended March.

ASB economist Wesley Tanuvasa said the data would largely show the state of the market before the conflict broke out, but he expected a bigger workforce and greater demand for work to push unemployment higher.

“[The] labour market data is expected to reflect a firming employment trend and strong labour supply response, but headline numbers will likely remain weak. This is expected to push the unemployment rate up to 5.5 percent. Labour cost growth should remain modest.”

Labour market numbers can be a statistical lottery, with the unemployment rate moved by the size of the workforce, how many are participating, are doing training, have stopped looking for work, irrespective of how many jobs may have been created.

BNZ economist Matt Brunt said business surveys, such as the Institute of Economic Research’s quarterly survey (QSBO), have shown a slide in confidence, which would most likely show a more pronounced hit to employment intentions.

“The latest QSBO showed some softening in hiring intentions. However, the responses deteriorated as the month progressed … when employment intentions were much weaker and consistent with net labour shedding.”

The BNZ now expected unemployment to hit 5.8 percent later in the year.

Toxic stagflation

ASB’s Tanuvasa said labour market recovery was now likely a story for next year because of the Middle East conflict.

“We do not envisage a labour market recovery unfolding until 2027 and cite heightened stagflationary risks over 2026 given higher near-term unemployment and higher near-term inflation.”

Stagflation is a toxic mix of slow economic growth, high unemployment, and high inflation.

The Reserve Bank no longer has a specific instruction to help the labour market and maximise employment, but nonetheless always casts an eye over labour market health.

Tanuvasa said the RBNZ was faced with how soon before it moved to dampen inflation caused by the conflict and the negative effects on the economy higher interest rates might have.

“[This] makes the trade-offs of monetary policy significantly more complex and painful for the economy. There are few, if any, winners in a situation like this.”

The RBNZ next meets in three weeks, with financial markets pricing in a 40 percent chance of a 25 basis point rise in the official cash rate to 2.5 percent. However, the majority view remains a series of rapid fire rises from September to 3 percent by the end of the year.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

Crossing the Cook Strait is about to get a whole lot more expensive for commercial operators and likely consumers.

The Interislander is hiking its fuel surcharge to 54 percent on commercial vehicles and trucks crossing the Cook Strait due to soaring energy prices.

International shipping company Maersk announced its own 27 percent fuel surcharge, and Bluebridge adjusted its prices last month.

Retail New Zealand chief executive Carolyn Young told RNZ that any increase in transporting costs will flow through to the till.

“It’s realistic to expect that the consumers will see increased prices, and obviously any increase in price is inflationary. We know the inflation factors are expected to be significantly higher than where we sit right now by the end of the year,” she said.

The near doubling of the fuel surcharge for commercial vehicles will apply to all sorts of companies – from livestock trucks, to groceries, furniture and goods.

Marcus Pickens from Wine Marlborough said it was creating more uncertainty with pricing.

“There’s a lot of pricing work going on week to week now, it’s not set in advance and everyone is reviewing things continuously.

“It makes it hard to price up those products and work out where the margin sits for everyone, it’s adding complexity for sure,” Pickens said.

While some people are holding off on shipments, that’s not possible for everyone.

“If a product is not super urgent they can, but there’s a lot of product that needs to be continuously supplied to keep shelf space full on shelves and in shopping trolleys around the world,’ he said.

The New Zealand Shipping Federation told RNZ the Cook Strait ferries are spending about $600,000 a week more on diesel than before the Middle East conflict.

Transporting New Zealand chief executive Dom Kalasih agrees consumers will see price increases – and said it would take about a month to come through the system.

“We’d have to be naive to think costs won’t be passed on. A good demonstration of this is we are seeing this in other areas too, I’ve recently seen some information from the building sector where fuel is used in a lot of cases.”

KiwiRail and the Minister of Rail Winston Peters declined to be interviewed – but in a statement Peters said Interislander should not be expected to absorb fuel price increases.

Matthew Lane, who is chief executive of the retailer Night ‘n Day, said suppliers were passing some of the fuel increase onto them.

“The majority are doing more a temporary increase which is encouraging because they’ve quantified it. So as petrol prices go down the prices go down accordingly, which means we all, in theory, end up at the historical retail prices and cost prices that were previously in play,” Lane said.

It’s exactly what Retail NZ wants to see from all businesses – ensuring if, or hopefully when, fuel prices drop – so too do the charges being passed onto consumers.

“We need to note when this charge is put in place and how we get back to normal, so that when prices come back we don’t only come partly back. We need to be really clear and transparent around that,” Young said.

KiwiRail said it was monitoring the situation and making every effort to absorb cost increases across a monthly period to provide certainty for customers.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand