ASB anticipates higher inflation, May OCR lift in latest forecast

New Zealand consumers can expect higher prices in the coming months as cost pressures ramp up across the country, ASB's chief economist says.

The bank has predicted growing wage and cost pressures will drive the Consumer Price Index (CPI) higher, and "these are expected to be passed on to consumers".

"Easing in restrictions and strengthening demand is pushing up global prices for most commodities," the bank said in its latest Quarterly Economic forecast released on Thursday.

"Global shipping demand is surging, pushing up freight costs given constrained supply.

"Ships are travelling off schedule and sometimes bypassing NZ given its isolation."

ASB chief economist Nick Tuffley said these aspects will be some of the key challenges New Zealand will face this year.

But the good news is spending in most retail sectors is back to pre-COVID levels, the report says.

"The opening of the trans-Tasman bubble means there is some good news on the horizon for the tourism and hospitality sector," Tuffley said in a statement. "While interest has been light so far, there are reports of increased interest from Australians to visit NZ during the winter - and the ski season in particular."

Last May, Treasury predicted unemployment to rise to 9.8 percent. It only peaked at 5.2 percent - and it's expected to fall during this year.

"The New Zealand economy did well in the second half of last year - there are some really, really good signs in our economy," Finance Minister Grant Robertson said in February.

A lift in the official cash rate (OCR) - which has been at a record low for the past 12 months - is expected from the Reserve Bank in May 2022, ASB predicts.

"Overall, New Zealand has weathered the COVID-19 pandemic relatively well, and its economy has outperformed many of our main trading partners," Tuffley said.

Last month, economist Cameron Bagrie said to keep inflation in check, the Reserve Bank will need to start thinking about the OCR again.

"They'll want to be pretty patient, but slowly but surely all the pieces are falling into place for interest rates to move up at some stage down the track," he told The AM Show.