A leading economist is warning high inflation may have a bit more "stickiness" in it yet - and it could take a few years to tame.
But Cameron Bagrie told The AM Show it could be a good thing for the Government - allowing it to erode New Zealand's growing debt.
"Under the bonnet, there's a whole lot of inflationary pressures out there," he said on Tuesday. "Globalistation is starting to reverse [and] Government policy's got a pretty strong redistributive element to it - that's adding an awful lot on to costs.
"I think this thing's [inflation] got a little bit more stickiness about it over a few more years - hence one of the reasons why the Reserve Bank's jumped out of the gate pretty quickly in the past couple of weeks to try to tame the thing."
Last week, the Reserve Bank announced it would keep the official cash rate (OCR) unchanged at 0.25 percent but halted buying bonds under the Large Scale Asset Purchase programme, also known as 'money printing,' in order to reduce economic stimulus.
Bagrie said there are mixed signals about whether inflation is here to stay or not.
"We've got pretty strong global demand at a time where borders are shut," he told host Ryan Bridge.
"On some levels, it's quite convenient for the Government because [if] you get a bit more inflation in the system, you get a little bit more [of] what's called 'nominal growth' - you get a higher tax take. Inflation is also a pretty easy way to erode their debt - make it magically disappear."
Bagrie predicted that during the next six months, New Zealand will start to wear the cost of several infrastructure projects.
"They're going to get absolutely blown out of the water… because we're seeing an awful lot of construction cost inflation out there," he said.
"The Government's got a pretty big economic incentive, like everybody else, to try to tame the beast and get inflation back into the bottle.
"I think we're talking too much across this economy about an 'economic recovery'. The recovery is long gone - outside of tourism, we are now managing an economic expansion."
Last week, the Reserve Bank acknowledged New Zealand's economy was continuing to perform better than expected through the pandemic.
"Aggregate economic activity is above its pre-COVID-19 level," the central bank said in a statement. "Household spending and construction activity are at high levels and continue to grow."