Expert warns uncertain global market means New Zealand's inflation could rise again

Just when it looked like inflation may have peaked in New Zealand, a financial expert warns there could be tough times ahead for Kiwis. 

The latest data from Statistics New Zealand in January showed annual inflation remained steady at 7.2 percent.

It comes after inflation steadily rose since 2021. In January 2021 it was 1.5 percent before peaking at 7.3 percent in July 2022. But since then there have been two steady periods in September 2022 and January.

The US Federal Reserve has indicated interest rates may have to go higher for longer and Milford Asset Management portfolio manager Mark Riggall said this could have an impact on inflation in New Zealand. 

"We have our own situation, it's similar to what we're seeing in the rest of the world, but again it's unique ... it actually looks like inflation will probably be a bit stronger and maybe growth a little bit weaker," Riggall told AM co-host Melissa Chan-Green. 

"But all the data is going to be so muddied by all the disruption that we've had in the economy. It means getting a strong read on what's going on is going to be very difficult and make it tough for the RBNZ (Reserve Bank of New Zealand) to do their job."

Riggall said central banks around the world are focused on reducing inflation but warns New Zealand still has work to do to tame it.

"I think what we're getting to is a situation where we think we're close, but we don't quite know, so proceed slowly and proceed maybe with a slightly divergent approach across different countries," he told AM on Thursday.

"The problem is they're only going to know once it's too late. You're only going to know once you've raised interest rates a little bit too much and the economy starts to weaken and inflation falls with that and you think we've done enough. 

"We thought we'd seen signs of that in the last quarter of last year, but actually no, it looks like we're going have to go harder again."

But it's not all negative with Riggall saying the current market is providing a great opportunity for investors. 

"If you're a saver, then of course, higher interest rates are delivering you higher returns on your cash investments. If you're a borrower, then obviously you're going to be facing higher costs on your debt … and you should be looking to reduce your debts if possible," he explained.  

"Lots of uncertainty creates opportunities and things are moving around, different companies are facing different outlooks and so there are chances to go and invest and generate a reasonable return going forward based on that." 

Watch the full interview with Mark Riggall in the video above.