Economist Shamubeel Eaqub believes some consumer prices won't return to pre-COVID levels 'for some time'

  • 21/04/2023

A leading economist says it's unlikely some pre-COVID consumer prices will be experienced for some time.

But Shamubeel Eaqub believes the global economic environment is improving after Statistics NZ on Thursday announced annual inflation fell to 6.7 percent from 7.2 percent.

Eaqub, from consultancy firm Sense Partners, said that showed inflation had probably peaked in New Zealand.

Consumer prices had been gradually easing for about the past year, he said, but the rate of growth was still "very high".

"One of the hotspots for inflation still is food [prices] - they're still rising at a really rapid pace so when you're doing your weekly shop, it's still going to feel really expensive - and getting more expensive," Eaqub told AM Early.

He said the positive news was global prices for the likes of agriculture commodities were easing. However, prices were settling at "much higher" levels than before the COVID-19 pandemic.

"We're not going to get a lot of relief on food for a while. So toward the second half of this year, we should see some moderate decreases but, in reality, I think we should really brace ourselves for food and the supermarket shop to remain expensive for some time to come."

While people are feeling the pressure of high consumer prices and associated rising interest rates, he said businesses will be under the pump too.

"People are spending less, people are borrowing less, people have less money available so there's less money going around - particularly for buying really big things like new houses [and] renovations. So we are going to see quite a lot of pain out there."

For Eaqub, the construction and retail sectors would likely feel the biggest pinch.

Shamubeel Eaqub.
Shamubeel Eaqub. Photo credit: AM

He also urged the Reserve Bank to not increase interest rates any further after Thursday's figures.

"A lot of New Zealanders will be experiencing poverty for the first time on relatively good incomes… just because their mortgage payments have gone up so much," Eaqub said.

"I think if they raise interest rates further, they will create too much pain. We've already seen too many New Zealanders experiencing financial hardship and we haven't even seen the large wave of mortgage refinancing to come yet."

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