Inflation hit 5.1% for the year to September driven by the mammoth spike in oil, food, and other commodity which has abated since then, for now.
There is nothing that could be done to avoid this impact on New Zealand from international markets. The economy is already in recession, and now would be the worst time to apply the brakes to the domestic economy in a futile attempt to counter price rises coming from abroad. Not that this fact will do anything to dissuade opportunistic attacks from National and its proxies, who will rely on their audience’s ignorance to dishonestly lay the blame at Labour’s door.
Fortunately, the worst is already over. September quarter inflation was lower than June quarter and December quarter will be lower again, given the drop in fuel prices. In the medium-term, barring more shocks (which I personally expect but the officials don’t model for), inflation will fall back into the target 1-3% range. Right now, inflation isn’t the problem, growth is (although the causes of the two are inter-linked and largely outside domestic control). Given that, there is nothing to stop the Reverse Bank making a major reduction in interest rate on Thursday to give the economy a kick start.