Economist warns war-driven inflation could let businesses lock in higher prices

A leading New Zealand economist has warned that the current surge in fuel and transport costs — driven by Middle East conflict — may give some businesses cover to raise prices on services only loosely connected to actual cost increases. Kelly Eckhold, chief economist at Westpac New Zealand, told RNZ that the real danger is not the visible fuel surcharge but the quieter reset of prices that may never come back down, leaving consumers paying more even after fuel markets stabilise.

The Details

Westpac chief economist Kelly Eckhold told RNZ that businesses can find it easier to raise prices when inflation is becoming widespread, even when their own cost increases are not directly tied to fuel. He said transparent fuel surcharges on freight and ferry services are easy to track and remove when costs fall, but a more persistent risk comes from businesses resetting baseline prices for subscriptions and services that do not directly depend on fuel. He said many price hikes can be shaped back to fuel quickly, and businesses often promise to remove them when prices come down. 'That's pretty transparent, isn't it?' he said. But he warned: 'What's more likely is that is the price, that's the base price that you'll pay in the future.'

The comments come as transport and shipping operators face sharp cost pressure from the Middle East conflict, which has disrupted fuel supply routes. A. P. Moller – Maersk, the global shipping and logistics company, said roughly 20 percent of global fuel passes through the Strait of Hormuz. Maersk said it implemented a temporary Intermodal Fuel Fee in New Zealand, with a current monthly rate of plus 27 percent from 1 May 2026. RNZ also reported that freight prices have soared as Maersk faces costs linked to the conflict.

Domestic operators are seeing similar pressure. KiwiRail raised the Interislander fuel adjustment factor on commercial vehicles to 54.4 percent from 27.7 percent. RNZ reported the Interislander ferry network was spending about NZ$600,000 more per week on diesel than before the conflict began. RNZ also reported 91 petrol was routinely above NZ$3 a litre.

Retail New Zealand and Transporting New Zealand told RNZ that higher transport charges were likely to flow through to shelf prices. Transporting New Zealand chief executive Dom Kalasih said: 'We'd have to be naive to think costs won't be passed on.' One transport executive estimated consumers could start seeing those increases within about a month.

Context

The latest price pressure is feeding into a broader inflation picture that had already begun to shift earlier in the year. RNZ reported consumer prices rose 0.9 percent in the March quarter and annual inflation held at 3.1 percent. Reserve Bank Governor Anna Breman made a tentative forecast of 4.2 percent annual inflation in the current quarter. The Reserve Bank has warned fuel and transport costs were likely to push inflation above 4 percent in the June quarter, heightening concern that price pressure could spread beyond directly affected industries.

Stats NZ data cited by RNZ showed the March-quarter inflation pulse was still being driven more by petrol and domestic costs than by a full pass-through of war-related supply-chain price increases, suggesting the broader pass-through from international freight disruptions was still building.

The situation has also sparked debate among economists about monetary policy. RNZ reported in April that economists were already split on whether the Reserve Bank should respond to war-driven inflation pressure with Official Cash Rate hikes. At the time, Kiwibank economists warned against what they called 'reckless' rate hikes, while others argued rising inflation warranted tighter policy. That divide underscores that the fuel shock had become a wider macroeconomic debate even before the latest commercial surcharges took effect.

What's Next

With fuel surcharges already climbing across freight, ferry and shipping networks, the question is whether those adjustments remain narrowly tied to fuel or bleed into broader service-price resets that do not retreat when geopolitical tensions ease. Retailers have warned consumers could see shelf-price impacts within about a month. The Reserve Bank is monitoring whether fuel-driven inflation becomes entrenched enough to affect interest-rate decisions, as economists continue to debate whether OCR hikes are an appropriate response to war-driven price pressure. Policymakers will be watching closely to see whether the current wave of cost increases remains transparent and reversible, or settles into a new, higher baseline for consumers.