The Reserve Bank of New Zealand expects headline inflation to reach 4.3 per cent in the September 2026 quarter after the Strait of Hormuz disruption drives up fuel costs. Markets price an official cash rate peak of 3.7 per cent by the end of 2027, above the central bank's conditional 3.2 per cent path.
This outlook arrives as New Zealand confronts the largest oil supply shock since the 1973 embargo. The effective closure has curtailed more than 11 million barrels per day of Gulf crude and condensate. Global consensus forecasts have been revised down only modestly to 2.9 per cent GDP growth for 2026.
New Zealand's position is distinctive. The country imports 100 per cent of its refined fuel since the 2022 closure of the Marsden Point refinery. Roughly 80 per cent of that supply has historically come from South Korean and Singaporean refineries processing Middle Eastern crude routed through Hormuz, according to RNZ and Infometrics analysis of MBIE trade data.
The May 2026 Monetary Policy Statement from the Reserve Bank of New Zealand sets out the inflation path clearly. Headline CPI stood at 3.1 per cent in the March 2026 quarter. The bank projects a peak of 4.3 per cent in the September quarter before a return to the 2 per cent midpoint in mid-2027.
The drivers
The statement decomposes the oil shock into direct first-round effects, indirect first-round effects, second-round price effects and second-round activity effects. The Monetary Policy Committee signalled that OCR increases will be required this year to prevent second-round effects from becoming entrenched.
The starting OCR of 2.25 per cent is described as stimulatory. The May decision featured a formal 3-3 split vote resolved by the chair's casting vote. Three external members — Carl Hansen, Hayley Gourley and Prasanna Gai — voted for an immediate 25 basis point increase, while Governor Anna Breman, Karen Silk and Paul Conway voted to hold.
BNZ chief economist Mike Jones notes that primary sector revenues remain buoyant, particularly for meat and dairy exports. A trade-weighted index 7 per cent below average provides additional support to exporters. These buffers operate alongside higher net migration and a tourism rebound.
Stats NZ data show overseas visitor arrivals 15 per cent higher year-on-year in March 2026, with 358,900 arrivals recorded. Net migration gain reached 24,200 in the year to March 2026.
Regional housing markets illustrate convergence toward historical norms rather than divergence. Since national house prices bottomed in April 2023, Auckland has eased 1 per cent while Southland has risen 19 per cent on the REINZ seasonally adjusted House Price Index.
