ANZ: Inflationary Risks From Gabrielle

ANZ note that “Cyclone Gabrielle has devastated many parts of the North Island, and our thoughts are with those who have been (and are still being) affected by this event. It comes on top of significant floods in Auckland.”

• “The economic cost of the cyclone is, as yet, impossible to quantify. But the sheer number of people and the area impacted point to a significant effect on economic activity. First there’s the near-term disruption and destruction (eg agricultural production), but in the longer term, there’s the repair and rebuild that will happen over 2023 (and beyond).”
• “The impacts of the cyclone point to clear upside risks to inflation. Construction costs, rents, insurance, furniture, and food prices (among others) could all face further upward pressure due to the cyclone.”
• “There’s not much monetary policy can do to help in an event like this – the response is best left to fiscal policy, which is faster acting and can be targeted where it’s needed most. At the margin, although its inflationary, this disaster reinforces our expectation that the RBNZ will ‘only’ hike 50bp next week, rather than the 75bp they signalled in November.”