The Dominion Post is reporting the views of Westpac on the inflationary outlook for the year ahead. The article says: Westpac chief economist Brendan O'Donovan said the outlook was more worrying. "We think annual inflation is headed for 4 per cent through 2008."
That compared with the Reserve Bank's forecast of 3.5 per cent in the third quarter of this year.
Mr O'Donovan said the central bank was yet to incorporate the inflationary effects of the Government's emissions trading scheme, which could add a full percentage point or more to inflation over the next three years.
"The Reserve Bank's inflation forecasts also include what we think is a conservative estimate of the inflationary effects of the upcoming regional petrol tax," he said. "Then there are likely ongoing food and energy price increases and increasing ACC levies."
Unfortunately The Hive agrees with this gloomy outlook and the fact that the key driver is Government policy. It will be interesting to see how the Government's climate change policies impact on public opinion once the general public realise the true cost.
