Reining in inflation, then keeping it low and stable, is going to be harder than it used to be.
The near-term outlook is grim.
Inflation indicators in the latest ANZ business outlook survey released on Monday are menacing. A net 92 per cent of respondent firms expect their costs to rise over the next three months and a record net 74 per cent expect to raise their prices as a result.
Their inflation expectations for the year ahead have jumped to 5.5 per cent, from 4.4 per cent in December.
The wider context is not encouraging either, because of two major trends — one in place already and the other looming.
The first is that for a while now there has been an ebb tide running in what has been a powerful disinflationary force, globalisation.
The migration of a lot of manufacturing to low-wage countries reduced the embedded labour costs in manufactured goods, which New Zealand imports, for the most part.
But it has also led to a political economy problem in countries which lost those jobs, resentments which could be exploited by populist demagogues like Donald Trump.
While it is good to have a free trade agreement with the United Kingdom, from a British point of view it is not much of an offset to the grievous self-inflicted wound of Brexit.
Meanwhile, Covid-related disruptions to supply chains have demonstrated the fragility of the global value chains criss-crossing borders as businesses captured the savings from the just-in-time approach to inventory management. The emphasis has shifted to resilience — just-in-case rather than just-in-time — with an inevitable cost in working capital.
As Reserve Bank governor Adrian Orr reminded us last week, in the decade prior to the pandemic imported inflation was either negative or close to zero. It offset the 60 per cent of the consumers price index made up of domestic, non-tradables prices, which wobbled around in the 2 to 3 per cent range.
Not any more. Annual inflation across the OECD was running at 6.6 per cent by the end of 2021, up from 1.2 per cent a year earlier and its highest rate since 1991. It was propelled by, among other things, an increase of more than 25 per cent in energy prices.
And now there is the war in Ukraine and the economic sanctions against the Russian aggressor.
The full effects of this shock have yet to be felt.
Trade and the concomitant benefits of globalisation depend on a peaceful, stable, rules-based international order. And rule No 1 has to be not to invade a neighbouring country.
So international sanctions, which may yet be ratcheted higher, are inevitable and entirely justified. But they are likely to elicit a response from Russia, including perhaps in cyberspace.
Weaponising trade, and the financial architecture which makes it possible, against North Korea or even Iran is one thing. Russia represents a quantum leap from that.
The spillover effects can only be guessed at. But we can be sure that they will not be helpful from an inflation point of view.
The same can be said of a long-term trend on the horizon, namely the increasingly urgent need for New Zealand and the rest of the world to transition from the bludger's economy we have become accustomed to.
It is bludging in the sense that the prices we pay for the goods and services we consume do not cover the cost of producing and delivering them.
That is because of negative environmental externalities — economists' jargon for the costs of the damage done to commons like the global climate or local waterways which polluters dodge and are not reflected in the prices that end consumers face.
The extent of that free ride in the case of the global climate is spelled out in gruesome detail in the latest report from the Intergovernmental Panel on Climate Change (IPCC). It covers the impacts of climate change — the why we should care stuff — and is the middle part of the IPCC's sixth assessment report.
It gives a sense of the extent of the costs we are offloading on to the young, the unborn and the global poor.
It concludes that between 3.3 billion and 3.6 billion people live in contexts that are highly vulnerable to climate change. A high proportion of other species are vulnerable too.
Choices made and actions taken in the next decade will determine the extent to which "climate resilient" development is delivered.
"Importantly, climate resilient development prospects are increasingly limited if current greenhouse gas emissions do not rapidly decline, especially if 1.5 degrees Celsius global warming is exceeded in the near term," it says.
United Nations Secretary-General Antonio Guterres, unencumbered by the need for the sematic consensus of an IPCC report, is more straightforward: "Nearly half of all humanity is living in the danger zone — now. Many ecosystems are at the point of no return — now.
Unchecked carbon pollution is forcing the world's most vulnerable on a frog march to destruction — now," he said.
Guterres accuses the world's biggest polluters (which on a per capita basis would include New Zealand) of "arson of our only home".
He said the science showed that to limit warming to 1.5C, the world would have to reduce emissions by 45 per cent (from 2010 levels) by 2030 and achieve net zero emissions by 2050.
"But according to current commitments global emissions are set to increase almost 14 per cent over the current decade. That spells catastrophe."
The Government is to announce its emissions reduction plan in May and a national adaptation plan in August.
The idea that they will not put upward pressure on the cost of living is deluded.
Nearly three years ago, on the morning of what was about to become the day of the Christchurch mosque shootings, I watched school children marching down Wellington's Lambton Quay as part of a global protest against endless procrastination on climate change.
Any thought that they were just grabbing the chance of a day off school was dispelled by looking at their faces. They were serious. They were in earnest.
And, okay, as school kids they might not have a subtle understanding of the free-rider problems that bedevil the geopolitics of climate change.
But they knew this much, that cooking the planet is a stupid and wicked thing to do, and that we are doing it to them.
One of the older kids had carried a placard saying "Next year I vote".
There is a message there that our political leaders would be wise to heed.