Finance Minister Grant Robertson says there are "no simple fixes" to the issue of high inflation – but National and Act say the Government should look to its own spending habits to try to ease the strain.
Responding to the annual inflation rate of 7.3 per cent and a rise of 1.7 per cent over the June quarter in the Consumer Price Index, Robertson said the Government was comparatively well placed to ride out the storm and provide support for households and businesses, given low unemployment and relatively low debt.
He pointed to the Government's decision to extend relief in the form of fuel tax cuts to January next year and a cost-of-living payment from next month for those on low incomes.
However, he also warned high inflation was here for some time yet, saying while most economists expected the June quarter result to be the peak of the cycle, it would be above usual levels for some time.
"Global factors such as the ongoing impacts of the pandemic on supply chains and the war in Ukraine are affecting prices, particularly those for fuel and building materials, and this means demand is not being met, and having a sizeable effect on New Zealand households and businesses."
While Robertson was putting it down to a "volatile and uncertain global environment," National's finance spokeswoman Nicola Willis said the Government was not helping.
She said it was not a problem that had crept up on them and the response should be more than "relying on temporary band-aid payments and gimmicky policymaking."
"Labour keeps blaming international events like the war in Ukraine but refuses to take responsibility for their policy failures at home.
"We have been calling on the Government to present a plan to fight inflation for months.
Spending more and announcing temporary measures won't cut it."
She said Treasury had told Robertson that a large portion of inflation was being driven by domestic demand and high Government spending was making it worse.
"Instead of listening to this advice, he ignored it. A real plan would focus on strengthening the productive economy and unlocking the bottlenecks in the economy that are worsening inflation, including fixing failed immigration settings and stopping adding costs to business."
NZ First leader Winston Peters has also weighed in on Twitter, saying the cost of living "crisis" was out of control "and is being made worse by the ineptitude of those who purport to be running our country."
He said the Sunday announcement that the fuel tax cuts would be extended to January was a knee-jerk response.
"It a clear example of the modus operandi of this Government, who continue to convince themselves that throwing money at a problem bodes well for our future. In the end, the taxpayers will have to pay the piper."
A Treasury paper to Parliament's finance and expenditure select committee had warned that if the Government spent more than it had allocated in the Budget, it risked pushing interest rates higher.
It said government spending and consumption tended to have the largest effects on domestic demand and interest rates.
Act's housing spokeswoman Brooke van Velden said one of the drivers of inflation was the high cost of construction material and called for more competition in that market. She said the plasterboard shortage was evidence of "unnecessary and illogical regulations" in that market.
"Plasterboard is a sandwich of plaster and cardboard. What first world, industrialised country gets itself into such a pickle where we have a nationwide shortage? An overly bureaucratic one and it needs to stop, today."
However, Robertson said the figures reflected "a volatile and uncertain global environment" which was also battering other countries.
"There are no simple fixes in the face of global inflation and its impact here in New Zealand."
He has said that the cost-of-living package was not expected to be inflationary because it was from money that had already been allocated in the Budget – not new money.
On Sunday, Robertson held a press conference to announce temporary fuel tax cuts and road user charges, as well as half-price public transport, would be further extended until the end of January next year.
The rising cost of fuel was one of the drivers of high inflation and those measures were estimated to reduce headline inflation by 0.5 percentage points in the June 2022 quarter.
The extension of the scheme was expected to cost $589 million, and money would be taken out of other areas to make up the shortfall for the National Land Transport Fund.
The Government was also monitoring margins in the fuel market to ensure that tax relief was being passed on in full.
The cost-of-living package will also begin in August, giving about $27 per week for people over 18 earning less than $70,000 who do not receive the Winter Energy Payment.