Inflation perceptions and petrol prices in New Zealand

Puneet Vatsa and Gabriel Pino

New Zealand Economic Papers, 2026, vol. 60, issue 2, 242-252

Abstract: Petrol prices are easily noticed and widely discussed. Thus, they may disproportionately influence how individuals form perceptions of inflation. We examine whether, and to what extent, petrol price shocks influenced inflation perceptions and headline inflation in New Zealand. To this end, we estimate structural vector autoregressions using Bayesian techniques. Two identification strategies are employed, with one relying on sign and zero restrictions and the other on partial identification. The results show that petrol price shocks had a slightly delayed, small and persistent effect on inflation perceptions, whereas their effect on headline inflation was instantaneous and short-lived. Shocks to overall energy prices produced effects similar to those of petrol price shocks. These findings suggest that fluctuations in petrol prices may help explain divergences between perceived and actual inflation.

Date: 2026
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DOI: 10.1080/00779954.2025.2562988

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