Kiwibank chief economist Jarrod Kerr explains what effect climate change will have on inflation, housing and policy – and whether there’s a way out.

Climate change. It’s a gigantic force and it’s coming into play at a time when New Zealand is already struggling with inflation. We’ve gone from a peak of 7.3% to 4.7%, but that’s not enough for the Reserve Bank of New Zealand to commence cutting the Official Cash Rate (OCR). More progress is needed. It’s not until the September quarter we expect Kiwi inflation to go below 3%, but it’s not until mid-October that we see that in writing. So that leaves the November meeting as the earliest date to begin delivering rate cuts.

The cost of transitioning and substituting to renewable sources is inflationary. The cost of assessing climate related risks, like flooding, is inflationary. We are seeing, and will continue to see, rising insurance premiums, and council rates. And then there’s the infrastructure costs associated with climate change, like cyclones. Rebuilding outdated and inadequate infrastructure is inflationary. Building back better, by looking to future proof infrastructure for an ever-increasing population, is very inflationary. We’re paying (through the nose) for decades of underinvestment.

Climate change will heat already heated inflation

More frequent severe weather events will cause more damage, which will become increasingly expensive to rebuild from and insure against, forcing price hikes in affected industries. The floods and cyclone that ripped through the North Island last year are an unfortunate example. The rebuild cost is estimated at over $13 billion and growing, lost crops hurt exports by around $1 billion and caused a spike in some food prices (like apples), but there are structural changes. Insurance costs and council rates are being marked higher in response. 

Kiwi are paying for decades of underinvestment in key infrastructure. Councils are loaded up to the eyeballs in debt, and the cost of the infrastructure deficit is ballooning. The more we spend, the more resources we use (from the cost of labour to steel), the more it will cost, and so on. Tackling the required infrastructure spend – which Infrastructure NZ guesstimated to be around $200 billion, with $100bn in the pipeline – will be inflationary in itself. 

What’s just as concerning is the revaluation of insurance. All Kiwi face a sharp increase in insurance premiums due to more frequent, and potentially more devastating, climate events. But some will find insurance inhibitive. Properties at risk of rising sea levels, for example, will become uninsurable. Insurers may offer insurance with exclusions, such as flood, meaning they’ll get insurance on everything except what they need. Not helpful. Or insurers will simply refuse to insure some areas. 

Without insurance, a mortgage may be unattainable. Without the ability to mortgage a property, a devaluation would be inevitable. IAG, the largest insurer, has flagged 20,000 homes at severe risk of flooding. The managed retreat will be both expensive and reduce the stock of housing in a market with a chronic shortage already. 

What does this mean for monetary policy? 

Monetary policy cannot address supply-side problems, and the structural lift in inflation makes targeting an inflation rate of 2% in years to come that much harder. The current war on inflation aside, central banks will have to get a little more creative. Looking through large increases in food prices, insurance premiums, council rates and other costs like (re)building supplies, will prove difficult. We’re (inevitably) going to ask the question, is 2% the right target? 

The short answer: no. Targeting 2% in a world of rapidly rising climate related costs would require a crushing of non-related costs to compensate. Punishing Peter to pay Paul is problematic and painful. We suspect the conversation will shift towards higher, looser targets, and targets that try to exclude the costs of climate change. A consumer price index (CPI) climate core index may develop, by looking at the basket of goods and services, less insurance premiums for example (similar to the CPI ex-food and energy group). 

But it won’t happen just yet, because central banks place an appropriately large weight on their credibility. And they’re currently fighting for their credibility in a post-Covid world where central banks reflated their economies and markets a little too much. Central banks need to break the inflation beast that reared its ugly head following over-stimulation from Covid. Once the beast is broken over during 2024 and 2025 then we’re going to hear more about climate related inflation heading into 2026. “Higher for longer” interest rates will make way for “higher for longer” inflation targets.

What we worry about is a worsening housing shortage

If IAG are correct, and there’s 20,000 homes at risk of severe flooding, we need to relocate. And that’s adding to an already short supply of housing. The monumental task we face in building enough homes for our burgeoning population will get much worse. Our housing is unaffordable. The only way to make it affordable is to build enough houses at a lower price point – something we have been unable to do. We have the solutions, of which prefabricated houses are a big part, but we haven’t invested in the infrastructure to unlock land supply. 

We have the technology and ability to adapt. But do we have the (political) will to deliver? 

It is not the end of the world as we know it, but it should be. We need to get off fossil fuels. We need to reduce, and ultimately eliminate, our carbon emissions. We need to drastically change the way we do things. We need to embrace technology, especially within the transport space. “Transport is one of our largest sources of greenhouse gas emissions and is responsible for 17 percent of Aotearoa New Zealand’s gross emissions” (Ministry for the Environment). AI has the ability to solve many, if not all, of our problems. Driverless cars are one example of such change. Imagine a world where we don’t own cars, utes or trucks – that’s one major expense we don’t need. It’s a world where we hit an app like Uber, anytime we need to get somewhere or move stuff. And a comprehensive network of driverless, electric or hydrogen, cars fulfil our needs. Putting two to four people in a car, rather than one, would eliminate all our traffic congestion. And the roads we have would be enough, reducing our infrastructure needs. So many problems solved with technology we already have. We need to embrace these changes a lot faster if we’re going to reverse the damage we’ve done.

There are so many options for menstrual care products available on the supermarket shelves these days, but that wasn’t always the case. Alex Casey spoke to five people from different generations about what period care was like for them.

We’ve come a long way when it comes to attitudes to periods in Aotearoa. You’ll see menstruation popping up in our local comedies, or dystopian dramas, our reality TV shows, just as readily as you’ll read headlines announcing free period products in schools, or people speaking up about the challenges of menopause and endometriosis. 

Walking through the aisles of the supermarket, you’ll also see so many more options available to those who have a period every month. Where once there were only pads and tampons on the shelves, these days menstrual cups are mainstream and reusable period undies, washable liners and pads offer even more solutions for those worried about creating period waste. 

In an attempt to trace the true evolution of period product use and our changing attitudes towards menstruation in Aotearoa, I interviewed people across four vastly different generations – the oldest being 83, the youngest 14 – about having their first period and how the range and availability of period products has changed.

Born in 1942: ‘My mother brought out the belt, the safety pins and the towels’

Coming of age in Auckland in the mid 1950s, Anne remembers “everybody was very embarrassed about the whole affair” that was menstruation. She was a shy teenager at a co-ed school in Ellerslie and, although they got “the basic facts” in health class every year, nobody asked questions, the girls didn’t talk about periods with each other and certainly not near the boys. 

It was at home where she got the period crash course. “When I was about the equivalent of year nine, my mother brought out the belt and the safety pins and the towels,” she explains. “You had to use little hand towels and pin them on (the belt) and then wear navy blue bloomers over that.” When the towels had done their dash, they were collected in the laundry tub and hand washed. 

Anne recalls the towels being very “bulky and smelly” and extremely inadequate for her heavy flow. But choices were severely limited. There were only two places in her area that sold disposable sanitary pads – a chemist full of men and a posh ladieswear store. “The very first sanitary pads were dreadful anyway, they were cheesecloth with cotton wool inside, and would form these little balls that would stick to you.”

As a teenager she was aware that her mother used something called Tampax, and built up the courage to ask her about it. “She said ‘oh no, no they’re not for you, they are for when you are a grown up lady,” Anne laughs, referring to the myth of the time that using a tampon would mean you are no longer a virgin. It wouldn’t be until many years later – when she was in her 20s – that she would start using tampons herself, a much more convenient option by comparison to the rudimentary sanitary towels of her high school days.

Seventy years since her first period, Anne says much has changed in New Zealand around menstruation. Having free period products in schools would have once been unheard of, and she’s noticed reusable period underwear now being widely available – a far cry from the towels and belts of her youth. “I saw some at the supermarket just this morning,” she says. “It’s such a good idea because those products do cost.” 

To prove just how much has changed since her period heyday, Anne recently was talking to her granddaughter, a recent university graduate, about what period products are popular. “I said to her ‘are any of the girls still wearing belts?’” chuckles Anne. “She just giggled.”

Born in 1961: ‘The sanitary pads were as big as surfboards’

As Michele was hitting puberty in the mid 1970s, she remembers the conversation becoming much more open about sex and periods. “Everybody was giving their children copies of ‘Where Did I Come From?, which is a book about sex and conception,” she recalls. “There was definitely a sense of that liberation from conservatism and secrecy around it all.” 

During their intermediate health class, separated by gender, Michele remembers seeing an image of a uterus, shaped like a bulls head, on an overhead projector. “I came away with a very clear idea that every month, your uterus would be lined with blood,” she recalls. The girls came out of the class chatty and giggly – the boys looked like “they had just seen a horror movie”. 

She was 15 when she got her first period, during a visit to Hawke’s Bay with her mother, grandmother and great aunt. “Suddenly all those women just gathered me up in the kitchen and told me all their period horror stories because we’re a family of heavy bleeders,” says Michele. “It was hilarious and fun. I was just so delighted to finally feel like one of them.” 

While her family might have had a more liberal approach to periods, the products available were still very limited. Michele used sanitary pads which were “as big as surfboards”, secured into a large pair of cloying plastic-lined briefs. “No wonder we all had thrush,” she laughs. “They were supposed to stop flooding but of course it didn’t work for me.” 

At school, used pads were seen as dirty secrets – they would be disposed of behind a mysterious metal door, and then carted off to a nearby incinerator by the caretaker. “Every now and again there would be ash in the air and you’d be like ‘ooh, they are burning the pads’.” 

Fifty years on from those ash laden sanitary pad skies, Michele says the conversation has “completely changed” around periods and that the range of products is liberating for people with periods. “I think it is fantastic that there are so many choices,” she says. “It used to be an act of rebellion to say that you had your period, and I think the rebellious thing to talk about now is menopause.”

Born in 1985: ‘this was also the era of applicator tampons, which freaked me out’

Claire got her first period in the mid 90s at horse riding camp, having only read about them in a comic book about puberty that her mum gave her. “I was completely unprepared and did not want to talk to an adult,” she recalls. “An older girl gave me a pad. I just remember being so grateful to her, but also so uncomfortable wearing jodhpurs with those bulky 90s pads.”

Although she remembers period conversations being “private and secret”, Claire’s mum was so stoked to hear the news from camp that she bought her daughter a paperweight with a flower in it. “I’ve still got it,” laughs Claire. This was also the era of period ads featuring white swimsuits and blue liquids, pads with trivia on them and “applicator tampons, which freaked me out”. 

She also remembers there being period advice in Dolly magazine about how to insert a tampon properly, and period narratives in popular books such as Looking for Alibrandi and The Red Tent. Two decades later, Claire says there has been much more progress in period representation. “All the ads now make having a period seem like the most fun you’ll ever have.” 

Having ordered her first pair of period undies recently, Claire is also grateful for there being more sustainable options available. “I’m sick of throwing things away,” she says. 

She’s also impressed at the progress some employers and organisations have made in catering to those with periods. “I really love how so many workplaces, events and schools have free products available now, because the cost of it all still annoys me every single month.” 

Another area where Claire has seen massive strides is around pre-colonial attitudes to menstruation. “There’s much more understanding now of pre-European culture around periods and it’s just great to have that more widely understood,” she says. “And maybe it’s because I’m peri-menopausal now, but I feel really comfortable talking about how much periods can change [over a lifetime].” 

Born in 2010: ‘I’m really happy that period undies are an option now’

Robyn and Ina are 14 year-old best friends from Auckland and were more than happy to chat about their (much more recent) period memories. “The first time anyone talked about it was in year six, when there was blood all over the bathroom because of someone’s period,” says Robyn. “Then I got a book from my parents about how it makes you become a woman and stuff. 

“I was excited,” she recalls. “But then I was also nervous because you get it every month for a week and it seemed like a big commitment.” 

Ina had seen YouTube videos of parents talking to their kids about periods, so also knew what she was in for. At intermediate school, they both recall getting period packs in class that had tampons and pads and brochures in them. “The boys were jealous because they thought they were pencil cases,” laughs Ina. “And then they were like ‘oh no we don’t want that’.” 

Robyn’s first period came during the 2020 lockdown, when she was on Zoom with her friends playing Roblox. “At first I saw the blood and it was just this whole moment of panic – oh no, my first period, this is like the end of the world – but then I just grabbed a pad, stuck it on, and went back to playing Roblox with my friends again.”

After being scared of getting her period for many years, Ina got hers in the summer holidays before starting year eight. “I was just so paranoid about it, so when it happened I didn’t know how to react, I was just crying so much,” she says. “But then my mum taught me how to use a pad and everything, and then we ate a charcuterie board.” 

While both girls aren’t quite yelling about their periods in class just yet, they both agree that periods have become pretty normalised in everyday life. Their school has free products in every bathroom, and both of them have used washable period underwear. “I’m also really happy that period undies are an option now, because it’s so much easier [than disposables],” says Ina.  

Another huge change is the role of social media in normalising the conversation. “Period stuff always comes up on Instagram Reels and TikTok,” says Ina, who often sees ads for period products like cotton tampons, washable pads and menstrual cups and as well as funny sketches, clips from movies and tips and tricks from “girls helping girls” get through their first periods. “It’s just a big thing so everyone has to learn about it,” she says. 

“It’s just so easy for us to talk about it now.”