The supply disruptions are unlikely to have a major impact on overall economic growth. Some increase in construction cost inflation is likely as this is already running at 7.9 percent in Auckland and 6.3 percent nationally due to capacity bottlenecks within the sector. Increases in freight costs are also expected.
At this stage these developments do not cause us to change our view on the direction of monetary policy as outlined in the November MPS. We expect monetary policy to continue to be accommodative, and that the projected policy settings will help generate sufficient growth to have inflation settle near the middle of the target range. 5.