Inflation is expected to have gone over 5% for the first time in 18 years when figures for the September quarter are released tomorrow morning.
Westpac chief economist Brendan O'Donovan said that for an 18-year-old, that would be something they had never experienced before.
But there was relief on the way as inflation was tipped to fall later this year.
"Inflation concerns are receding rapidly, despite our expectation that New Zealand will print its first above 5% inflation rate in 18 years."
Retreating petrol prices would see headline inflation peel back in the next 12 months.
Also, a worsening economic outlook as the international credit crunch bites would see previous capacity constraints relax.
The Reserve Bank would remain focused on financial and economic stability in coming months with inflation taking a back seat, Mr O'Donovan said.
ASB chief economist Nick Tuffley said yesterday that normally an inflation outcome around 5% would set off a number of warning sirens with the Reserve Bank but the central bank need not worry about the high inflation rate.
The global economic environment and commodity prices were set to be substantially weaker than looked the case two months ago.
A large cut in the official cash rate was due on Thursday with the minimum being 0.25%.
That would take the cash rate to 6.75%.
"Market pricing will ultimately heavily influence the decision and is currently leaning to a 1% cut.
"If that pricing remains in place early next week, then the Reserve Bank is unlikely to disappoint," he said.
Key drivers behind the soaring Consumer Price Index (CPI) - the official measure of inflation - included: food prices lifting 3.6%; higher public transport fares and international and domestic airfares; petrol prices peaking; housing related costs driven by the usual increase in local authority rate rises and rising energy costs; the annual rise in alcohol prices.
The large increase in food and petrol prices would drive a 2% increase in tradeable prices, while non-tradeable prices were expected to rise 1.3%.
The third quarter consumer price index would be the first release following the overhaul of the index, Mr O'Donovan said.
Beyond the immediate changes, the re-weighting would see inflation lower than it would have been under the old measures.
With the housing boom over, the effects of the housing slump would now have a larger influence on lowering the index than under the old measure.
The same applied to the increased weight on petrol.
"That said, the influence of the revamp on the inflation outlook appears trivial compared to the radically changing economic outlook and its likely influence on actual prices."
