Key said labour-market mobility, capital and productivity loomed as ongoing issues needing to be properly addressed in the battle against inflation - even if moves are initially unpopular.
“I think in the end, if you want to resolve these issues, you ultimately need to unblock the choke points,” he said.
“I think you've got to do the things that aren't very sexy, in terms of an announcement when you're a prime minister or a politician, but actually long term put the economy on a footing where it actually can give you real and productive growth.
“It's a little different to the sugar hit of just throwing money at people.”
New Zealand in particular still had a way to go before rising rates began to chip away at inflation, Key said.
“Unlike Australia, where [the style of home loans are] 80 per cent floating and 20 per cent fixed… in New Zealand they are 80 per cent fixed and 20 per cent floating,” he said. “It takes a long way to flow through.”
He said NZ’s tight labour market, with wages increasing, was an important factor limiting the effectiveness of any monetary policy.
“Wage rounds are going through and if we look at source income, what we see is that, for ANZ customers, their source income has risen about 5.5 per cent in the last 12 months,” Key said.
“At one level they're going to face these increases - and it's obviously not just interest costs, it's energy and it's everything (including) the cost of a latte. But they’ve also got pay rounds that are mirroring that.”