The Government says it's fixing the cost of living, so what happens if voters don't believe it?

NZ Herald

2 days ago

It was clearly designed to assuage fears, fanned by the Opposition, that the Government had put the entire Crown infrastructure build on ice, leading to the mass exodus of construction labour to Australia.
The tactic isn't an unfair one. All Governments indulge in the vice of reannouncing things to focus attention on them. A billion or so dollars spent on a road earns the Government a few hundred bites of the PR cherry, or so the political arithmetic goes.
So no, the tactic wasn't unfair or even ridiculous - but nor was Labour's criticism that a fair whack of the projects were funded by the last Government. (Infrastructure Minister Chris Bishop's riposte that Labour might have funded some of the projects, but it certainly didn't do a good job of delivering them, was equally true.)
This early success evaporated on Monday, when Luxon held one of the most bizarre press conferences since taking office. Alongside Finance Minister Nicola Willis, he spoke for more than 10 minutes to mark the first anniversary of the Government's tax package coming into effect. He listed every other cost-of-living policy the Government had implemented since taking office.
Finance Minister Nicola Willis and Trade Minister Todd McClay spoke about US tariffs yesterday. Photo / Mark Mitchell
Again, there's nothing inherently wrong with reannouncing something old. Former Prime Minister Jacinda Ardern liked to mark anniversaries too. Some years, she'd put out a press release celebrating the fact that superannuation payments were increasing in line with wages - despite the fact that this annual increase is written into primary legislation.
But Monday's announcement, coming as voters' economic sentiment bounces along the bottom and the country seems on the verge of rioting over the butter price, seemed vacuous.
There was something ever so faintly Soviet about a Government thinking that, simply by telling voters it had a policy to fix their problems, they'd believe those problems were being fixed.
There are two obvious pathways for how the next few months might pan out.
The Government is clinging to several good forward economic indicators: business confidence surveys report okay-ish vibes from firms and suggest something of a recovery next year; the primary sector, far from being the villain of the butter crisis, is driving an export-led recovery in the regions; the Reserve Bank is likely to continue cutting interest rates, spurring investment and growth in 2026, giving Luxon an economic tailwind of good vibes and rising house prices in election year.
The snow will soon melt, the ground will thaw, and New Zealanders may spend their summer holidays contemplating having endured the worst of it. Luxon and his colleagues may return to work in January, set the election date and wonder what on earth they were so worried about in winter.
That's one scenario, sure.
There's another. For every positive data point, there is an equally negative one. The Reserve Bank's GDP tracker suggests what every New Zealander feels in their bones: the economy has been shrinking, and could shrink further. A small recession, measured by the glib but powerful two-negative-quarters definition, could be on the cards. The most recent ANZ business confidence survey showed residential construction intentions tanking, to use the words of the bank's economists.
If things continue to follow that negative trajectory, another scenario opens up: one of panic, as the once-distant prospect of a first-term defeat becomes more plausible.
If the economy continues to worsen, and National's polling materialises into gloomy party vote numbers, don't entirely rule out a leadership change.
A change is not 'on' - you'd be a fool to put money on it — but you'd also be a fool to bet against it. There's no real affection for Luxon in the caucus room, and National has little patience for underperformance, particularly from its leaders.
Luxon's intense self-belief could count against him. He does not seem to observe that, of all his frontbenchers, he is the one who is struggling the most.
Despite the whole Cabinet fighting fires on every front, National's ministers do a decent job of rebuffing their Labour opposite numbers during Question Time.
Health Minister Simeon Brown has come under the most pressure, but has so far survived in the House. Chris Bishop seems unbothered by Kieran McAnulty and seemed to be enjoying himself on Thursday when he answered finance questions on behalf of Willis, who was away (the caucus enjoyed it too). Willis herself never breaks a sweat debating her opposite number, Barbara Edmonds.
FBI director Kash Patel visited Wellington to open a new office. Photo / Ola Thorsen
Luxon is the most challenged of the lot and was devoured, degustation-style, by Chris Hipkins in the debating chamber this week. Hipkins, who can excel in the House when he wants to, wasn't even trying a particularly sophisticated line of questioning.
He resorted to a past Luxon tactic of using each supplementary question to list another case of something going terribly wrong in the economy - migration to Australia, construction jobs, board director remuneration - and then asking the Prime Minister what he thinks about it.
Luxon should be able to answer questions like that easily, but could not. His belief in the power of political marketing is so fundamental that he undervalues the importance of backing up that marketing with substance; even more than most prime ministers, he's too quick to answer every question with a canned line and not quick enough to respond by substantively dismantling the question and defending himself.
He seems to think this doesn't matter. He's disdainful of Question Time, or of anything that happens in Wellington. But it does matter - and you could tell from the ashen faces behind Luxon as he answered Hipkins' questions that the backbench is worried.
If the economy doesn't turn around meaningfully, there's a chance the Government could be in serious trouble, however scary they think a Labour-Green-Te Pāti Māori Government might be.
Slumps such as this one are difficult for centre-right governments. They're instinctively anti-intervention. When the public demands 'something must be done', centre-left governments have no shortage of ideas for that 'something'.
The National benches regularly look despondent during Question Time - as pictured here in March. Photo / Mark Mitchell
For the right, recovery comes from automatic stabilisers like benefits doing their job, before the fiscal part of the Government gets out of the way of the monetary side, allowing the reduction of interest rates to encourage firms to borrow and invest.
It's a less politically attractive recovery because it involves substantially less ribbon-cutting, but that doesn't make it any less sensible a strategy. Ultimately, however much a government tries to pump-prime an economy back to life with fiscal policy, eventually private firms will need to pick up some slack too - and that means low interest rates.
Luxon, to his credit, has been explicitly articulating this as his vision for the economic recovery. Last month, he successfully rebuffed one of Hipkins' questions, noting that the construction sector was 'hit hard because of high interest rates. High interest rates happened because Government spending was out of control, and you let inflation get out of control'. Not bad.
Grim economic times will always be tough for a government, but they needn't be as tough as these. Back in 2012, net migration to Australia was even higher than it is now and the unemployment rate, in September of that year, was higher than at any point in the past 25 years.
Yet that economic malaise failed to find its way into politics. National's party vote polling peaked at 48.8% in October 2012, rising - strangely - in tandem with the unemployment rate. Prime Minister John Key's popularity was unassailable.
A government can be popular when an economy is under strain. But that appears to require the public to have faith that the government has a plan to make things better.
Voters don't have that faith currently and, after this week, who could blame them?