Inflation is showing little sign of slowing down, posing a problem for freshly minted PM Chris Hipkins.
According to that old campaigner Richard Prebble, Hipkins should call a snap election. If he waits till October, he risks being swept away.
The dilemma for the new leader is that fighting an election while inflation is raging is no fun at all. It underlines the extent of Labour’s failure to implement successful economic policies.
Statistics NZ reported the CPI rose 7.2% in the latest quarter. It follows months of high inflation where prices frequently rose faster than at any time since the early 1990s.
Housing and household utilities were the biggest contributors to the December 2022 annual inflation rate.That was due to rising prices for both constructing and renting housing.
“Higher prices for ready-to-eat food, vegetables, and meat and poultry drove the overall increase in food prices,” Stats NZ said.
Transport was the next largest contributor, driven by rising prices for both international and domestic air fares.
Pundits had predicted inflation would be below the 7.5% reading the Reserve Bank forecast in November. But they weren’t all convinced that would be enough to persuade the central bank to ease aggressive official cash rate (OCR) hikes.
Against the background of high inflation, it may seem odd that Prebble would advise Hipkins to call a snap election. But as Prebble says, earlier Labour leaders who stepped in like Bill Rowling, Geoffrey Palmer and Mike Moore were defeated when they served out the terms of their respective predecessors.
Prebble contends the reason Hipkins has to go early is because he does not have a mandate to change policies.
“If he has solutions for crime, the cost of living, the failing health system and the unworkability of co-governance he needs to set them out and then seek a mandate for this new direction”.
Prebble says National would be wise not to underestimate Hipkins.
“He is a proven campaigner. He has massively increased his majority. He knows how to portray himself as an ordinary Kiwi. ‘It’s a big day for a boy from the Hutt.’ But also, Hipkins is Mallard-trained and he has a ruthless streak”.
Prebble notes Hipkins was a vigorous minister in charge of the Covid response
“… but with a bit more thought he would have been a better minister. We lost our place in the vaccine queue, MIQ was a lottery, the over 100 days of the Auckland lockdown was too long and mandatory mandates shattered the team of five million.”
Finally, Prebble says reappointing Grant Robertson was politically necessary but makes calling a snap election a necessity.
“Labour will continue to borrow and spend so putting upward pressure on inflation. The Reserve Bank will continue to aggressively raise interest rates. It is 7 per cent plus mortgages that are the greatest threat to Labour’s re-election.”