Much excitement as Hipkins gets down to business – but can he defeat inflation with his devotion to “bread-and-butter” issues?

A  new Prime Minister, a revitalised Cabinet, and possibly  revised priorities – but is the political and, importantly, economic landscape  much different?

Certainly  some within the news  media  were excited by the changes which Chris Hipkins announced yesterday or – before the announcement – by the prospect of changes in Cabinet personnel and priorities.  

The NZ Herald, for example, headlined a report: “Chris Hipkins’ and Labour’s popularity soars in new polls”.

Readers  of the text of that article  would have found that while Labour had bounced up five or so points, Labour plus the Greens were still trailing National and ACT.

The following day, the same newspaper  over another  report   had the headline “Snap election: Is it Hipkins’ wisest option?”

But  with inflation running  at 7.2%, and  showing little sign yet of slowing down, it  makes  little  political  sense  to fight  an election on cost-of-living issues.

Meanwhile  Luke Malpass, Stuff’s Political Editor, was  telling his  readers:

“The first Chris Hipkins cabinet is a game of two halves. The top team – Hipkins
kitchen cabinet – is basically made up of the same familiar faces we have seen
in the Government for years, sans Jacinda Ardern.

“The top five are Chris Hipkins, Grant Robertson, Carmel Sepuloni, Kelvin Davis and Megan Woods.

“It is also a story of new faces and a revamped outer ministry – some in areas that will get significant air time over the coming months.

“The biggest bolters into ministry positions are, like Hipkins, Wellington-based. MP for Mana Barbara Edmonds comes in as Minister for Internal Affairs and Minister for Pacific Peoples, while Ginny Andersen MP for Hutt will get Minister for the Digital Economy and Communications, as well as Minister for  Seniors, and Minister for Small Business”.

Columnist Simon Wilson in the NZ Herald writes that  progressive tax reform  would be   the  most “bread-and-butter” thing  Hipkins  could do.   Wilson suggests the new PM could  announce he will lower  tax on middle and low-income earners, paid for by higher taxes on the wealthy.  

Other  ideas  from  Wilson  include promises of  free dental care and  “a lot more” affordable homes.

 The last, though, might only remind voters  of the Ardern government’s most abject failure. 

While  the political  pundits are  excited  by Hipkins and his Cabinet changes, the  hard political truth is the Reserve Bank  will almost certainly  be raising  the Official Cash Rate  again later this  month as it seeks to squeeze  inflation out of the system.  This means  the  economy  could fall into  recession which,  even  if it is  relatively short in duration, nevertheless will  be painful.

As Richard Prebble argues, the reason governments should never let inflation get to 7.2% is because there is no painless way to reduce entrenched  inflation…

“There is nothing  Hipkins can do about the ‘poverty effect’  (from falling house
prices). Those with mortgages  will have a double-whammy: higher mortgage
costs and a house that has lost value.”  

So,  New Zealanders awaiting  the results of  Hipkins’ focus  on bread-and-butter issues  for relief from  the  economic pain of  high inflation will have to be extremely patient. 

The  excitement of recent political changes  may soon dissipate.