Hipkins shows his quality as PM in securing a bounce for Labour, but now comes the hard part

Chris  Hipkins has surprised even  some of his  closest  friends  and  backers with the  bounce he has  secured  for Labour  in  public polls  since  he  became Prime Minister. He  has  been put to the test since  he  took  over  from Jacinda  Ardern  in the  top job, and has  shown a  quality that  was  well hidden in  his  previous  portfolios.

It’s  not  just the long  hours  he is  putting into  the  job, but  projecting the human touch  to those  hard hit by Cyclone Gabrielle, or the other disasters of recent weeks as well. Then this week he  was steering the  government in decisions which, as  he  said, will  enable pensioners to start seeing a bit extra in their bank accounts from next month.

For couples over 65, their superannuation payments will now be higher by an extra $102.84 per fortnight between them, while single people living alone will receive an extra $66.86 each payment.

Hipkins  said the package of “bread and butter support” would help people who were “really feeling the bite from the rise in the cost of living”.

The changes also mean boosts for those on other benefits, with working-age people on a main benefit set to get $19.81 and $46.20 more per pay depending on the type of benefit and whether they are single or a couple.

Does  this  mean about 1.4 million New Zealanders will not go backwards, as one newspaper suggested?

Possibly, but  that may depend on  whether Hipkins  can complete the formidable  task of  bringing  inflation under control.

That  won’t  be  easy. Food  prices have risen 12% over the  past  year,  and  some economists are expecting  quarterly rises  to continue at 4%. Food  prices  in February were running at 2.1%.

What makes  the task harder  for  the  authorities  is  that as  the  government pumps spending  power  into the economy, the Reserve Bank  is  trying to squeeze it out in order to bring inflation under control.

New Zealanders  will once  again  have almost  certainly  to  learn there  are  no quick fixes.

After  all, they had to  learn the hard way the  lessons from economic stimulus during Covid as  a result  of extra government spending and monetary policy being even greater as a proportion of the economy than elsewhere. The restrictions on the border were more disruptive to the labour market than in other countries, and the desire to crank nominal wages for political reasons more intense.Since this government came into office, the minimum wage has risen by a  massive 44%.

Ministers also lifted the effective minimum wage for migrants much higher, and both flowed through to increased labour costs. NZ was in a pro-inflationary environment ahead of the rest of the world.

Now, on one side Hipkins  seems  to be  seeking  to  sustain  spending  power  (at least through to October),  and  on the other, to get inflation  under  control.

Some might  say  it  is  an impossible  task.  This generation of  New Zealanders  might have  to  learn the  hard way what the answer is.