Framing an election-winning budget a priority for Hipkins-led team — but will inflation erode any benefit before it arrives?

Incoming Prime Minister Chris Hipkins has already indicated he intends making the tax system “fairer”.  That points  to the route a government facing an election could take to tilt the odds towards winning  in its favour, given Labour’s support in the  last  months  of the Ardern era had been drifting downwards.

Appearing on AM on Monday, Hipkins said he will focus on bread-and-butter issues, like the cost of living, in his new role. 

He also hinted that tax changes could be on the cards, saying “we should always look at how we can make the tax system fairer”.

Yes, the PM did have something to say in Napier – NZ will go to the polls on 14 October (without her leading Labour’s campaign)

Buzz from the Beehive

Hard on the heels of our Buzz from the Beehive earlier today, the PM has made two announcements – the 2023 general election will be held on Saturday 14 October and she will not be campaigning to win a third term as Prime Minister.   She will be stepping down as Prime Minister and Leader of the Labour Party.

Her resignation will take effect on the appointment of a new Prime Minister.

It turns out we were remarkably prescient with the headline on our earlier post: If you are looking for the PM, try Napier – and for good measure she might have something to say.

She did have something to say – something much more momentous than (fair to say) your Point of Order team had expected.

Our earlier post noted that Jacinda Ardern had posted nothing on the Beehive website in the first 18 days of 2023 (but nor had most of her colleagues).

Looking ahead to voters opting for a progressive government, a reactionary one – or maybe something in between

Cabinet ministers  obviously are enjoying   the  final days  of  their summer  break while  their desks back in Wellington are piled  high with the problems of  a  country beset with raging inflation, labour shortages and a  pandemic  that refuses to go  away.

Prime Minister Jacinda Ardern has had  her  own set of  issues to ponder, not least  a  reshuffle  of  Cabinet and, along  with her deputy Grant Robertson, the challenge of  shaping the political agenda  for  a general election, possibly in October  but  more likely in November.

This, of  course,  is  going  to  be a  very different election from that in  2020,  when the  nation  was still afflicted  by the trauma of Covid and  Ardern  had  acquired  the  aura of  saviour.   NZ had not been afflicted  with  anything  like Covid  since the Great Flu of 1918.

Prime Minister shines again on South-east Asian tour: her deputy not so much at home

Prime Minister Jacinda Ardern has been snaring the headlines again on her mission in South-east Asia, celebrating the signing of an upgraded free trade agreement with ASEAN, condemning  the regime in Myanmar, and having a 10-minute conversation with US president Joe Biden.

Then there were the formal  meetings of the East Asia Summit in Cambodia. Now  she is seeking to lift trade with Vietnam. Still to come is the APEC forum meeting  in Cambodia, where possibly she will have  a  head-to-head with China’s President Xi Jinping.

She  does this so well that  some  of  her  countrymen  back  home  think she  should do it permanently.

But would those same countrymen accept deputy Prime Minister Grant Robertson in the  role of Prime Minister?

Not judging by the criticis  he has been attracting while  she has been away.As Sports Minister Robertson  could  share the glow of the Black Ferns’ triumph. As Finance Minister,the report card was less favourable.

In his Saturday column in the NZ Herald Steven Joyce was particularly severe, contending that the failure to let the central bank focus on stability risks its independence.  

The headline neatly encapsulated the Joyce criticism: “Robertson sticking an Orr in on RBNZ’s role”.

Joyce argues the reappointmentof Adrian Orr as governor of the Reserve Bank by Robertson for a second term of 5 years is “troubling”.

“Because of the bank’s importance and independence, the appointment of the governor is supposed to be a non-partisan decision that both sides of politics can live with. For whatever reason, it is clear that for the opposition parties and many independent commentators that is not currently the case.

“A sensible finance minister concerned for the independence of the institution would have either appointed a new governor or reappointed the current one for a shorter term.

“I should stress the criticism is directed at Robertson. It is Robertson who appointed Orr  and the buck stops with him on  Orr’s reappointment”.

Business journalist Bernard Hickey told Radio NZ’s Morning Report that as an independent, inflation-targeting central bank, RBNZ had missed its target and the public were right to want some accountability.

He said while it had responded to the pandemic in a similar way to other central banks around the world, the various things it had implemented in addition to its remit of setting the official cash rate (OCR) had caused a “perfect storm”.

Hickey points out:

“The Opposition is now saying Adrian Orr is not just a purely independent apolitical person, he did so many things in concert with Grant Robertson, so many joint memorandums of understanding, joint letters, that he crossed the line.”

Claire Trevett, political editor of the NZ Herald,noted in her Saturday column that the cost of living is rated the top  issue for voters,with the economy ranking second.

She says polling  shows on the  issue of which party is  considered best at managing the economy, almost twice as many people believe National is best  at 47% to Labour’s 24%.

Hardly a  feather in Robertson’s cap.  

Trevett reckons the bluntest lesson—or solution—for Labour came in the Reid Research poll,in which an overwhelming 85% of people supported a  tax-free income threshold

“Labour has not ruled out some tax cuts in its 2023 policy, and Ardern’s observation that a tax-free threshold did at least deliver the same to  those on low incomes the same as high may or may not be a hint about what it is looking at.

“It may be Labour’s only  hope”, says Trevett.

So, with an election budget still to come, Robertson back at his desk may be telling himself “Don’t count me out yet”

Finance Minister back to his old ebullient self — but what’s happened to NZ’s economy?

Finance Minister Grant Robertson confirmed in Parliament this week he is  back to his old ebullient self and exuded good cheer when questioned on the state of the NZ economy, though he  did note, almost as an afterthought, forecasts for the global economy are being revised downward, and this will affect NZ’s prospects.

 How come? You might ask.

He cites ANZ’s economists as saying that NZ’s “extraordinarily strong labour market means households are, on average, starting from a good place when it comes to income growth and job security”. They are forecasting a steady decline in inflation, from a peak in the June quarter and with positive real wage growth improving from here.

This, he  says, will help New Zealanders with cost of living pressures.

Reappointment of Orr as RBNZ Governor Evokes Chorus of Criticism

The Ardern government has reappointed Adrian Orr for a second five-year term as governor of the Reserve Bank of New Zealand.

Finance Minister Grant Robertson said the RBNZ board unanimously recommended his reappointment.

He said the central bank had been going through considerable change during Orr’s first term and his reappointment would make sure the changes were bedded in.

But the reappointment has brought a chorus of criticism from Opposition parties. National’s  deputy leader Nicola Willis says

National is “appalled” by the Finance Minister’s decision to re-appoint  Orr without first completing an independent review of the Bank’s performance.

“In recent years, Adrian Orr as the Chair of the Monetary Policy Committee signed off on an extraordinary programme of money printing and cheap lending that pumped tens of billions of dollars into the economy. That programme directly contributed to house prices rising 28% in one year, inflation rising to a 32-year high, and record bank profits”.

ACT leader David Seymour was equally fierce in his denunciation of the reappointment.

“Despite a term of poor leadership, poor focus and poor outcomes, Adrian Orr has somehow been reappointed for another term as Reserve Bank Governor,” says Seymour.

“In September I sent Finance Minister Grant Robertson an extensive letter outlining the many reasons we can’t afford another term of Adrian Orr in the role.

“He has shown poor leadership throughout his term, punctuated by high staff turnover and a failure to accept any responsibility for these issues”.

However  the  Finance Minister defends  the  reappointment and  says in light of global conditions, it is a time when stability and continuity are paramount for the Bank.

 Robertson says Orr has demonstrated the skills, knowledge and experience to help steer the financial system through the 1-in-100 year economic shock of the pandemic.

“I am happy to endorse the recommendation of the Board. I have full confidence that he will continue to display the same integrity and leadership in performing his duties as Governor in what is still a challenging environment.”

Orr was appointed in 2018 to succeed Graeme Wheeler and his term was set to expire in 2023.

He is a former head of the NZ Super Fund, chief economist at the Reserve Bank, Westpac and National banks, and has worked at the OECD and Treasury.

Orr has overseen the RBNZ expanding its scope, with monetary policy widened to include employment as well as inflation targets, taking climate change into consideration of policy, making banks hold more capital, tougher regulation of banks and insurance companies, and a broader engagement with te ao Māori.

Critics  have  directed  fire  at the RBNZ for its bond buying, and cheap finance for banks as fuelling the hot housing market and current spike in inflation, and the subsequent response of ratcheting up interest rates.

Orr has responded that the RBNZ has taken a “least regrets” approach opting to do run the risk of doing too much rather than too little to support the economy and households.

Critics  also  note that when appearing in front of the Finance and Expenditure Committee last week Orr refused to accept the Reserve Bank had got anything wrong, despite massively overstimulating the economy, causing consumer price inflation, asset price inflation, inequality, and now higher interest rates.

A report on the RBNZ’s handling of monetary policy over the past five years is due out shortly, and the central bank is also consulting on the remits it operates under.

Ardern receives rapturous reception – but was it real?

Political journalists, indulging in a bit of  hyperbole, reported Prime Minister Jacinda Ardern as  being treated to a “rapturous” reception at the Labour Party annual  conference.

It’s clear she does command the  adoration of not  just those delegates, but also of many other New Zealanders in a manner  few of her predecessors who led the Labour Party did.

But this may be blinding her to the stern  reality of the current political  mood,  as she  tells RadioNZ’s Morning Report the latest poll figures should be taken with a “grain of salt”.

The Newshub-Reid Research Poll, released  on Sunday night, showed Labour at 32.3%  support, far below  where it  stood  at the  last election.

How  could it be? Ardern might  have  wondered.

In any case, she insisted to interviewers, Labour’s own polling shows it is  neck-and-neck with National.

 All that is  needed  is a spend-up by Finance Minister Grant Robertson in  next year’s budget to  get  it  across the line.

What about  tax  cuts?

Whoa. 

Robertson says tax cuts would be inflationary.

So, instead, expect a stream of announcements like those which Ardern made herself on Sunday of  increased childcare subsidies.

That  should do  the trick, party  strategists believe.

Yet  New Zealanders  are  realists and  they  understand  that  the inflation unleashed  in the wake  of Covid is  not  going  away  anytime  soon.

Almost  certainly that  is  why National  has  been inching  ahead  of  Labour in the  polls—even  though  Ardern reckons  they  are  “neck-and-neck”.

According to last night’s Newshub-Reid Research poll, National has nearly a third more support than Labour – 41% compared with 32%. As a result, Labour is currently projected to lose about 24 of its MPs at the next election, and be booted out of office just as the  Labour governments  in 1975  and 1990 were.

Ardern says  NZ is roughly 12 months away from the election and the government’s focus is “people, not polls”.

 The policy  she announced on Sunday  would see a change in the childcare subsidy payment from next year – something more than half of all Kiwi families might benefit from.

The change would mean a family with two parents both working 40 hours a week on $26/hour with two children under five who were currently not eligible for childcare assistance, be eligible for $252/week.

But exactly how much each family saves on childcare will depend on how many hours they work, their incomes, how long their children spend in care and the cost of it.

The government expects the changes will mean the parents of about 7400 additional children will receive the payment on average per month.

About $190 million over the next four years will be spent on the policy.

“I know it will make a difference”, and was in direct response to issues voters had been raising, Ardern told Morning Report.

Point of Order  doesn’t see this kind of  policy move shifting, or reversing, the direction   the polls  are moving. What  Labour  can do  now  may only staunch the  bleeding.

 As  Dr Bryce  Edwards puts it: “New Zealand now essentially has two conservative major parties for the public to choose from. Unfortunately for one of them – the Labour Party – the public increasingly prefers the more authentic conservative option, National”.

On his analysis,  the  rapture  at the  Labour Party conference may have been  more  synthetic  than  originally reported.

Who’s to blame for Kiwis’financial pain? Seymour may have the answer

As  inflation hits  levels a  generation of  New Zealanders hasn’t  seen, politicians are thrashing  about,blaming anyone but themselves for the   financial  storm  enveloping   households  and  businesses  alike.

The  official  cash rate has already  risen  from a Covid low of 0.25% to 3.5% and is expected to hit 5% or  higher.

Grant  “look, no hands” Robertson tells  the  Dominion-Post  the  banks’  social licence   requires  them to  support  borrowers “if  times get  tough”. 

Meanwhile  over  in the  NZ  Herald,  the  Greens’ Julie-Anne Genter  says  we need  a  tax  system that prioritises  people  over profit.

Bryce Edwards: The Increasing speculation about Jacinda Ardern quitting

Bryce Edwards writes:

Prime Minister Jacinda Ardern flies to Antarctica today, and her media spin doctors will be hoping for some good photo opportunities to lift the leader’s popularity. But they will be asking a lot.

Tomorrow it will be five years since Ardern was sworn in as Prime Minister. At that time she was incredibly popular, and her support kept rising, hitting its heights in 2020.

That tide has certainly turned in recent months, and there are signs that Ardern is headed for a very difficult time as Prime Minister in the near future. Economic and social factors may get much worse. And the prospect of Labour’s popularity declining further is possible, especially as difficult reforms throw up problems. Re-election in 2023 has never seemed more in doubt.

Unsurprisingly, there has been an upswing in speculation about how long Ardern will stay on as leader and prime minister. The idea of her stepping down before the next election is gaining traction, despite there being no obvious candidate in the Labour Party who could do a better job than her.

Robertson is not too dismayed by CPI data – but they challenge his blaming overseas forces for our rising cost of living

Buzz from the Beehive

We are left wondering whether our hard-working ministers were numbed into inactivity by the latest inflation figures.

The only statement posted since Point of Order last monitored the Beehive website comes from Finance Minister Grant Robertson, who sounded curiously untroubled by the latest consumers’ price index data from Stats NZ.

These are the key facts, according to the official statistics.

For the September 2022 quarter, the:

• quarterly inflation rate was 2.2 per cent
• annual inflation rate was 7.2 per cent