OPINION
Never in New Zealand politics has so much been borrowed by so many for so few.
Grant Robertson’s sixth Budget revealed that net debt will be $21 billion or 31 per cent higher by 2027 than he said as recently as December.
The big election-year spend-up is about Chris Hipkins regaining just 35,000 or so median voters from Christopher Luxon. According to the Herald’s poll of polls, that’s how few votes Hipkins needs to win back from National in order for Labour and the Greens to govern for three more years without needing Te Pāti Māori (TPM).
Labour doesn’t want to win back the 35,000 just on the day, but immediately. The Beehive needs the polls to turn just that tiny bit more so that National and Act can no longer credibly campaign against the Labour-Green-TPM “Coalition of Chaos”.
The 35,000 median voters in Labour’s immediate sights are in their late 30s or early 40s and live mostly in West Auckland, Hamilton or provincial cities. They’re heterosexual, Pākehā and married with two young kids.
They paid off their student loans years ago after Helen Clark made them interest-free.
While they rewarded Clark with their votes in 2002 and 2005, they switched to John Key and Bill English for four elections, and then back to Labour for 2020.
Today, they own their own home with a loan-to-value ratio of around 50 per cent. They are worried about a big chunk coming off a fixed rate around the time of the election.
They service the mortgage and pay the bills with two or three jobs that, combined, bring in just under $150,000 before tax. Pretty much all their income is taxed at 30 per cent or less.
Neither the 33 nor 39 per cent upper rates matter to them. They’d like a tax cut but they also think the so-called rich should pay more.
Robertson couldn’t have targeted them better.
Had they been asked yesterday morning who they planned to vote for on October 14, they’d have said National. Robertson’s announcements of cheaper early-childhood education, free public transport for primary school kids and getting rid of prescription charges is meant to make them change their minds. If yesterday doesn’t work, Robertson has put $5 billion aside to up his offer progressively in the lead-up to early voting starting on October 2.
Luxon desperately needs the 35,000 to stick with him.
Like Hipkins, that’s not just because he needs their votes in October, but so the polls remain in good enough shape to support his “Coalition of Chaos” line. If it looks like Labour and the Greens could govern without TPM, then it’s just the status quo against an unliked National leader and a resurgent, ambitious and thus scary Act.
National’s strategy has largely been to hope the economy gets worse between now and October and then to promise a brighter future.
It has always been a bit dubious. Since last year, polling has shown voters are even more worried about the future than the prevailing economic numbers would seem to justify, indicating a further downturn is already priced into the polls.
The risk for National is that while Treasury’s economic forecasts yesterday were still bad, they are less bad than when last updated in December. Back then, Treasury thought the economy would contract by 0.3 per cent in 2023/24. Now it thinks — and Treasury Secretary Caralee McLiesh has signed her name to it — that the economy will actually grow by 1 per cent next year, and then by an average of 2.7 per cent in the following three years. This is pretty pathetic, but not catastrophic.
Robertson and McLiesh have also put their names to forecasts indicating inflation has already peaked and will be down as low as 3.3 per cent in 2023/24 and within the 0-3 per cent band thereafter.
Unemployment will rise from the current 3.7 per cent to just 5 per cent by the middle of next year. That is not high enough to start worrying the median voter.
On the downside, house prices are now expected to fall by even more, while interest rates will be a smidgen higher next year than expected.
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The current account balance remains appalling right through the forecast period, but it seldom becomes a political problem. Despite our ongoing failure to pay our way, the Kiwi dollar is picked to remain stable over the next four years. Trips to Australia, cars and household gadgets should remain fairly affordable to the median voter.
There is plenty for National to attack, beyond the further debt explosion and ongoing balance of payments disaster. There are no tax cuts for anyone. Cuts to the bloated Wellington bureaucracy are derisory. Questions can continue to be raised about government profligacy, with 300 new classrooms apparently set to cost an inexplicable $1 million each.
But National also knows this risks sounding like nit-picking. Moreover, with Robertson now committed to raising net debt to 22 per cent of GDP next year — or 43 per cent under the old “net core Crown debt” measure National prefers — it has no room for spending promises of its own, or for the income-tax threshold adjustments it has been talking about, unless it wants to be open to charges of cuts.
Promising even a decent butchering of Wellington bureaucrats and their consultant friends would ultimately just be a drop in the ocean. Another well-trodden path by oppositions is to promise, as part of the “brighter future”, to deliver higher GDP growth than the Government-of-the-day forecasts.
Such rhetorical moves have sometimes papered over fiscal holes, but National must expect greater than usual scrutiny of its numbers after its 2020 accounting fiasco.
If it wants to play the higher-GDP card, National will also need to release a plausible microeconomic reform programme, which risks being either presentationally inadequate or unpopular with vested interests. None yet seems on the cards, except for sloganeering like promising to abolish two regulations for every new one it proposes and mailing out taxpayer receipts, apparently with the help of artificial intelligence.
What looked like an unlosable election for National before Christmas is slipping away from them. If National wants to combat yesterday’s play by Robertson — let alone the $5b in further handouts he has stashed away — the only obvious option left is to seriously outline how it would reverse New Zealand’s decades-long decline, as Erica Stanford did with her education policy back in March.
There’s not much time left — either before the election or before second-world status becomes irreversible.
- Matthew Hooton has previously worked for the National and Act parties, and the Mayor of Auckland.
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