A major surge in New Zealand's economy defies the merchants of doom. Video / NZ Herald
OPINION:
The Taxpayers' Union poll last week, along with the Talbot poll, continued to paint the picture we have seen pretty much all year.
Since the last election, the Labour Party has crashed while National and Act have picked it up and are broadly on target to form the nextgovernment.
So the question for Labour is: what can we do to change that between now and about next July, when opinions will have been formed as to how we will vote.
A small ray of hope turned up in the form of the GDP number - at 1.7 per cent economic growth over the latest quarter it was a lot better than most (including me) had expected.
Could our economy defy expectations? Could the economy save the Government given the critical role that economies play when it comes to voters' moods?
Answer, no.
Although much was made of the fact we escaped a technical recession, the reality is, if you add the two numbers so far this year together (ie quarters 1 and 2) we are barely above water.
No one, not even the Government, is arguing the economy is going well.
Making it worse are the numerous forecasts for 1) a recession into next year both global and quite possibly local, and 2) a mood that has been created by the Government over non-economic polices, ideological ideas that many New Zealanders can't and won't stomach: Three Waters, co-governance, centralisation of education and health.
The simple truth around the economy is that the day of reckoning is coming.
First, we must accept now that the bulk of the inflationary trouble we have is locally produced.
The global food price index, for example, has been dropping for months, while the price of oil is well down on what it was. In fact it's below where it was before the war.
The irony of that being that it's dropped because of the slow down in demand.
FedEx last week announced a drop in their business, announced staff lay offs and said a worldwide recession is coming. FedEx is at the cutting edge of the global purchasing and shipping of stuff.
There is enough evidence that we are currently living in a fool's paradise.
The mistake we are making is that we are handing out pay rises to anyone who asks and we are doing that because there is no labour.
Fedex last week announced a drop in their business, announced staff lay offs and said a worldwide recession is coming.
As much as we might like getting more money, the pay rise isn't real, because the increases in sales production and productivity aren't there.
So someone is paying artificially to stop you walking out the door, eventually the bill for that falsity will come due, and that's when people start getting laid off.
Salespeople have seen incomes rise on average 30 per cent, many other sectors are well into the 20s, even the toilet paper makers last week got inflation-adjusted increases plus lump sums ... and with all due respect they make only toilet paper and they're not making anymore of it.
So the cost of toilet paper either goes up, which is inflationary, or eventually jobs will go.
If you want proof, watch the Reserve Bank: the cash rate is currently 3 per cent, they have two more announcements before the end of the year, both will be 50 basis points, that takes the rate to 4 per cent. They have said it won't go higher than 4.1 per cent.
So we are expected to believe that by the end of the year and early next, inflation is under control, and coming down towards that sweet spot of 2 per cent.
And they are doing that by opening the new year with a rise of 0.1 per cent? Who believes that?
As of this week, not the ANZ, who now suggest it will be 4.75 per cent.
So as we enter the new year, election year, the pay rises that have cushioned us will be coming home to bite, all that mortgage money at 2 per cent will have been rewritten at well over 6 per cent possibly into the 7s, people's spending will match their mood.
Jobs will start to be lost.
Our exports and the falling dollar have and will continue to help, but if the world is in trouble, they are not buying as much of what we sell.
In really simple terms, central banks have blown it.
They misjudged inflation, we've been greedy and thought pay rises would stave off reality, we've gone to the pub, bought a car, gone overseas and seen GDP pop 1.7 per cent.
The Government has blown its budget and more, there is no more money, no more hand outs, no more invented cushioning.
They will have to win the election by telling us Three Waters is a good idea and that the recession we will then be in is not their fault.
