Within a fortnight, Reserve Bank governor Adrian Orr has apparently gone from zero to hero in the National Party’s estimations, courtesy of the utterances around his move to try to stifle inflation by ramming the official cash rate up.
A modern-day monetary Moses, this week Orr had made hissix-weekly descent from the Mount Doom of the Reserve Bank to issue the latest OCR decision and his set of commandments.
The OCR decision was not pretty and the commandments included thou shalt not ask for a pay rise, thou shalt not buy nice Christmas presents for people, thou shalt swap the Christmas turkey for a humble, cheap chicken, thou shalt have a nice staycation.
Orr’s own gift was high mortgage rates and a recession for 2023 - a cruel-to-be-kind present. He wrapped it in an apology, saying the bank’s monetary policy committee was very sorry about the whole state of affairs indeed.
He had a few commandments for the Government as well, and it was those that have delighted National so much.
Just a couple of weeks after baying for Orr’s head when the Government reappointed him, National MPs are now quoting him as the great omniscient one.
There was Nicola Willis asking Finance Minister Grant Robertson about Orr’s comment “we’ve got too much home-grown inflation” and what the Government would do to address its contribution to this home-grown inflation - a snippet that tied nicely into National’s attempts to pin inflation on government spending.
We had both Erica Stanford and Willis quoting Orr’s comment that tighter immigration settings were “a handbrake”, that more labour would be better “and everyone has told the Government that”.
That ties nicely into National’s attacks on immigration settings contributing to worker shortages.
It would be hard to tell which group is filled with most dread by Orr’s bitter medicine: the Government for the impact on mortgage rates as election year looms, retailers for his “have a sensibly spending Christmas” sign-off, or the 80 per cent of mortgage holders who have to refix in the near future.
From the Government’s perspective, Orr is at least now taking some of the heat for something it doesn’t particularly want to wear the blame for itself: The pressure on household pockets from both inflation and the remedy for inflation (the higher interest rates).
People tend to blame the target that is most visible, and this week at least that was Orr.
That will be a temporary reprieve: it will not be long before it centres on the Government again.
Labour is now confronted with an election-year hell – and so are voters.
After hoping inflation would ease by the end of this year, more recently Prime Minister Jacinda Ardern has taken to warning voters that 2023 was shaping up to be a “very tough year”.
Now both National and Labour – and the smaller parties - will have to digest what Orr’s commandments mean for them as that very tough year ahead coincides with an election.
Thus far the debate has been more of the same: Labour accusing National of wanting “austerity” and National accusing Labour of wasteful spending.
It amounts to Labour saying it will spend your money on more worthy things than National, while National says it won’t spend as much of your money, but you won’t notice any difference.
Reserve Bank governor Adrian Orr delivers the bad news this week. Photo / Mark Mitchell
Whenever Robertson is asked about cutting government spending, he immediately reaches for the line that New Zealanders would not thank the Government for cutting “key services”.
He is right - but not everything any Government spends money on is a key service, although its ministers seem to think otherwise.
Robertson did say the Government was looking at its programme to see what might be delayed or scotched (albeit while insisting that the Government’s spending was not the problem anyway).
The next day, Transport Minister Michael Wood insisted his road and rail empire-building plan would not be affected – one of the most expensive areas of government capital spending – again while insisting the Government was going to be judicious with the books.
There is capital to be made here by the smaller parties who can promise the world without any real expectation they will deliver on it. For the larger parties, putting up big-spending policies to try to win that election is not necessarily the election winner it might otherwise have been.
National has already made a token acknowledgement of that, stating that the luxury item in its tax cuts package (repealing the 39c rate on incomes of more than $180,000) was on the chopping board.
The backdown on that policy has been in the works for some time but was presented once the time was right.
That time was when a sacrificial lamb was needed to illustrate that National was the “responsible” manager of money matters, willing to sacrifice its wish list for the sake of the economy.
It carries the side benefit of depriving Labour of something to whack it about the head with: Big tax cuts for the rich while the poor got crumbs was not playing well.
And it does it without actually getting rid of the potential vote-winner policy, its wider tax-cuts plan.
The real ballot-box gain from its tax-cut policies lies in its parallel policy to adjust the other tax thresholds, giving a tax cut to everybody – and that remains intact.
It Is indeed tempting for voters to go the party that says it can make everything all right, even if they don’t necessarily believe it. That is easier for an Opposition party to do.
Meanwhile, Robertson has claimed the Government is already trimming its spending.
The definition of “trimming” is in the eye of the beholder.
Robertson is indeed trimming spending from the bacchanalian feast of the Covid-19 years – but not from the pre-Covid years.
It will drop from 35 per cent of GDP during the Covid years, when the Government chequebook was propping up workers and businesses, to about 31 or 32 per cent of GDP, the same as usual.
Labour’s week had begun relatively well with National Party leader Christopher Luxon once again stumbling over policy positions, this time on clean cars. Then came Wednesday and Adrian Orr. Then came Wednesday night and news of the horrific killing during a dairy robbery in Sandringham, the PM’s own neighbourhood and electorate.
That was just a day after Ardern had pointed to the apparent decline in recent months in ram raids and retail robberies and put Labour back on the back foot on the issue.
It was fighting fires on both the economy and the law and order front at the same time. Both issues decide elections.
One week does not an election loss make. The crime wave may well improve.
The pronouncements from Mount Doom, on the other hand, will not be getting any more cheerful for some time yet.
