Editorial: Economic good news may be too late for Labour

For many New Zealanders, the recent run of positive data will feel disconnected from the everyday reality of the economy.

Editorial

OPINION

In a tight political race, the recent flow of economic data ought be providing fair winds for the incumbent Government.

Food price inflation, the current account deficit and yesterday’s GDP data have all landed favourably in the last few weeks.

None of this last round of pre-election numbers looks particularly flash in isolation, but they were ‘better than expected’ and paint a picture of an economy that is starting to heal after the pandemic shock.

GDP data shows the economy is not in recession and, after some revisions, technically never was.

A current account deficit still running at 7.5 per cent of GDP is hardly cause for celebration. But the direction of travel - down from a peak of 8.8 per cent in the March quarter - should be comforting to those worrying about credit ratings downgrades and a return to the bad old days of the 1970s and early ‘80s.

Food price inflation is still high but trending in the right direction, and also points to there being better times ahead for consumers as the cost of living crisis starts to slowly ease.

Food prices increased 8.9 per cent in the 12 months ended August 2023, compared to a 9.6 per cent rise in the year to July and an eye-watering peak of 12.5 per cent in the year to June.

We don’t get new top-line Consumer Price Index inflation until Monday, October 17 (a post-election weekend treat for whoever ends up holding the reins of power).

Forecasts are for an inflation rate dipping closer to 5 per cent. Better, although not yet good enough to call time on the cost of living crisis.

Even as the pace of inflation slows to a more normal level, the annual rate is still running well above the RBNZ target of 1-3 per cent. Meanwhile, the cure - high interest rates have started to bite and most mortgage holders are now grappling with them.

On top of that, we have GDP strength pointing to another OCR hike and more mortgage rate pain.

And economists still believe a real recession is coming later this year - meaning higher unemployment and more job insecurity coming our way as employers look to cut costs.

This all adds up to a triple whammy of negatives weighing on voters as waves of the turning economic tide overlap.

For many New Zealanders, the recent run of positive data will feel disconnected from the everyday reality of the economy.

Better times may well be just around the corner, but that is a tough story to sell if you are the incumbent Government.

For a government to hold power in these conditions requires rock-solid team performance and the retention of a high degree of voter trust.

Unfortunately for Labour, the polls suggest they have fallen well short of that mark so far, and time is running out.

National is unlikely to be rattled by the latest run of Stats NZ releases, regardless of how much they have surprised on the upside.