The latest Taxpayers’ Union-Curia poll shows Labour climbing to 34.1% (up 2.8 points), overtaking National, which also rose slightly to 33.6% (up 1.7 points).
According to these poll numbers, the parties on the left could form a coalition Government.
Luxon’s own brand has taken a hit. The poll shows Labour leader Chris Hipkins moving ahead of him in the preferred Prime Minister stakes – by 20.7% to 20.3%.
In response, Luxon noted that it was still a “tough time for Kiwis” and he remained entirely focused on fixing the economy.
I think the PM is right to pinpoint the sluggish economic recovery for a lot of the public dissatisfaction
There are other issues – school lunches, the Treaty debate and perhaps even Luxon’s personal style – that may be playing a part.
But history tells us the economy decides elections in the end.
When voters feel things are getting better, they don’t change governments.
The economists tell us we’re in recovery. In fact, we might have been in recovery since about October last year.
GDP data for the fourth quarter of 2024 is due next Thursday. It is expected to show that we are out of recession.
But you have to squint to see the economic growth – which economists are picking will land between 0.3% and 0.5%.
That’s dangerously within the margin of error. Across the economy, it feels like things are flat. Some sectors – such as construction and retail – may still be in recession.
Either way, it is an interminably slow recovery.
Some of the obvious triggers that might have started a real rebound haven’t kicked in as hoped.
Where’s the housing market recovery? Love them or hate them, rising house prices are a big driver of consumer confidence in this country.
The Reserve Band (RBNZ) pared growth expectations back from about 7% to 3% in its last Monetary Policy Statement.
Last week, ASB followed suit, revising its expectations to just 3.4% for this year and 5.1% for 2026.
Economists point to the falling rate of net migration, which at about 32,000 (for the year to January) is the lowest it has been since 2014, if we look through the Covid era of travel bans and closed borders.
Lower interest rates should start to turn the market around, but the process has been slower than expected.
It’s seven months since the first Official Cash Rate (OCR) cut sparked celebration and hopes that the recovery is imminent.
With historically high numbers of Kiwis on shorter-term fixed rates, that ought to translate to money in people’s back pockets.
But the prospect of lower rates to come has tempted many Kiwis on to floating rates. That means they are actually paying more than they might, with the hope of locking in when the cycle hits bottom.
Economists have warned that banks have priced in future cuts and there might not be much further to fall.
So perhaps there will be a big switch coming soon and the benefits of lower rates finally add a bit more stimulus.
But overhanging all of this is a big piece of economic data that needs to turn around before we will really start to feel the warm glow of recovery: the labour market.
Unemployment has been rising for more than a year now. Employment growth has stalled there, the number of job applications is falling and the number of applicants is rising.
The unemployment rate is 5.1% and is expected to rise to a peak of about 5.5% by the middle of the year.
That’s historically low for a recessionary period, but it is flattered by the large number of Kiwis who have left for Australia and further afield to find work.
If not for the brain drain, it would likely be well above 6%.
Regardless, the trend is what matters for wage growth and consumer confidence.
While there is excess labour and rising unemployment, there is lower job mobility – something that accounts for a large chunk of wage growth.
There is also less pressure on employers to lift the wages of existing staff.
Government job cuts have taken an outsize toll on the economy in the past year.
UBS economist Nic Gueson points out that the public sector in New Zealand represents 21% of total employment, compared with about 17% in Australia and just 15% in the US.
Government cost-cutting will remain a significant headwind in the year ahead.
In the absence of fiscal stimulus, the Government needs to help businesses by streamlining regulations, reducing costs and removing risk.
Finally, while the economic data might tell us inflation has been beaten, it doesn’t feel like it.
Inflation is back in the safety zone of the RBNZ target band at about 2.2%.
But telling the public can elicit a very angry response (trust me, I’ve read the Facebook comments).
The cumulative pain of rising prices across the past three years is still very much being felt by many people – and that won’t change until wage growth outpaces the inflation rate for a sustained period.
That’s not going to happen until the labour market tightens – and that’s not happening until consumer confidence returns.
So we find ourselves caught in a trap, as Elvis would say.
Can we get out? Yes, absolutely. But the sluggish economy of the past few months is a reminder of how difficult recessions are to turn around.
There are some fair winds.
Agricultural exports will be delivering several billion dollars' worth of extra earnings into the economy this year.
The low dollar helps them and should also boost tourism.
Meanwhile, Kiwis are technically poorer, so should be importing less and travelling overseas less.
Lower rates of migration should help tighten the labour market soon.
And as long as inflation stays in check, the RBNZ can cut rates further.
Across the next year or so, the cheaper cost of borrowing will continue to deliver gains to mortgage holders as they lock into new rates.
The wheels are turning. But it’s slow.
That’s where leadership comes in. Telling people that things are getting better when they don’t feel it doesn’t work. Telling people to be patient is wearing thin.
The Prime Minister has a tough sales job ahead of him.
But if he can hold his nerve, he might find timing is on his side.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up for his weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here.
