Tricky issues could haunt Nats
When David Shearer was Labour Party leader and it was hard to see how voters would endorse a weakly led Labour coalition with the Greens, the Government was operating on a presumption that somehow it would win the 2014 election.
A couple of weeks into David Cunliffe's Labour leadership, it is too early to say whether the initial spring in Labour's step will be maintained. But there is no doubting the relief and optimism that Labour supporters feel at the appearance of a genuine alternative prime minister.
As a result, the clutch of complex issues facing the Government as it heads into election year, and which it might have felt confident could be handled against a demoralised Opposition, look suddenly far more dangerous.
Let's count a few.
First, there is the messy politics of housing affordability.
Asked to defend the new loan-to-value ratio (LVR) restrictions imposed from this week by the Reserve Bank, Key responded: "Like all medicines, I don't necessarily like having to swallow it either, but what is the best thing overall for the economy?"
That is a principled response, but anger among the major banks over the new restrictions is deep, while the real-life impact of the restrictions on would-be home buyers is an easy news story.
The counter argument requires imagining something that has not happened here - a sudden crash in property prices. For those with large mortgages, and with interest rates rising from next year, such a crash would be economically and socially profound in its impacts.
However, in the meantime, the policy is easily portrayed as an attack on an undeserving target - aspiring home owners. The fact that 25 other countries have LVR restrictions of some kind cuts little ice as an argument for those affected.
However, the bigger initiatives to improve housing affordability - faster resource consents, more competitive construction costs, special housing zones, accelerating the Christchurch rebuild, relaxing city boundaries, or reforming the tax system to stop rewarding property investors - are all long-term solutions that won't crystallise before a November 2014 election.
Then there is the ultrafast broadband kerfuffle.
Cunliffe, as a former telecommunications minister, is well placed to take the fight to the incumbent, Amy Adams.
Who is right in this debate depends on where you stand. If fast uptake of fibre-based broadband is the goal, then making copper wire-based services a similar price to fibre will encourage switching to fibre. But if low-earning New Zealanders need lower cost more than fibre services, then attempts to gerrymander broadband pricing are a rort.
Adams has another set of problems, in her environment portfolio, where support for changes to the Resource Management Act's balance between environmental protection and economic opportunity has evaporated.
Meanwhile, a summer of deep-sea oil drilling in the exclusive economic zone, which she also administers, will almost inevitably spark high-profile environmental activism.
Then there is the partial privatisation policy. A huge amount of political credibility rides on the success of the Meridian Energy float, measured by whether much larger numbers of small investors take shares than bought into Mighty River Power.
Lost in the mix is whether it is appropriate to sell a state-owned asset facing several factors undermining its value, ranging from a flatlining electricity market through to the Labour-Greens' intention to force cheaper power prices and lower power company profits.
Instead, huge energy has gone into ensuring the Meridian float is easy to grasp and intuitively appealing. Pitching it as a $1 "pay to play" offer is masterful, as is the instalment receipts plan.
However, the New Zealand sharemarket is looking overweight with electricity stocks, with Meridian already weighing on Contact Energy and Mighty River Power shares. It is a moot point whether a partial sale of Genesis Energy is achievable in the first half of election year.
In case it is not, work is under way now on scenarios to break-up rather than float Genesis.
That would get the Government the cash it wants and make it more difficult to implement the Labour-Green's power policy.
With Genesis still 100 per cent state-owned, it could become the electricity sector's answer to Kiwibank, giving the rest of the power sector a run for its money while facing fewer commercial disciplines. But it wouldn't be popular. Of course, against these and other problems is the increasingly robust economy.
But National cannot rely on a feel-good factor to get the party over the line next year. In the past, voters have proven more willing to take a chance on Labour, which rates below National as an economic manager, when times are good.
As we approach the end of the year, widespread assumptions in the business community that there is no likelihood of the Government changing next year are fading. That means taking the Opposition seriously again - and that alone puts Labour back in the game.