Rising economy may take National with it

16:00, Oct 25 2013

Political folklore has it that governments are rarely voted out when the economy is on the rise. 

That being the case, the economy should be National’s friend next year. New Zealand is tipped to be one of the few developed economies to grow strongly in 2014.

Every survey seems to be brimming with optimism. Net migration is back in the black – a sign more Kiwis are returning home because of better prospects, and fewer leaving, compared with the previous few years. 

Dairy incomes are still strong, despite the Fonterra scare and fears about a slowdown in China. Construction activity is gearing up in Christchurch and Auckland, manufacturing is generally expanding, and exports reached near record levels in the September quarter. If any fragility was exposed by those export figures, it was the fact that demand for dairy products remains the big driver, underscoring both the potentially catastrophic effects of New Zealand continuing to pay lip service to protecting its clean, green image, and our over-reliance on China. But that may be making a pig’s ear out of a silk purse. A win is a win after all.

Consumer sentiment is also up, another reason for good cheer within National. Voters are at their most content when they’ve got money to spend and feel secure in their jobs. The latest ANZ-Roy Morgan consumer confidence survey even used the word buoyant, particularly in Wellington and Auckland. The same survey showed people generally feel better off relative to a year ago, though the extent to which that had to do with the ‘‘wealth effect’’ of stories about rocketing house prices remains to be seen. 

The dampening effect of the Reserve Bank’s clampdown on low-deposit lending has already seen a tail-off in house sales. The black mark is unemployment, which isn’t falling fast enough. But, all in all, the economy is National’s good-news story. If there are any doubts, they mainly centre on the ability of the economy to grow as fast as tipped ‘‘without blowing a gasket’’, as one ANZ bank economist put it, and heightened global uncertainty exacerbated by the brinkmanship of United States politicians.


It is a ready-made platform for re-election. Themes like ‘‘if it ain’t broke don’t fix it’  and ‘‘don’t put it all at risk’’ have a tendency to drown out everything else.

So why the long faces?

It isn’t just that the past few weeks have been heavy weather for National – a slap down by the courts over Christchurch school closures, John Banks referred to trial over a donations scandal, allegations about misspending at a kohanga reo trust and, more disastrously, a flop for the latest asset sale – though none of those things have helped.

There is also a sense  that  the tide will inevitably go out – which some National MPs already talk about as being under way – and as National nears its fifth anniversary in   power, the end may be  closer than the  beginning.

That makes the obstacles loom a little larger.

The most obvious is its well-traversed lack of friends. Mr Key has already stepped up his courtship with Conservative Party leader Colin Craig, who National insiders are talking up as making big strides in the Auckland vote and believed good for at least 3 per cent on election night.

If National has to help the Conservatives win a seat to get it over the line, as it has with ACT in Epsom, and Peter Dunne in Ohariu, it will.  Mr Key’s early attempts at making overtures to Winston Peters have only reinforced the view within National that it does not want to be reliant on the NZ First leader. In trademark fashion, Mr Peters has just milked any of those overtures as an opportunity for game-playing and one-upmanship.

As for ACT, the mood within National appears to be hardening against ploughing much more effort into a doomed cause. That may change if the minor party hurries up its efforts to find someone to replace ACT leader Mr Banks. But it doesn’t seem to be in much hurry. Meanwhile, the prospect of Mr Key endorsing Mr Banks if he ends up in the dock defending electoral fraud allegations look slim.

The Maori Party is a part of the equation that National can’t change. But on current polling, Te Ururoa Flavell should be returned, giving Mr Key at least one ally.

Perversely, National’s second big obstacle is the economy – or more particularly selling the recovery as one that has delivered a dividend in the form of higher living standards to the average Kiwi. There is no sense yet of widespread rising wealth. Many Kiwis are still living from pay cheque to pay cheque. And for every good-news story, there seems to be a bad-news story about job losses, on a big scale. Whether it’s Telecom, New Zealand  Post, or the factory down the road, the perception is that jobs are still being shed at a steady clip. Some, like NZ Post, or retail stores, are stories of natural evolution and the move to an online world. But Labour leader David Cunliffe has been smart about positioning those stories as symptoms of wider economic dysfunction. His decision to pick up the regional development portfolio was also a smart one.

The third obstacle is holding on to its reputation among voters as the safest pair of hands on the economic tiller. On the surface, enough indicators are pointing in the right direction. But not all of National’s economic moves have looked convincing. Successive polls show that its determination to press on with asset sales has confounded even many of its own supporters. The Meridian flop raises even more questions. The anti-asset-sales petition at the end of the year will keep attention focused on the issue.

National has also been slow to react to the housing squeeze. And it has copped some of the backlash to the Reserve Bank’s intervention in the housing market, which has hit first-home buyers the hardest.

After five years, Labour’s game plan will be simple, meanwhile. Remind voters of National’s accumulating baggage, and pick on flops like Meridian to tell a story about the Government being a shambles.

But mostly the strategy is likely to borrow from another bit of political folklore: Oppositions don’t win elections, governments lose them.

Fairfax Media