Pattrick Smellie: On whose watch does the rock star economy give up?
OPINION: Whoever forms a government this week, they may come to curse the timing.
After a long, robust run, there are signs of a slowdown in the New Zealand economy.
The 2.5 per cent annual growth rate achieved in the year to June, and announced in the last week of the election campaign, was unexceptional by the standards of the last five years. It should arguably have been ammunition for the Opposition parties in the lead-up to polling day but, oddly, they failed to bite.
The factors are mainly domestic. If anything, the global economy is performing a little better now than it has been.
But in New Zealand, there's mounting evidence that the two main sources of recent economic strength – housing and inward migration – have run their course, at least for the moment.
First: the housing market slowdown.
Lending restrictions imposed by both the Reserve Bank and by trading banks getting nervous about the impact of even small interest rate rises on stretched mortgage-holders' budgets are taking their toll. So, too, are sheer unaffordability and the drying up of hot money from China.
Another influence, albeit far less significant, has been the traditional reduction in property transactions that tends to accompany general elections.
But the overall impact of these influences on consumer sentiment is starting to become apparent. The confidence among property owners that has spurred high levels of consumer optimism is on hold and starting to fall, according to bellwether indices over the last couple of months.
That is starting to affect retailers too. A general fear about the impact of Amazon starting operations to target this part of the world is a backdrop to the less fizzy consumer spending environment that the slower housing market represents.
Second, there's the net migration slowdown. The flood of new arrivals has now almost certainly peaked and numbers will start to fall in the coming months.
Note: A falling tide of migrants may yet give New Zealand First a policy win without having to adjust policy settings much. Quite apart from anything else, New Zealanders are starting to leave the country again in larger numbers, especially as Australia throws off recent economic doldrums.
Nontheless, one effect of reduced new migration is a reduced rate of growth in consumer spending.
So, for a new government of any political stripe, there are political risks in this somewhat less vibrant domestic economic environment.
It will be all too easy to blame political change rather than economic circumstances if, by Christmas, the shine seems to be coming off the rock-star economy.
The risk would be all the greater for a newly minted centre-left government.
For a start, pre-election polling and the devastating impact of National's simplistic, borderline mendacious campaign against Labour's tax and spending policies both demonstrated a relative lack of faith in a Labour-led government's ability to manage the economy well.
That sentiment is particularly strongly felt in the corporate world, where political leanings are naturally centre-right, and where unwelcome policy uncertainty can affect hiring, spending and investment plans.
In this context, what New Zealand business leaders tell their international peers – who are often also their owners these days – is likely to have a material impact on global sentiment towards New Zealand as an investment destination.
This shouldn't be overstated. If weaker business sentiment contributed to a weaker kiwi dollar, export returns would improve and the country would become even more attractive for international tourists.
But New Zealand is a very small business opportunity for a global investor. Reasons not to deploy capital here need not be especially compelling when bigger, albeit riskier, opportunities beckon elsewhere.
The new government, especially a new centre-left government, may find itself walking a tightrope between a domestic economy that's softening anyway and the capacity for its early actions to accelerate that trend.