National takes full credit when interest rates drop. It’s only fair it gets the blame when they rise.
Nicola Willis quickly blamed everyone but the government for the Reserve Bank’s decision to raise the official cash rate to 2.75% this afternoon. The move was aimed at taming inflation, which rose to its highest level in two years in the June quarter. But that was mainly due to offshore events that National didn’t instigate, the finance minister claimed. “Rising fuel prices from the Middle East conflict have pushed inflation to 4.1% and there are concerns this could spread to other goods and services,” she said, in response to some characteristically tough questioning in parliament from her colleague Carlos Cheung.
Willis was dismissive of Green co-leader Chlöe Swarbrick’s insinuation that the government was at least partly to blame for leaving the country exposed to those price rises, given it had paused investment in green energy early in its term. “For the member to be asserting that somehow our government’s decisions have led to this predicament, I think shows ignorance and recklessness,” she said.
Some economic observers might say that’s fair enough. US president Donald Trump has undeniably forced fuel prices up thanks to his genius move to start a war with a country that controls the world’s most important shipping bottleneck. That’s increasing costs for motorists and businesses that rely on petrol or diesel, which is unfortunately pretty much all of them.
But a more consistent, principled interpretation is that this is entirely, 100% National’s fault. There’s strong precedent for that stance, starting with the fact that the party has taken full credit every time the Reserve Bank has dropped the OCR since it came to power. “This government has delivered on its promise to Kiwis – our careful and deliberate plan to get on top of inflation is working,” Willis said, after the bank cut interest rates the first time this term in August 2024. “The reduction in the Official Cash Rate (OCR) affirms the work done by the government to bring public spending back under control,” she reiterated after a 25 basis point cut in April 2025.
Some analysts may have attributed the bank’s rate cuts to factors including a lagging jobs market, falling consumer confidence and weak economic activity at home, along with international volatility hurting export growth. They have pointed out that the government is borrowing and spending more than Labour did. But National has been unwavering in attributing the OCR’s downward trajectory to its own fiscal prudence. “Today’s announcement shows the work done by the government to take the pressure off inflation by bringing public spending back under control is continuing to pay dividends,” said Willis after a 25 basis point cut in May 2025.
On the flipside, National has been derisive of governments that try to blame OCR rises on international factors beyond their control. In 2022, Grant Robertson, the then-finance minister, pinned the Reserve Bank’s interest rate raise on fuel price rises from a superpower’s ill-advised war, along with global supply chain disruptions and the hangover from Covid-era monetary stimulus. Maybe this sounds familiar. But back then, Willis was unimpressed. “The finance minister should stop pretending that inflation is a mysterious visitor from overseas, that he has no control over, and instead present a clear plan to help fight it,” she wrote in a column for Stuff.
Willis’s boss has been similarly merciless with those blaming overseas events for their misfortunes, with Christopher Luxon recently delivering a right royal telling off to Air New Zealand over its $336m pre-tax loss, despite it being one of our businesses most exposed to global fuel prices.
As the saying goes, what’s good for the economic goose is good for the fiscal gander. You can’t poo-poo the war in Ukraine and oui-oui the one in Iran. You can’t say every OCR decrease is your doing and each increase is the fault of whatever fungating mass is controlling the US president’s neurons. By the standards it has set, this is National’s cash rate, put in place to tame price rises it caused. As a wise politician once wrote, the finance minister should stop pretending that inflation is a mysterious visitor from overseas that she has no control over. At least if she is going to do that, maybe she could consider applying those standards consistently.
