While some warn the true cost of Operation Epic Fury is only beginning to land, one economic commentator is finding reasons to be cheerful, writes Catherine McGregor in today’s excerpt from The Bulletin.
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Fuel stocks stay steady
The government’s latest fuel stocks update, released on Monday, showed 61.9 days of petrol, 51.5 days of diesel and 50.1 days of jet fuel in-country or on the water, with importers reporting no material disruptions. Finance minister Nicola Willis confirmed the country would remain in phase one of its crisis response, and, as RNZ reports, said a planned 12-cent-per-litre fuel tax rise next January was now “very unlikely”.
Also on Monday, foreign minister Winston Peters flew to Washington DC to meet US secretary of state Marco Rubio for discussions on the cooperation plans for the Pacific and “the conflict in the Middle East and its impacts on our region”.
A spiralling conflict seemed more likely than ever after another unhinged social media post by the US president over the long weekend. On Truth Social, he demanded that Iran “Open the Fuckin’ Strait, you crazy bastards, or you’ll be living in Hell – JUST WATCH!” He added: “Praise be to Allah.” Iran this morning rejected a peace plan from Pakistan, a key negotiator, which would have involved an initial 45-day ceasefire and the reopening of the Strait of Hormuz.
Three reasons not to despair
What does all this mean for the economy? Amid the alarm, the NZ Herald’s Liam Dann (paywalled) is “sticking with the broadly optimistic tone” he has maintained since the conflict began. Markets tend to get “bored” with geopolitical crises, Dann argues, pointing to the market panic and subsequent recovery following Russia’s invasion of Ukraine in 2022. Monetary policy also provides a buffer, Dann says. With interest rates still set at a stimulatory level, the Reserve Bank “has room to move – in both directions”. Dann’s other reason to be (relatively) cheerful: “What we face here is disruption and inconvenience, not an existential threat.”
Even so, the timing has been brutal. Writing in the Sunday Star-Times (paywalled), Vernon Small notes that, until the war, the government’s books were improving. “Of course, Operation Epic Fury has changed all that.” On Wednesday, the Reserve Bank will release its latest OCR decision. While the interest rate will almost certainly stay at 2.25%, the accompanying monetary policy review is likely to “make grim reading”, Small says. “Uncertainty may be the best we can hope for.”
A fragile foundation
In a meaty piece of analysis for The Weekend Post, Luke Malpass challenges Christopher Luxon’s claim that New Zealand was “incredibly well positioned to head into the crisis”. The reality, he argues, is a fiscal position weakened by accumulated shocks and compounded by choices made under two successive governments.
Nicola Willis’s consistent warning over the past two years that New Zealand needs to rebuild fiscal buffers has been “proven right” by the Iran crisis, Malpass writes. Yet, “on nearly every financial measure – debt, deficit, revenue growth and spending – the situation has worsened under this Government, reflecting both inherited conditions and policy decisions since 2023.”
“[This] shock is merely the latest event that begs the question whether the pace of fiscal repair is appropriate both for the level of debt New Zealand has or the times in which we live,” Malpass writes. “It is an opportunity for a fundamental rethink once the crunch of the crisis abates.”
Everyone’s in opposition
Writing in The Spinoff, Joel MacManus argues, tongue in cheek, that the governing coalition has concluded that incumbency is no longer the political boon it once was; now it is “a hot potato no one wants to handle”. Of 64 countries that held national elections in 2024, incumbents lost vote share in 80% of them. The reason: “voters just hated whoever was in charge”.
As a result, even the parties of the coalition are eager to proclaim their oppositional bona fides. NZ First and Act are old hands at this, but now National is getting in on the act, MacManus writes. Just look at the evidence: Luxon calling himself “CEO”, not prime minister; the government avoiding the Beehive Theatrette for its Covid-era optics – and perhaps “to avoid looking too much like a government”. As for Luxon’s absence from the fuel-crisis podium: he may be wary of gaffes, or “it could be because he doesn’t want to give the wrong impression that he is in charge and has the power to do anything.”
