We have an OCR announcement and food and rent price data out this week. A note from Labour’s pollsters suggests the mood of the nation is now beginning to properly reflect cost of living pain, writes Anna Rawhiti-Connell in this excerpt from The Bulletin, The Spinoff’s morning news round-up. To receive The Bulletin in full each weekday, sign up here.
Official pre-election period begins on Friday
On July 14, most of us will be enjoying our second Matariki public holiday as we celebrate the coming of the Māori new year. For our political parties, the date marks something else. This Friday is exactly three months until election day and the start of the official pre-election period. The regulated period for election advertising expenses begins and political candidates, parties and anyone else who publishes election advertising must limit their spending to the amounts prescribed in legislation. That makes today’s official cash rate (OCR) announcement and cost of living data from Stats NZ published this week, the last before parties begin to ramp up their campaigns and pitches to voters. A note in yesterday’s polling from Labour’s internal pollsters, Talbot Mills, frames the upcoming period as one defined by the Reserve Bank’s (RBNZ) actions to tame inflation and the flow on impact to the cost of living.
The centre-left no longer defying gravity
Yesterday’s Talbot Mills poll has Labour at its lowest point in at least four years at 31% and National up one point at 36%. The commentary released with the poll will be ringing alarm bells for Labour.
“After a long period of very close results, we may now be seeing the long-expected breakout of the centre-right. The next few polls will tell. The centre-left had seemed to have been defying the political gravity of a generally negative mood; the acute political pressures stemming from cost of living rises and cascading ministerial scandals.”
As indicated by the prime minister’s comments overnight, the result may well reflect the ministerial messiness of the last couple of months but Hipkins himself frames these incidents as a distraction from the issues New Zealanders want the government focused on.
OCR likely to stay where it is
As indicated in May, the RBNZ believes the current OCR of 5.5% is peak OCR. Seven out of the eight members of the NZ Institute of Economic Research’s central bank “shadow board” agree. For now. The rate hiking cycle of the last two years has seen mortgage interest rates lift from figures in the low to mid-two percent range in 2021 to the sevens. BNZ joined all the main banks yesterday in lifting some of its rates. There is debate about why banks are lifting rates despite the signals from the RBNZ which the Herald’s Jenée Tibshraeny does a good job of explaining (paywalled). There is also debate about the impact of a large number of people yet to refix home loans at higher rates. Bernard Hickey has thoughts on that (potentially subscriber-only). He contrasts a report from Westpac economists suggesting mortgage servicing costs could rise by $900 a month throughout New Zealand and $1600 in Auckland, with data from the NZ Bankers Association about the size of the average mortgage and suggests the impact will be less of a bomb going off and more of a bang.
‘Still at the starting line for the real economic downturn’
With all the debate going on about rates and servicing costs, it’s still pretty safe to conclude that people are feeling squeezed. The cost of living remains the number one concern of New Zealanders according to the Ipsos Issues Monitor. Despite all the talk of home loans, we’re a nation of renters and rent has been steadily rising. This month’s food price index data won’t reflect any flow-on effects of the removal of the petrol tax cut this month but will no doubt reinforce what we all know when we go to buy food. Liam Dann writes that we’re still at the starting line for the real economic downturn (paywalled). ANZ’s Sharon Zollner says “We expect the “real recession [i.e. one that reflects the aggregation of individuals’ more cautious decision-making, and rising unemployment] to occur in the second half of the year.” When people start losing jobs, the abstract economic numbers we’ve been reporting for the last year start to become real. That’s when they start to have political ramifications. The note from Talbot Mills could be the canary in the mine for the government as the countdown to the election begins in earnest this week.