Dr Bryce Edwards’ NZ Politics Daily Political Roundup: Could inflation lead to a voter backlash?

The current cost of living crisis in the New Zealand economy could yet have severe political consequences. Warning signs could be seen in Monday’s French presidential election result – in which the nationalist-populist Marine Le Pen upset the status quo by getting through to the second round and winning an incredible 42 per cent of the vote.

Rather than being a vote for her nationalism or rightwing politics, Le Pen’s stunning result was due to a campaign that targeted France’s cost of living crisis. Le Pen was able to leverage huge anger amongst those disadvantaged by quickly rising inflation and other assaults on ordinary people’s standard of living. Polling shows that Le Pen won the support of workers and those on low incomes, while the incumbent Emmanuel Macron won the votes of managers, professionals and the wealthy.

Could a similar revolt against Jacinda Ardern’s government happen here?

While a mass revolt against the status quo is unlikely to occur here, it’s not impossible that some sort of electoral backlash could yet punish politicians associated with the rising cost of living. If this is the case, the Labour administration could be in trouble at the next election.

The current cost of living crisis is a catastrophe for the poor and working class of New Zealand. Rising inflation comes on top of many other crises that have severely impacted those on the bottom – the housing affordability crisis, Covid, failing infrastructure, and an inadequate health system.

The rich have already done incredibly well out of the last few years. Inflation has been stoked by massive cash handouts to business and big asset owners in the form of cheap credit and money printing. Business profitability is currently very high – banking profits were up 48 per cent last year, the big four power companies’ profits were up nearly 60 percent in the last six months and the supermarket duopoly is still making super-profits. In many ways, the corporate sector have never had it so good.

The gulf between those who are financially very successful and those who are being punished by the current system is growing. Soaring food and energy prices are leaving growing numbers of people choosing between eating and staying warm. One bank has estimated that the average household will need to spend an extra $150 per week, money that won’t come from increased incomes. Hence foodbanks are in greater demand than ever before, with reports that middle income earners are being forced to use them as well as the poor.

It’s still the working class and the poor who are most impacted by inflation – who have to spend a greater proportion of their income on the basic commodities that have increased the most. According to the Reserve Bank, transport costs have gone up over 16 per cent over the past two years, and housing costs an incredible 48 per cent since 2019. While the minimum wage has increased by 12 per cent in the last two years, average wages have increased less than 9 per cent. Clearly most lower income earners are falling behind and, with no sign of inflation falling in the next few years, those New Zealanders will become further impoverished.

The Prime Minister’s key goals on housing, inequality and poverty are going to be very hard to progress, and yet Labour’s own traditional constituency will be the ones hurt by government policies both here and abroad. The party therefore faces a real challenge to retain those voters.

Even the Minister of Finance seems trapped by his own newfound conservatism. The Grant Robertson of old used to campaign to reduce the cost of living by removing GST off fresh food, and bring in a tax-free first $5000 of income. He even argued that GST of 15 per cent – which was increased by Bill English from 12.5 per cent – was too high. So why isn’t Robertson ready to relook at such policy settings now?

Instead of such innovations in the economic sphere, this Labour Government seems to want to invest their political capital on fighting for reforms in co-governance, and implementing other social reforms that might well be necessary, but do not address  the fundamental material needs of their traditional constituency.

Perhaps this is simply because it’s easier to implement a new school curriculum than it is to reform housing rules or to build new state houses. Regardless, it leads to a feeling that the Labour Government does not see combating the declining standards of living as a priority.

Robertson and his colleagues do make noises about having increased the minimum wage and benefit rates, but these small increases have almost all been eroded by inflation.

And benefit rates will continue to erode due to Labour’s decision to index benefits rates to wage increases instead of the higher rate of inflation. The Government chose not to use the formula used in countries such as the UK, in which benefit increases are indexed against whatever measure is highest, and now the poor will pay the price.

Can National win over workers and the poor?

National has succeeded in getting the cost of living crisis onto the public agenda. But are they also putting forward genuine solutions? Certainly, National’s tax cut proposals would do little for the poor and much more for the already-rich.

So National might well be able to attract the votes of the poor for a period of time, but such support will be extremely soft if the party isn’t able to put forward credible solutions to raise the standard of living for workers. The instincts of the party make this highly unlikely, and National seem set to continue the status quo. And in opposing minimal wage increases they would make things worse.

Although National is loudly blaming Labour for the current cost of living crisis, so far the party has not been able to differentiate itself from Labour’s approach. Eventually, this will also make National appear equally out of touch. Certainly Christopher Luxon seems an unlikely leader to excite the working class and downtrodden.

All politicians have spent the last week talking at great length about the inflation problem – explaining supply constraints, “tradeables”, global impacts – and mostly it sounds technocratic. Politicians of both left and right come across as if they don’t really feel the pain of those at the bottom. They look out of touch, and their solutions sound empty. Largely the policy solutions put forward by all sides translate to “more of the same”.

The looming political revolt over the cost of living crisis

Returning to the French election result, it’s worth noting that many poor and working class French voters were also alienated by the liberal, middle class social engineering political agenda of some of the Establishment parties. For instance, the presidential candidate of traditional party of the centre-left, the Socialist Party, won only 1.7 per cent of the vote. The New Zealand Labour Party should take note of that.

Today’s Otago Daily Times editorial notes that Le Pen’s relative success this week was based on her concentration “on bread-and-butter issues, notably the cost of living”. The newspaper says: “Her relative success, however, is another warning about politics, including the kickback from voters who feel a political, media and social elite run the show. Labour and the liberal professional classes in New Zealand should also take note. Many New Zealanders are rejecting the parties they might have supported in the past. Some are sceptical of the changed woke world where their traditional attitudes are rejected. Some feel excluded or resentful.”

It can be a powerful push to revolt when you are feeling impoverished, unheard, and unrepresented. At the moment, those who feel abandoned by Labour have no obvious alternative to vote for, but elections and financial pain have a funny way of creating surprising success stories for unlikely candidates, even those on the far right like Marine Le Pen, or on the radical left like Bernie Sanders.

Under MMP it would only take 5 per cent of voters to gain a foothold in Parliament – about 145,000 people. And such a party could be consequential – if it is the difference between being in government or in opposition, the big parties will make concessions. National, in particular, would be susceptible if they had to make deals deal with both Act and a new populist movement.

New Zealand’s political elites – regardless of their party colours – now face the prospect of ordinarily voters feeling angry and frustrated, especially the working class and poor. Such a rebellion from below seems unlikely, but as in France this week, new divisions in society are still surprising us all. Populism of both left and right varieties is still a major force around the globe, and it would be unwise to ignore the possibility of New Zealand’s cost of living crisis sparking an electoral upset.

Other items of interest and importance today

PARTNERSHIP POLITICS (CONSTITUTIONAL REFORM, CO-GOVERNANCE, THREE WATERS; MĀORI WARDS)
Felix Desmarais (Local Democracy Reporting): Rotorua Lakes Council Māori wards bill ‘unlikely to pass in time’ – legal expert
James Perry (Māori TV): Te Arawa leaders vow fight for equal representation
Felix Desmarais (Local Democracy Reporting): Māori ward fallout: Councillor Peter Bentley resigns during stormy meeting
Martyn Bradbury (Daily Blog): Why didn’t Labour & Greens see the problem with Tamati Coffey’s proposal
Shane Te Pou (Herald): Troublesome interview betrays Luxon’s values and priorities(paywalled)
Herald: One more councillor and Māori ward in Far North’s next local body elections approved
Waatea News: Commissioners make case for Ngāi Tahu council role
Paul McBeth (BusinessDesk): Breakaway mayors mount last-ditch bid on three waters(paywalled)

PARLIAMENT AND GOVERNMENT
Liam Hehir (Spinoff): What Christopher Luxon should have said
Ben Thomas (Stuff): Luxon’s careful conservatism raises questions for Labour ministers
Tova O’Brien (Today FM): Luxon’s recent missteps show signs he wasn’t quite ready for National’s top job
Pete Burdon: Luxon’s tax question problem and possible answer
Glenn McConnell (Stuff): Opposition MPs hit out at Labour’s select committee gatekeeping
Craig Renney (Herald): Budget office proposal could shine a light down fiscal holes(paywalled)
ODT: Editorial – Warning from the French election?
https://www.odt.co.nz/opinion/editorial/warning-french-election
Abbey Wakefield (1News): Parliament’s favourite dog leaving for new job

INTERNATIONAL RELATIONS AND DEFENCE
Zane Small (Newshub): Peace Movement Aotearoa condemns plan to spend $20 billion on New Zealand defence as global military spending tops $2 trillion
Peter Dunne (Newsroom): Fifty years of sycophancy to China have left NZ more exposed than protected
Richard Harman: Depending on China (paywalled)
Andy Fyers (BusinessDesk): China trade: over-exposed or cashing in? (paywalled)
Sam Sachdeva (Newsroom): NZ’s China export share grows in face of overexposure concerns
Today FM: See our people as people’ – Ukrainian in NZ pleas government to let ‘Whānau’ in
Martyn Bradbury (Daily Blog): Why ACT are 2% cowards!
Justin Wong (Stuff): No-show from Russian Embassy on anti-war petition

TAX REFORM AND WEALTH
Thomas Coughlan (Herald): Taxes on wealthy coming? You betcha (paywalled)
Bridie Witton (Stuff): Government’s ‘landlord tax’ may have already broken David Parker’s new proposed tax principles
RNZ: Revenue Minister reiterates need for data on high-income earners’ tax
Simon Louisson (The Standard): Is Parker procrastinating or scene setting for fairer tax system?
Lloyd Burr (Today FM): What is a wealth tax and does anyone benefit?
Gordon Campbell: On Parker’s tax plan And Musk’s Twitter purchase

EMPLOYMENT AND ECONOMY
Peter Dunne: Labour relying on more of the same to beat recession
Maiki Sherman (1News): More Govt support on the way for workers past retirement age
Jean Bell (Newsroom): Talk is cheap: Kiwi investors aren’t as ethical as they claim
Jack Santa Barbara (Newsroom): Is NZ’s economic growth uneconomic?
Jonathan Milne (Newsroom): Retirement villages to close doors in ‘perfect storm’ of nursing shortages
Calida Stuart-Menteath (NBR): Greenwashing concerns as awareness of ethical investing grows (paywalled)
RNZ: Fonterra capital restructure: Government support comes with conditions

COVID AND MIQ
Claire Trevett (Herald): Covid 19 and what the MIQ High Court ruling means for the Government (paywalled)
Mike Hosking (Newstalk): I admire Grounded Kiwis, but what does their MIQ win really mean?
RNZ: MIQ judgment: ‘We need to be prepared for the next pandemic’
River Lin (1News): Law expert explains Grounded Kiwis MIQ court case win
David Farrar: The illegal MIQ lottery
Amelia Wade (Newshub): Man who went on hunger strike in MIQ calls for Government apology after High Court ruling
Jamie Morton (Herald): 150 experts back masks in classrooms this winter
Brent Edwards (NBR): Covid-19 no longer a political issue, yet it hasn’t gone away(paywalled)

CLIMATE
Russell Palmer (RNZ): Councils, property owners must share costs of climate, Shaw warns
Will Trafford (Māori TV): Minister defends potential $7b hit to Māori forestry
Herald: Government’s plan to remove pine from ETS ‘disastrous’ for Māori
Michael Neilson (Herald): NZ climate change adaptation plan to tackle costs and who pays as extreme weather events, managed retreat becomes reality
Marc Daalder (Newsroom): A novel approach to stopping floods
Russell Palmer (RNZ): Climate change adaptation plan out for consultation
Zane Small and Alexa Cook (Newshub): Insurance, property transfer and who pays: Government seeks feedback on climate change managed retreat
Tess McClure (Guardian): New Zealand unveils plan to tackle climate crisis by adapting cities to survive rising seas

HOUSING
1News: ‘Bank of mum and dad’ now NZ’s 5th biggest home loan lender
Glenn McConnell (Stuff): Government pumps $1.4 billion into Auckland, to prepare more land for housing
RNZ: Government announces $1.4b funding to boost Auckland housing growth
Tom Pullar-Strecker (Stuff): New controls on mortgage lending at least a year away
RNZ: Call for new body to police regular checks on rentals to lift standards
Graham Skellern (Herald): Kāinga Ora to create modern neighbourhoods (paywalled)

HEALTH
Rachel Smalley (Today FM): Cancer treatments go unfunded while we throw billions at Covid
John Weekes (Herald): ‘Medicine crisis’: Husband who lost his wife to breast cancer says report shows bare minimum of funding tragedy
1News: Report ‘grossly understates’ NZ’s cancer drug funding gap
Rowan Quinn (RNZ): Cancer experts, support groups respond to new Cancer Control Agency report
Isaac Davison (Herald): A group of young New Zealanders were already disengaging from public life – then Covid-19 arrived (paywalled)
Eda Tang (Stuff): Frustration as new ‘Safe Areas’ abortion law ineffective without application process in place
Will Trafford (Māori TV): Gov’t campaign tackling inequity in smoking declines

POLICE AND LAW AND ORDER
Debbie Ngarewa-Packer (Herald): Big questions remain over police shooting of Kaoss Price
Tova O’Brien (Today FM): Ram raiding madness has got to stop, it’s going to take a collective effort to get us there
Nathan Morton (Stuff): Auckland store owner sleeps in his shop, glued to CCTV, after five attacks

LOCAL GOVERNMENT
RNZ: Auckland Council pre-election report pitches climate change, inequality and finances as city’s main challenges
Adam Jacobson (Stuff): Auckland’s pre-election report presents tough future ahead for city, local politicians
Kirsty Frame (RNZ): Wellington City Council knocks back water budget

Original Source: https://thedailyblog.co.nz/2022/04/28/dr-bryce-edwards-nz-politics-daily-political-roundup-could-inflation-lead-to-a-voter-backlash/

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