With new inflation figures due today, the Government moved yesterday to ease both the cost of living and some of its own probable political embarrassment at the same time.
Finance Minister Grant Robertson and Energy Resources Minister Megan Woods said they would extend 25 cents a litre petrol excise duty cut and half price public transport until January 31 next year.
The move comes as the trading banks are forecasting today’s annual inflation figure to be seven per cent or more, the highest in three decades.
And the cost of living is now the main battleground between Labour and National.
“What we know is this every time New Zealanders go to the supermarket right now, every time they fill up at the pump, they can feel that prices are totally out of whack and the sad thing is wages aren’t keeping up, so people are going backwards,” Opposition Finance spokesperson Nicola Wilis told “Q+A” yesterday.
New Zealand’s inflation rate is significantly higher than Australia’s, which is sitting at just over five per cent.
But Robertson was quick to point out that the Australian rate is forecast to hit 6.7 per cent for the June quarter and very possibly seven per cent by the end of the year.
He suggested New Zealand was peaking.
“The consensus also remains that this will be the peak, albeit that down from there, may be relatively slow,” he said.
Robertson conceded that the measures extended yesterday cannot go on forever.
However, the political imperative to do something through next year in the leadup to the election if inflation remains high will be huge.
Australian Labor Party polling showed that “cost of living” was the key determinant policy issue in that country’s recent election. The same would be likely here next year.
The Government will have a new transport measure that will come in on February 1, the day after the excise cut is expected to end.
“ We do have the Community Connect program that starts on February 1,” Robertson said.
“That will give free public transport to about a million people.”
Robertson said the “cost’ of the programme was $649 million in taxes that would not have gone to the National Land Transport Fund, which pays for building and maintaining roads and funding public transport, walking and cycling initiatives.
“In terms of the fuel excise and road user charges, we do need that money to fund our transport program going forward from here,” he said.
“But we’ll continue to monitor the situation.”
His opposite number, Nicola Willis, is beginning to emerge in public with more details of what National’s eventual economic policies might look like.
She spoke at the Australia New Zealand Leadership Forum in Sydney ten days ago, and the cost of living was central to what she said.
“In New Zealand’s case, real wages are slipping backwards,” she said.
“A survey published today (July 8) in New Zealand shows that around one in five Kiwis is considering moving elsewhere in the world in pursuit of better living standards.
“So the case for productive growth to restore incomes and purchasing power could not be stronger.
“And it is incumbent on policymakers to unlock the possibility of holding back that growth.”
Yesterday, speaking on TVOne’s “Q+A”, she went further, accusing the Government of not doing enough to address the domestic drivers of inflation.
She was critical of Robertson’s path to a Budget surplus, which he is forecasting to happen in 2025.
“It’s important that New Zealanders understand that we’re not intending as a country under Grant Robertson to have the books back and balance until 2025,” she said.
“We’re still racking up extra debt.”
In a speech in London the week before last, National’s Leader, Christopher Luxon, identified five areas where National believed it could help raise New Zealand productivity.
But they were vague generalisations; improving education, ensuring infrastructure investment was where it was needed, upgrading technology, improving the regulatory environment and stepping up trade and immigration.
Willis yesterday, on the other hand, offered some specifics.
“What we know is this if governments are disciplined about spending, if governments reduce bottlenecks in the economy and I’m thinking, for example, of immigration pathways, ensuring we have enough people in the labour force; if governments resist the urge to add more costs to business, then overall they can have an effect on inflation,” she said.
But in a major break with the austerity health budgets of the English-Joyce era, Willis promised a National Government would spend more on health.
“Every budget that National delivers will include an increase in health expenditure,” she said.
“That will be a priority for me as finance minister and how we achieve that.
“What the formula is, is something that we’re looking at carefully.”
And she made a firm commitment to keeping the NZ Super Fund going, something that National spokespeople have been equivocal about from time to time, and the key Government suspended contributions altogether.
“We will want to keep contributions going towards the super fund; the exact amount of those will depend on the books that we inherit from Grant Robertson,” she said.
Willis is beginning to define what a post-Key, post- English, post-Joyce National Government might be like.