National's problem may soon become how well the economy is performing

Wednesday, 31 January 2018

Leader of the opposition Bill English addresses the public with his State of the nation speech.

OPINION: Will the golden weather never end? Opposition leader Bill English thanked the audience at his state of the nation speech in Wellington for putting on ties 'some of you for the first time' this year.

Like most of the country, the capital is seeing a long hot summer. English said he had experienced Invercargill's hottest day in 100 years.

But a day after Agriculture and Rural Communities Minister Damien O'Connor added Southland and parts of Otago to the many parts of the country officially in drought on Tuesday, a reality appears to be dawning, which could hurt the National Party.

Less than 24 hours before Bill English's speech, Standard & Poors delivered what is effectively an endorsement of the new Government's direction.

Despite a plunge in business confidence that followed the formation of the new Labour-led Government and even as mother nature giving New Zealand's major export industry a knock, the economy is showing no signs of slowing down.

**READ MORE:

Leader of the Opposition Bill English addresses an audience of business leaders and lobbyists with his state of the nation speech in Wellington on Wednesday.

* Bill English's warning to Government

* NZ 'wealthy and resilient' says S&P**

The Opposition, which has spent much of the time since the election promoting the economic platform it had built, appeared to assume that the situation would slowly but surely change. That the financial promises that Labour had made would be exposed as unrealistic, debt would creep higher, sending voters back to its proven formula.

If anything, the economy seems to be improving. December was, by some margin, the strongest ever for exports.

Figures from the Treasury released on January 25 showed that the Crown accounts are running ahead of expectations, with companies and consumers delivering more tax than expected. The chief accountant even hinted that some of this change might persist.

All else being equal, this could give Finance Minister Grant Robertson a little more room to manouevre than National hoped he would have.

Less than 24 hours before English's speech, Standard & Poors delivered what is effectively an endorsement of the new Government's direction.

While the ratings agency was simply restating its existing rating and outlook for the New Zealand economy, it predicted more good times to come, with debt as a share of the economy slowly falling.

'Our ratings reflect solid fiscal performance and our expectation that higher government spending will not materially weaken the country's fiscal profile.'

Labour could have hardly dreamed for better timing, even before rumblings about National's leadership emerged.

National clearly hopes that it will take the credit for the strong economy it delivered, with unemployment now at its lowest since the global financial crisis.

'In the last two years New Zealand has created 245,000 new jobs - more than 10,000 a month,' English said in his speech.

'And family incomes have risen. Since 2008 the average wage has grown by $13,000. It now sits at $60,000 a year.'

As Standard & Poors' statement also noted, New Zealand's financial position improved remarkably between the year following the Canterbury earthquake and the 2017 election.

The problem is, whatever gains have been made up until now, they will probably have been long forgotten by voters by 2020. Unless the economy starts to slow down relatively soon, in a way that consumers feel, it will be old news. But strong growth is expected to continue for some time yet.

National has warned Labour's policy will cause problems for the economy. English's only announcement in his speech on Wednesday was a campaign to talk about the risks posed by Labour's industrial relations policy.

But already Labour is showing signs of pragmatism. Conveniently blaming NZ First, Labour has said 90-day trials will still be available to employers with fewer than 20 employees. That is, the ones who would miss trial periods the most.

In Opposition, Labour pledged to slash migrant numbers. In Government, Labour is walking away from its promises as it dawns on it that the economy is addicted to migrant labour.

New Zealand may dawn to the fact that Labour is doing less to the economy than it seemed to promise, which will be bad news for National's attempts to convince voters that things were better before.

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