National vs Labour: Who is ‘most’ responsible for the current state of the economy?
Sunday, 19 July 2026
ANALYSIS: The economy has emerged as the defining issue for voters in the November general election, but New Zealanders are deeply divided over who - or what - is responsible for its current state.
The Post/Freshwater Strategy Poll, done in June, shows voters are most likely to attribute blame for the present lacklustre state of the economy to the current National-led Government.
In all, 26% of those polled said most blame lay at the feet of Luxon and his colleagues from National, ACT and New Zealand First.
Eighteen percent of the voting public polled blame the previous Labour-led government most for the current state of the economy.
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Less blame is attributed to US President Donald Trump, with just 15% of voters laying most of the blame for the state of the economy at the feet of “international conflicts”.
There is also a dwindling minority who blame neither Trump, nor Christopher Luxon, nor Chris Hipkins, but who blame the lingering effects of the Covid pandemic - 10% of voters are in that category.
But what is the case for it being the current National-led Government’s fault? And how strong is the case against Hipkins and his colleagues in Labour and the Greens?
The case for it mostly being the National-led government’s fault
The National-led Government imposed spending reductions on government departments and slashed public service jobs at a time when the economy was struggling.
Or as Labour’s Ayesha Verrall put it in May: “Nicola Willis has cut jobs, crushed confidence, slowed the economy, and now unemployment is climbing fast.”
For the Opposition, it is a clear case of this government’s economic mismanagement that lies behind the state of the current economy.
Except, says independent economist Tony Alexander, voters who believe the current government’s policies on the public service are mostly to blame for the state of the economy are deluded.
“It shows how little they understand,” Alexander says. “The bulk of public servants are located in Wellington, and if they get laid off it makes almost no difference to what's happening in the economy of Auckland.”
“Similarly, the Christchurch economy is driven by the primary sector,” he says.
“It’s a mistaken belief that a decrease in the numbers of public servants is going to influence the rate of growth in the economy, especially when you acknowledge that actually the number of people employed at the core public service hasn't changed all that much over the past two and a half years,” he says.
Data from the Public Service Commission shows that despite high-profile cuts at departments like the Ministry of Education, the Ministry of Business, Innovation and Employment, and Oranga Tamariki, there were more public servants in March 2026 than there were in June 2024. (It must be noted that Finance Minister Nicola Willis used Budget 2026 to announce the Government would cut 8700 jobs from the public service by mid-2029.)
“The people's understanding of what fundamentally drives the economy is pretty bad,” Alexander says.
Dr Oliver Hartwich from the right-leaning New Zealand Initiative policy think tank says spending as a proportion of GDP remains high.
The rhetoric aimed at attributing blame to Luxon and his colleagues in power rings hollow for Hartwich.
“They get accused of austerity all the time, but even on government spending, actually they have not reversed the previous government spending,” he says.
The proportion of core government spending to GDP remains around 32% or 33%, Hartwich says.
“It's hard to accuse the current government of running austerity regimes when they are spending more than Jacinda Ardern did in her first wellbeing budget in 2019, unless you want to accuse Jacinda of running an austerity budget back then,” he says.
However, says NZIER associate economist Peter Wilson: “They are tightening and so therefore that deliberately will slow the economy down a little bit.”
Alexander is dubious about the question The Post asked in its June survey.
That question was: “In your view, who is MOST responsible for the current state of the economy in New Zealand?”
Because of the state of public economic illiteracy, Alexander thinks it actually equated to asking people what their political affiliation was.
The Post survey suggests not everyone is entirely victim to their political affiliation, or as economist Shamubeel Eaqub puts it their “partisan one-eye-manship”.
First there are those who looked to external factors like Trump’s tariffs and his aggression against Iran, which led to a massive spike in oil prices.
And a minority of those who voted for Labour or National at the last election, do lay the most blame at the feet of the parties they backed with their ballot: 11% of people who were National-affiliated, and 7% of Labour-affiliated people.
Green Party and Te Pati Maori-affiliated people were the most likely to heap most blame on the current government, however.
Alexander says: “I think overall it reflects an incorrect belief by people that the state of the economy is primarily determined by government actions. And that's just wrong.”
It’s an incorrect belief that politicians foster, especially while in opposition when they peddle the idea that the state of the economy is the fault of the sitting government, and that everything would be better, if only it was replaced by the wiser, more far-sighted souls on the opposition benches.
But what really drives the economy?
Migration numbers, the interest rate cycle, and commodity prices, Alexander says, and in the long-term, productivity.
“The reality is that it isn't the politicians who are going to determine the economic cycle, and how the economy performs over the short to medium term,” he says.
Alexander, Hartwich and Wilson say that over the long term, government policies will influence productivity growth.
But Wilson says the ability of a modern democratic government to influence economic factors is often quite narrow in short-terms, such as New Zealand’s three-year electoral cycle.
Hartwich points to Education Minister Erica Stanford’s attempts to fix New Zealand’s education system, which has been in decline, especially under the previous two governments when school attendance declined to disastrous levels.
“No matter what Erica Stanford does now, she and her government will not be the ones benefiting from that for economic performance uplifts,” he says. “That will be in 10 or 15 years time once the students graduate from university, much further on the track. It takes a long time.”
Wilson would like to see politicians stop giving the impression they can bring prices down, if only the voters put them back in office.
“They shouldn't promise to bring prices down,” Wilson says. “What they can do is increase incomes.”
At the recent China Business Summit, Luxon outlined his theory of government, which was that it was his job to put in place the “operating system” that created the best medium and long-term opportunity for the economy to grow.
This translated into reducing red tape, green-lighting big projects through fast-track laws, reducing the costs of doing business, investing in infrastructure, putting trade deals in place, fixing the education system, and lowering tax to create a country where the answer to an opportunity was “yes”, not the “no” he attributed to the previous Labour government.
But exactly how that would have panned out had the US not attacked Iran driving up oil and fertiliser prices is a moot point.
The case for it mostly being the previous Labour government’s fault
National’s rhetoric lays the much of the blame for the current state of the economy on the shoulders of Labour and the Greens.
It’s oft-repeated mantra has been “fixing the basics” that previous governments have left unfixed, though that includes resource planning laws, which were not fixed by previous National-led governments either.
Rampant spending, a bloated civil service, and disastrous Covid-era economic mismanagement are the charges the National-led government lays against Labour and the Greens and they want voters to believe that more of the same would follow if they win.
“If it gets back in power, it will do exactly the same thing again: borrow more, spend more, tax more and plunge the country into dangerously deeper debt,” Willis said in March.
Just as Hartwich thinks it is unreasonable to lay most of the blame for the current state of the economy on the current government, he feels something similar can be said about the previous government.
However, the previous government’s actions and inactions have had more time to percolate through the economy, so there is a better case to be made that fault for the current state of the economy lies at the feet of the previous Labour-led government, and the one before that.
But even then, to say those governments carried “most” of the blame was to ignore other culprits, and in his opinion, one culprit in particular.
“If I had to single out a one institution actually for a lot of the economic pain we've had over the last few years, it would not be the government or the previous government. It would be the Reserve Bank under the previous leadership,” Hartwich says.
Economists tend to have a level of generosity for the initial decisions made as the Covid pandemic bore down on the country.
Hartwich agrees.
“No-one here had any idea how this would play out because we have never experienced a pandemic in our lifetimes. The last time we had a pandemic a bit like that was the Spanish flu and that was after World War I,” he says.
“But as the weeks wore on, it became clear that reacting to the Covid pandemic as we had to the Global Financial Crisis in the late 2000s would be to over-stimulate the economy, ramping up inflationary pressures that would ultimately have to be fought with high interest rates to depress the economy.“
Yet that is what we did and what many other countries did.
“If you stimulate into an exogenous supply slump, what you get is higher prices because you have no reduction in general demand,” Hartwich says.
“When you do that at scale, you're basically asking for price increases.”
Some of the cause was disrupted supply chains, but some was also produced locally.
And that’s what New Zealand got with inflation increasing in 2021, and peaking in 2022 at about 7%.
“You had two two parties to that. There was the Reserve Bank, but there was also the Government,” says Hartwich.
The Labour government stimulated through support packages like the wage subsidy, and the “shovel ready” infrastructure projects, some of which still haven’t been rolled out. The Reserve Bank slashed the official cash rate.
Then inflation had to be crushed, so the Reserve Bank raised the official cash rate driving up the cost of mortgages, and business borrowing, squashing households’ ability to spend, and businesses’ capability of growing.
Only in August 2024 did the Reserve Bank start cutting the official cash rate again. That was nine months into the current Government’s term in office.
Some voters did put most blame on the Reserve Bank, though only a small minority: 6% of New Zealand First and Te Pāti Māori voters, 5% of Labour voters, 4% of National voters, though only 1% of ACT and Green voters.
And yet, even then, the current economy would be in a far better state if oil prices had remained at the levels they were before the Iran conflict.
Before the bombing started in late February, the price of diesel, which is relied on by industry, was $1.87 a litre. It’s still around $2.50, but peaked at just over $3.40.
And regular petrol went from around $2.50 a litre to a peak of just under $3.50, and is still at nearly $3.
That’s added cost to the economy, and hit many households’ ability to spend.
The party whose voters were among the most likely to put most of the blame on the previous Labour-led government for the current state of the economy were also most the voters most likely to put most blame on international conflicts and international markets: those who voted for ACT at the last election.
Fully 26% of ACT voters put most blame for the state of the economy on international conflicts, and 20% fifth put most blame on international markets.