If the economy keeps growing at its September pace, it will exceed expectations and the 3.3% annual growth Treasury picks for the year to June 30, 2026.
Outside the artificial Covid rebound, that will be the highest economic growth since the 3.7% in 2017/18.
Willis could be confident unemployment will be past its peak by election day and that tax revenue will be roughly as Treasury forecasts.
If anything, her political problem might be inflationary pressures and interest rates.
With inflation still at the top of the 1-3% target range, strong growth almost certainly rules out Willis’ chosen Reserve Bank Governor Anna Breman’s Monetary Policy Committee cutting the Official Cash Rate (OCR).
The five OCR cuts under previous Governor Christian Hawkesby in April, May, August, October and November are now probably the last this cycle.
Willis and Prime Minister Christopher Luxon must pray no OCR hike is announced under Breman until December 9 at the earliest.
Indeed, Luxon may judge it safest to get the election done before the monetary policy review on October 28.
That argues for an election on Saturday, October 17, before Labour weekend and mid-November’s Apec leaders’ meeting in China, which he should attend if possible.
If Luxon also wants to avoid All Blacks’ tests, he’ll already have put a circle around Saturday, October 3.
Sensibly, that would also allow plenty of time for coalition negotiations if, as seems likely right now, the election outcome is messy and depends on results in key electorates, including to decide whether National or Te Pāti Māori (TPM) benefit from overhangs.
Electorate results will also decide whether National’s top list MPs, including Speaker Gerry Brownlee, Justice Minister Paul Goldsmith and, most importantly, Willis herself, make it back to Parliament.
Infrastructure Minister Chris Bishop likewise risks leaving Parliament if he can’t retain Hutt South, which has swung between him and Labour’s Ginny Anderson since 2017 after being held by Labour’s Trevor Mallard for 21 years.
Worse for Brownlee, Goldsmith, Willis and Bishop is that National’s representative on the Representation Commission, Roger Sowry, has done so well arguing for boundaries that favour National that it may retain pretty much all its electorates, creating an overhang in its favour, but denying any National list MPs seats in Parliament.
Willis leaving Parliament next year may yet be to Luxon’s personal advantage. Very reputable polling companies from left and right, including National’s pollster Curia, now put Labour ahead of National, so that Luxon’s coalition negotiations with NZ First and Act would be even more difficult than in 2023.
Act’s David Seymour already says he will put the Treaty principles issue back on the table.
Winston Peters wants Seymour’s Regulatory Standards Act repealed.
These are two policy disagreements we know about only because they have gone public.
Many more lie beneath the surface, including Act’s dismay that the Government it is part of is taxing, spending and borrowing more than the Ardern-Hipkins regime.
The three parties must also agree on how to attract the foreign direct investment New Zealand desperately needs, and how interventionist to be in tackling the banking, energy and supermarket oligopolies.
Right now, Act is wary of more hands-on reform of the market structures that have evolved, and in practice holds a veto.
Luxon argues he is improving in his job, so presumably won’t make the same mistake of conceding so much to Act over Treaty issues or to NZ First on corporate welfare, but might still find it handy to have both the foreign affairs and finance portfolios available to offer to his partners.
If National does wind up with only around 30% of the vote, as polls suggest, and Act and NZ First secure around 10% each, there’s no strong case why both foreign affairs and finance couldn’t be held by the smaller parties.
In a worst-case scenario, with National in the 20s and NZ First and Act in the teens, Luxon would need to spend precious time in coalition negotiations arguing why he should automatically be Prime Minister for the full three years.
Labour, of course, would argue that, as the largest party, it should lead the Government, but that is nonsense.
Even if National won just 25% of the vote, NZ First 15% and Act 10%, Luxon would remain a perfectly legitimate Prime Minister, albeit a weak one.
The current automatic reversion to the economic mean is lowering that worst-case risk, but Luxon needs to find a way to improve his personal popularity, not so much against Chris Hipkins but in the battle for centre-right voters against Peters and Seymour.
With wokeness still an issue, Peters will continue to find fertile ground on National’s fringes, especially with his skill – that Seymour lacks – of indicating alignment with those fringes without risking full-scale race and other culture wars.
Likewise, Act will target the remaining National voters who can read government accounts and know what a government bond is, recognising that such voters cannot plausibly vote for a party running even more irresponsible fiscal policy than Labour’s Grant Robertson did over his six years.
Over his six Budgets, Robertson let gross debt grow by an average of $15 billion a year. According to Treasury’s forecasts this week, Willis’ first six Budgets will see it rise by an average of $19b a year. Willis will have borrowed $115b off the next generation in the same time Robertson ran up “only” $88b.
Willis does better on net core Crown debt, which will increase by an average of “only” $13b a year in her first six Budgets compared with $20b a year under Robertson.
According to Treasury, there are no surpluses forecast under either the cash or traditional operating balance before gains and losses (obegal) measure, and just one under Willis’ dodgy “obegalx” which Treasury advised her not to use.
Now, according to Willis, it won’t be the 2010s and 2020s that will be decades of paying back debt and saving for the future, but the 2030s, just as superannuation and health costs really blow out.
No one can believe that. If Act focuses on that issue for the next 10 months rather than race-baiting, then both it and, more importantly, New Zealand will be better off.
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