The answer also has to be yes.
Nothing sinks a Government’s popularity like a cost-of-living crisis, and the supply shock of war threatens to
take us there.
The coalition doesn’t appear to be heading into this from a position of strength.
National’s poor polling and the ongoing rumour mill about Christopher Luxon’s future as leader grabbed headlines last week.
The war and its economic fallout will only compound the problems in the coming weeks as a global supply shock flows through to New Zealand consumers.
If Luxon had a card up his sleeve, it was the progress of an economic recovery that was threatening to be well enough advanced for voters to actually notice it by November.
But he and Finance Minister Nicola Willis were already cutting it fine.
No amount of green shoots news about manufacturing performance or improving terms of trade will placate voters if rising grocery bills make them feel poorer.
The immediate risks to the recovery are primarily around inflation, which is already higher than Kiwis would like at 3.1%.
Food prices were up 4.6% in the year to January.
An Ipsos poll last week showed inflation and the cost of living remain the number one issue facing New Zealanders – rated that way by 59% of respondents.
Concern about petrol prices/fuel also increased in this wave, re-entering the top 10 issues at 9%.
The supply shock from the Iran conflict could see those public fears realised.
If the conflict is short-lived, the Reserve Bank should be able to look through the inflation spike. Any direct damage to the economy would be limited.
But there’s a big risk of a hit to still-fragile economic sentiment.
The damage rising prices could do to consumer and business confidence is a real cause for concern.
As we saw with the United States tariff issue last year, a badly timed blow to confidence can have an outsized effect on the economy, even if the direct impact is limited.
If people stop spending and businesses stop investing, we have a very real problem.
It doesn’t bear thinking about the psychological blow the nation would feel if the recovery were to stall in the second quarter again.
That’s where strong political leadership is needed.
So far, financial market reaction – including oil prices – has been measured.
Oil is up, and shares are down, but there hasn’t yet (touching wood as of Friday afternoon) been a sense of uncontrolled panic.
The longer things drag on, the more pervasive the overall impact on prices will be.
Brent crude oil is up around US$13 a barrel.
The Automobile Association (AA) estimates that every US$1 increase equates to about 1c per litre at the pump – although this may be exacerbated by falls in the kiwi dollar.
Retail pump prices are just the start, of course. Higher petrol, diesel and jet-fuel costs will put upward pressure on all goods as transport costs rise.
On top of all this, the Government faces a double whammy in the next few months as a renewed surge in dairy prices (good for the country in the long term) sends butter and cheese prices back to headline-grabbing levels.
The commodity price for butter, having retreated by 37% from peak “buttergeddon” levels in April last year, started rising again in December and is back up 34%.
It takes two or three months for the export price to flow through to the supermarket shelves, so we can probably expect another round of consumer angst from May.
It seems unlikely that news of another record payout for dairy farmers will go far to placate the average voter.
Time and time again, it has been shown that voters are highly sensitive to the cost of living.
The Government can point back to the much larger inflation spike under the last Labour Government.
But there’s a problem with that if the broader economy is still stalled.
The only economic indicator that has a hope against rising living costs is rising wages.
In the last inflation spike, through 2021 and 2022, prices soared, but so did wages.
Unemployment was at record lows during the period. People were at least secure in their jobs, and for many – especially younger people – there was a good deal of opportunity to move around to boost earning power.
This time around, we have persistently high unemployment. That’s limiting wage growth.
Low wage growth is one part of the equation that has kept economists confident that inflation will ease back from its current peak.
In combination with rising prices, it equals stagflation – the worst of potential economic scenarios.
So what can the Government do?
As National was quick to point out in opposition, efforts to put money back in consumer pockets with state subsidies just exacerbate the overall inflation issue.
Luxon and Willis could try to sell the idea that this is all beyond their control, and we just have to suck it up.
But in opposition, they were happy to let Labour take the blame for price spikes that were clearly global in origin.
You live by the sword, you die by the sword.
The best hope for all of us right now is that the conflict is short-lived.
That might seem optimistic as the missiles fly across the Middle East this week. US President Donald Trump has talked about a four- or five-week campaign.
But we can take some comfort from the fact that Trump is also politically vulnerable on the cost-of-living issue.
There might be a cap on how far Trump can allow oil prices to rise based on domestic political blowback.
Polls already show that about 60% of the US public is opposed to the war.
That is high for the early stages of a campaign.
Trump almost certainly has the audacity to just pull out of the conflict without regard for the regional mess he leaves behind.
As Antony Blinken (Secretary of State under Joe Biden) told Bloomberg last week, Trump’s off-ramp is simple – he just declares victory and moves on.
The factors that might determine the timing of Trump’s inevitable “mission accomplished” speech will be oil prices, financial markets, US inflation and, ultimately, political polls.
We can only watch and wait.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
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