Is the economy on hold for the election? Probably not, if new analysis from ASB is anything to go by.
It is common to hear, in the run-up to an election, that everything from business investment to the housing market is in a holding pattern, waiting for the result.
But ASB economists say their data shows that there may be less of an effect than people think.
They looked at business and consumer data including GDP, business investment, filled jobs and vacancy growth, house sales, household spend and discretionary spend, one year each side of general elections from 2005 to 2023.
“Every election year, there’s a narrative that businesses and households sit on their hands, waiting for clarity before cracking on with plans. But economic data across seven election cycles shows this doesn’t stack up,” senior economist Mark Smith said.
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“We found no discernible impact around election years. In the 12 months leading up to the election, if anything, investment was a bit stronger than after the election. That sort suggests … firms just tend to get on with it and do what they need to do.”
He said this year, the conflict in the Middle East and rising fuel prices were likely to be more of a hurdle for businesses and households than the political uncertainty.
That was a pattern seen in the past, too. The global financial crisis had also dominated any election concerns, and Covid had been the dominant issue of that period.
“But apart from those periods, the general perceived wisdom that firms and households sit on their hands and wait for the election to clear before making decisions … the data certainly did not support that at all.”
Smith said it might reflect an understanding that doing nothing could have a cost, particularly for businesses.
New Zealanders had become more experienced in managing volatility.
Smith said anyone waiting for the housing market to improve after the election could also be disappointed.
He said there was little evidence of election-related slowdown in real estate activity. House building and sales were largely unaffected, and house prices generally unchanged through election periods.
“This might be as good as you get in terms of things like the housing market.
“Housing decisions are usually shaped by life and family changes. People don’t tend to put a house move on hold just because of an election.
“Elections matter, and the policy that follows matter, but they’re only one of many things businesses and households weigh up. The current election race is tight, but history tells us New Zealanders are more pragmatic than the election uncertainty narrative gives them credit for.”
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