But in doing so, we raised expectations about what a centre-right government could do to help. Three years on, while interest rates and rents are lower, the general price level is 9% higher and, understandably, voters are still angry.
The economy is also not delivering stronger growth, but this isn’t the coalition’s fault. While governments can wreck an economy in three years, they don’t and can’t immediately return it to health over a parliamentary term – they can only lay the foundations for longer-term success. And international factors, such as the Iran war and Trump’s tariffs, haven’t helped.
Rightly or wrongly, the coalition now owns the cost of living crisis politically, in the sense that voters believe the state of the economy and the cost of living are primarily the fault of the people currently in the Beehive. And, rightly or wrongly, voters are punishing them for it. The left is now riding the wave of voter angst that swept them out.
But Labour needs to be careful. Because as much as politicians are talking about getting the cost of living under control, there are no short-term fixes to bring prices down.
The Reserve Bank can limit future price rises, but Covid-19 inflation – about 30% since the start of the pandemic – is now baked in. Barring a deep recession, yesterday’s prices are gone.
The prices of certain goods and services can fall over a longer period of time with the right policies in place – an important qualifier – but not over a term of Parliament.
Global oil prices might ease, but there is nothing the New Zealand Government can do about that. The effectiveness of plans to bring down the cost of groceries is highly uncertain. Bringing down the cost of housing is a long-term project.
Governments can introduce bans, regulations and subsidies, but there’s no free lunch. Costs don’t disappear; they are simply transferred as governments raise taxes, and businesses recoup them elsewhere.
In short, it’s the number one concern for voters, and the next government will be able to do little about it, at least over the next three years.
The other side of the cost-of-living crisis equation – wages – is under-discussed. Real wages have been flat for about five years, so the average worker isn’t any better off than they were in 2021. Productivity drives wages and that has been weak for many years. Political parties regularly talk about productivity but aren’t likely to produce policy that will improve it.
It’s little surprise then that Chris Hipkins and Labour have been slightly more measured about what the cost of living would look like under a left-wing government. It has attacked the coalition’s record effectively, but it hasn’t made sweeping promises.
While some of its policies – like three free GP visits a year and a three-year freeze on fuel excise tax increases – are unwise and will have unintended consequences, much of its offering on the cost of living is specific and measured, or simply commits to no more than stronger competition, pricing transparency or longer-term price reductions. In short, Labour seems to have learned a lesson from the coalition’s experience. But its claims are still likely to clash unfavourably with reality if it takes office.
On the other hand, the economy might start to bounce back to healthy growth over the next three years, but if it does, it’s unlikely to have anything to do with Labour’s economic plan.
There’s a graph that does the rounds on social media from time to time. It shows how the cost of various goods and services have tracked in the United States since 2000.
The cost of healthcare, education and housing are all up significantly. The price of cars, clothing, consumer appliances and software are all either flat or falling. The former are all either directly provided by or heavily regulated by government, and the latter are dominated by private enterprise.
The lesson you might take from this is that governments and politicians need to get out of the way and leave the market to provide goods and services as far as possible while providing direct financial support through the welfare system to New Zealanders who genuinely can’t afford the basics.
But politicians have a genetic predisposition requiring them to be involved in micromanaging the economic affairs of the nation – even centre-right politicians claim to want to “manage the economy” – and most voters want them to do so. Until that changes, we’re going to be stuck paying more for everything than we need to.
Andrew Ketels was the Act Party’s chief of staff from 2020 to 2025 and has worked as an adviser to the National Party. He is now head of government relations for corporate affairs firm Sherson Willis.
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