The answer also has to be yes.<\/p>\n
\n Nothing sinks a Government\u2019s popularity like a cost-of-living crisis, and the supply shock of war threatens to
\n take us there.\n <\/p>\n
The coalition doesn\u2019t appear to be heading into this from a position of strength.<\/p>\n
National\u2019s poor polling and the ongoing rumour mill about Christopher Luxon\u2019s future as leader grabbed headlines last week.<\/p>\n
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.<\/p>\n
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.<\/p>\n
But he and Finance Minister Nicola Willis were already cutting it fine.<\/p>\n
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.<\/p>\n
The immediate risks to the recovery are primarily around inflation, which is already higher than Kiwis would like at 3.1%.<\/p>\n
Food prices were up 4.6% in the year to January.<\/p>\n
An Ipsos poll last week showed inflation and the cost of living remain the number one issue facing New Zealanders \u2013 rated that way by 59% of respondents.<\/p>\n
Concern about petrol prices\/fuel also increased in this wave, re-entering the top 10 issues at 9%.<\/p>\n
The supply shock from the Iran conflict could see those public fears realised.<\/p>\n
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.<\/p>\n
But there\u2019s a big risk of a hit to still-fragile economic sentiment.<\/p>\n
The damage rising prices could do to consumer and business confidence is a real cause for concern.<\/p>\n
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.<\/p>\n
If people stop spending and businesses stop investing, we have a very real problem.<\/p>\n
It doesn\u2019t bear thinking about the psychological blow the nation would feel if the recovery were to stall in the second quarter again.<\/p>\n
That\u2019s where strong political leadership is needed.<\/p>\n
So far, financial market reaction \u2013 including oil prices \u2013 has been measured.<\/p>\n
Oil is up, and shares are down, but there hasn\u2019t yet (touching wood as of Friday afternoon) been a sense of uncontrolled panic.<\/p>\n
The longer things drag on, the more pervasive the overall impact on prices will be.<\/p>\n
Brent crude oil is up around US$13 a barrel.<\/p>\n
The Automobile Association (AA) estimates that every US$1 increase equates to about 1c per litre at the pump \u2013 although this may be exacerbated by falls in the kiwi dollar.<\/p>\n
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.<\/p>\n
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.<\/p>\n
The commodity price for butter, having retreated by 37% from peak \u201cbuttergeddon\u201d levels in April last year, started rising again in December and is back up 34%.<\/p>\n
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.<\/p>\n
It seems unlikely that news of another record payout for dairy farmers will go far to placate the average voter.<\/p>\n
Time and time again, it has been shown that voters are highly sensitive to the cost of living.<\/p>\n
The Government can point back to the much larger inflation spike under the last Labour Government.<\/p>\n
But there\u2019s a problem with that if the broader economy is still stalled.<\/p>\n
The only economic indicator that has a hope against rising living costs is rising wages.<\/p>\n
In the last inflation spike, through 2021 and 2022, prices soared, but so did wages.<\/p>\n
Unemployment was at record lows during the period. People were at least secure in their jobs, and for many \u2013 especially younger people \u2013 there was a good deal of opportunity to move around to boost earning power.<\/p>\n
This time around, we have persistently high unemployment. That\u2019s limiting wage growth.<\/p>\n
Low wage growth is one part of the equation that has kept economists confident that inflation will ease back from its current peak.<\/p>\n
In combination with rising prices, it equals stagflation \u2013 the worst of potential economic scenarios.<\/p>\n
So what can the Government do?<\/p>\n
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.<\/p>\n
Luxon and Willis could try to sell the idea that this is all beyond their control, and we just have to suck it up.<\/p>\n
But in opposition, they were happy to let Labour take the blame for price spikes that were clearly global in origin.<\/p>\n
You live by the sword, you die by the sword.<\/p>\n
The best hope for all of us right now is that the conflict is short-lived.<\/p>\n
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.<\/p>\n
But we can take some comfort from the fact that Trump is also politically vulnerable on the cost-of-living issue.<\/p>\n
There might be a cap on how far Trump can allow oil prices to rise based on domestic political blowback.<\/p>\n
Polls already show that about 60% of the US public is opposed to the war.<\/p>\n
That is high for the early stages of a campaign.<\/p>\n
Trump almost certainly has the audacity to just pull out of the conflict without regard for the regional mess he leaves behind.<\/p>\n
As Antony Blinken (Secretary of State under Joe Biden) told Bloomberg last week, Trump\u2019s off-ramp is simple \u2013 he just declares victory and moves on.<\/p>\n
The factors that might determine the timing of Trump\u2019s inevitable \u201cmission accomplished\u201d speech will be oil prices, financial markets, US inflation and, ultimately, political polls.<\/p>\n
We can only watch and wait.<\/p>\n
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.<\/p>\n