There\u2019s no shortage of big long-term structural issues to worry about.<\/p>\n
But the structures that maintain our short-term viability remain robust.<\/p>\n
We have open markets, a free-floating currency, a reputable Reserve Bank, a powerhouse export sector and considerable household net wealth (at more than $2.5 trillion; we\u2019re richer than we tend to acknowledge).<\/p>\n
That\u2019s why we still have a good credit rating.<\/p>\n
Immigration and tourism will keep picking up; the country is still beautiful, and the people are still friendly.<\/p>\n
Our housing market will pick up; confidence will return to our big cities and, Bob\u2019s your uncle, there\u2019ll be cranes dotting the Auckland skyline again.<\/p>\n
New Zealand will get its mojo back. It always does.<\/p>\n
But here\u2019s the pressing political issue for the Government: it\u2019s not going to happen before November 7.<\/p>\n
It\u2019s not even going to be close.<\/p>\n
Blame tariffs, blame oil prices or blame the spending spree of the last Labour Government.<\/p>\n
National will surely blame all three.<\/p>\n
However you cut it, we\u2019ve run out of time for economic conditions to materially improve in time for the election.<\/p>\n
We might still see some signs of growth and recovery coming through.<\/p>\n
But there simply isn\u2019t enough time for them to flow through and deliver material benefits for most Kiwis.<\/p>\n
That doesn\u2019t mean National and its coalition partners can\u2019t still win.<\/p>\n
But if they were counting on an economic recovery to do the heavy lifting for them \u2013 and I suspect they were \u2013 then they have big problems.<\/p>\n
We can see it in the polls. This election is shaping up as an incredibly tight race.<\/p>\n
Such low levels of support for National, as a first-term incumbent, are highly unusual.<\/p>\n
It\u2019s more than 50 years since an incumbent was thrown out after one term \u2013 Labour in 1975 \u2013 and a mitigating circumstance there was that their leader (Norm Kirk) died in office.<\/p>\n
Only two other Governments have achieved the feat in the past century.<\/p>\n
Labour was also turfed out in 1960, unforgiven by the public for Arnold Nordmeyer\u2019s infamous Black Budget.<\/p>\n
The only conservative party to lose after one term was the United-Reform Party coalition, thrown out in 1935 against the backdrop of (um, checks notes) … the Great Depression!<\/p>\n
In 1975, though many considered Labour\u2019s Bill Rowling no match for Rob Muldoon, the incumbent Government was also coping with an oil shock and a trade shock (as Britain joined the European common market).<\/p>\n
Former New Zealand Prime Minister Sir Robert Muldoon. Photo \/ New Zealand Herald Archives<\/p>\n
There\u2019s a theme here.<\/p>\n
There\u2019s been a lot of focus on Luxon\u2019s leadership.<\/p>\n
But anyone who\u2019s met him in person will tell you he\u2019s actually very likable. He\u2019s friendly and affable, funny and often self-deprecating.<\/p>\n
I\u2019ve got plenty of left-wing friends who can\u2019t stand him, but I don\u2019t recall them having much love for John Key either.<\/p>\n
Perhaps on camera Luxon\u2019s personality doesn\u2019t resonate with enough strength to be considered a strong asset for National.<\/p>\n
His leadership has also been consistently undermined by both his coalition partners and, at times, his own party.<\/p>\n
But he hardly seems so deficient that it explains the precarious position the party finds itself in.<\/p>\n
No, as the saying goes: it\u2019s the economy, stupid.<\/p>\n
The political aphorism (attributed to Bill Clinton strategist James Carville) remains almost as true as ever.<\/p>\n
I don\u2019t doubt the culture wars have knocked the edge off it for some voters.<\/p>\n
Like the MAGA Republican Party in the US, NZ First continues to successfully position itself as an anti-establishment party (despite having been embedded in that establishment for 30 years).<\/p>\n
The lousy economy won\u2019t shift its base.<\/p>\n
But for National, a party that has always tied the economy to its metaphorical mast, it is the No 1 issue.<\/p>\n
It\u2019s a big problem.<\/p>\n
There\u2019s something quite remarkable about the downturn of the past few years.<\/p>\n
It started as an engineered recession. The Reserve Bank pushed interest rates up rapidly to control post-Covid inflation.<\/p>\n
What\u2019s remarkable is that we\u2019ve now come out the other side \u2013 we\u2019ve been through a cycle of low interest rates and high export commodity prices.<\/p>\n
That\u2019s a traditional formula for economic good times in this country.<\/p>\n
Now interest rates are on the rise again, and there is a risk that the commodity boom runs out of steam.<\/p>\n
In other words, we\u2019ve come back around to the part of the cycle that traditionally slows the economy without experiencing any kind of recovery \u2013 let alone an economic boom.<\/p>\n
When they came into power, Luxon, Nicola Willis and National\u2019s strategists had to be assuming the economic cycle was on their side.<\/p>\n
We all did.<\/p>\n
Everyone was disappointed when the economy couldn\u2019t shrug off high interest rates in 2024, but we smiled and turned \u201csurvive till 25\u201d into a popular business meme.<\/p>\n
Cut to late 2026, and that joke isn\u2019t funny any more.<\/p>\n
It is still plausible that we\u2019ll see the recovery really take hold in 2027.<\/p>\n
That\u2019s what most economic forecasts suggest.<\/p>\n
But trying to convince people of that right now is a thankless task.<\/p>\n
Trust me, I regularly speak to business groups, and I\u2019ve heard the groans.<\/p>\n
Even in a best-case scenario (the Iran war ends tomorrow), it\u2019s unlikely we\u2019ll get enough improvement by November for ordinary Kiwi voters to feel particularly upbeat.<\/p>\n
And the war won\u2019t end tomorrow.<\/p>\n
Based on what we\u2019ve seen in the past couple of months, there appears to be no easy path to a total resolution of the US-Iran conflict.<\/p>\n
I think a reasonable assumption is a stuttering \u2013 two steps forward, one step back \u2013 path towards peace.<\/p>\n
That could take several more months to fully play out.<\/p>\n
Meanwhile, we can expect the price of petrol to keep fluctuating but remain elevated relative to what we were paying last summer.<\/p>\n
Even if inflation has peaked by November, it will still be elevated \u2013 compounding voter anger about the cost of living.<\/p>\n
It will also force the Reserve Bank to keep lifting interest rates.<\/p>\n
Financial markets are currently pricing a 95% chance the OCR will be hiked at the next meeting on September 2, with a 65% chance of another hike on October 28.<\/p>\n
The labour market will still be weak. It\u2019s typically the last part of the economy to improve.<\/p>\n
New data on Wednesday is forecast to show unemployment has risen again.<\/p>\n
Many economists expect it to keep rising into 2027.<\/p>\n
Even if you don\u2019t lose your job, the weakness of the job market will keep wage inflation low.<\/p>\n
That\u2019s technically good news for the Reserve Bank\u2019s inflation fight, but not nearly so appealing for the average worker.<\/p>\n
History suggests National and the coalition Government could still get across the line in November despite the economic headwind.<\/p>\n
But to do so, Luxon and Willis are going to have to sell a broader and bolder vision of where New Zealand is going and how they are going to lead us there.<\/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