Effect on election

Govt will need to take careful steps during the tough times ahead

IT is clear that coronavirus will have a big impact on the economy and that it will get worse before it gets better. It could also have a big impact on the election result in September.

It is easier to say that now, before the it becomes established in New Zealand, and before anyone is killed by Covid-19.

This may be the only period in which the effect of coronavirus on the fortunes of political parties can be canvassed without it sounding crass or inappropriate.

Disaster management has always been an important part of the political calculation, and most recently in New Zealand since 2008 over the global financial crisis, the Canterbury earthquakes, Pike River, the mosque shootings, and the White Island/Whakaari eruption.

Politicians will always say there should be no politics in disasters. They know it is impossible for there not to be.

National was seen to have done such a good job after the Canterbury earthquakes that Labour struggled to get a look-in the 2011 and 2014 elections. Its party vote only regained parity with the rest of the country at the 2017 election.

The bar is not high. Prime Minister Jacinda Ardern and Finance Minister Grant Robertson simply have to do a competent job because unless it really mucks up, the Opposition will struggle for relevancy.

National leader Simon Bridges and finance spokesman Paul Goldsmith have to be on solid ground before criticising the Government’s response. There has to be clear failure. No one wants a carping Opposition trying to exploit a crisis.

In a contest between a competent incumbent and an irrelevant Opposition, the advantage is clear and with the election looking like a close-run thing already, any advantage is important.

You need look no further than across the Tasman for a reminder of what a botched response to a crisis can do to a political reputation.

When Ardern exhibited reluctance to raise climate change with her counterpart Scott Morrison this week, it was more about the way it should be raised.

Climate change is so closely linked to the summer bush-fire disaster and the miscalculation by Morrison to be on holiday at the wrong time that it would have been considered offensive for her to have raised it in anything but a careful way.

It was clear from Morrison’s surprise move on Thursday to activate an emergency plan — before a pandemic had been declared — that the coronavirus had given him a chance to reassert his authority, leaving an ambushed Opposition to bleat on about sports grants.

But the coronavirus also presents more risks for an incumbent government to attract blame than a natural disaster such as an earthquake, especially if a relaxation of the border controls were to result in the virus establishing itself.

After a quake, the focus is on

Disaster management has always been an important part of the political calculation

rescue and recovery and it is localised. By contrast, with coronavirus, the Government and its agencies are involved with planning and decision-making every step of the way over public-health preparation and economic management.

The anticipation and anxiety is nationwide and the sheer volume of “information” from across the globe can add to that anxiety.

In view of that, Ardern and Robertson went through a confidence-building exercise last Monday outlining the Government’s preparedness before she left for Fiji and Australia.

While the challenges so far have hardly been arduous, Robertson has been doing a competent job. He has found a reasonable balance between reassurance that contingencies are being made to lessen the impact of the virus and not pushing business any further into the funk it is naturally in.

The prospect of recession is real and while National speculates it would have had a more resilient economy to withstand what lies ahead, ironically the coronavirus downturn has also given Robertson cover for two strong National weapons: the forecast deficit and lower growth.

December’s half-yearly (HYEFU) forecast deficit for the current financial year was seized on by National as a symbol of economic mismanagement by the Government.

The markets didn’t bat an eyelid because it was one tiny deficit in a sea of surpluses. But until Covid-19, National was set to campaign on it at least until the Budget when it looked like the forecasts would be favourably revised.

The Government’s monthly financial accounts since the HYEFU show a surplus, not a deficit, including yesterday’s $1.4 billion in the seven months to January 31. But with the economy stalled, that could switch again with several years of deficit in May’s Budget (the actual result for the June year won’t be known until October).

The difference is that such a state would no longer be seen as a reflection on the Government but the natural consequence of a downturn, lower revenue and higher expenditure on welfare and other measures to buffer the effects on key sectors.

The respective responses to respective crises faced by National after 2008 and this Government were to type. For National, the message to get through the global financial crisis was “restraint is permanent” and getting back to surplus was a priority, without cutting state assistance.

For Robertson, the message is Keynesian all the way and expansionary fiscal policy — with a fortuitous head start in the $8 billion infrastructure announcements in January (and $4b up his sleeve), and the 3.09 per cent increase in welfare payments from April.

The relatively low unemployment rate of 4 per cent and reasonably high wage growth have also given him a platform from which to counter the natural bias against centre-left Governments for financial management.

John Key and Bill English built big reputations for getting New Zealand through the terribly tough times of the GFC and the quakes — a reputation from which National continues to benefit, according to the polls.

Their achievements have since been derided by Robertson and Ardern as “nine years of neglect”.

It is now their turn to show whether they have the leadership to get New Zealand through what will almost certainly be some tough times ahead.