The rate hike matters
This Government has placed a premium on the notion that it is reinvesting and spending more money on essential Government services.
3. This is good for the National Party and right of politics
Rightly or wrongly, the National Party has, over the years, enjoyed a reputation with voters for being the better economic manager than Labour. A clear exception to this was in the leadup to the 2020 election when Labour and Robertson clearly stomped all over National’s economic turf. However, as much as voters may be grateful for the Government’s then Covid management, that is now history. The question will more likely be who can guide the economy through a cost-of-living crunch. All things being equal, that should benefit the National and ACT parties. That doesn’t mean they will win the election, but the conditions are favourable.
4. Unemployment could rise again – but not necessarily by much
Labour has continued to hew back to the fact that unemployment is at record lows. That that has been a key aim – and achievement – of the Government, especially coming through the Covid-19 pandemic. But if there is a recession that will likely increase the unemployment rate, which at present is at a near historical low of 3.3%. The actual numerical effect of what the Reserve
Bank expects will be a ‘‘shallow’’ recession remains unclear.
5. It’ll be open season on the Reserve Bank
The overall modern Reserve Bank regime has enjoyed significant crossparty and social support across the economy. That’s because for most of that period it has kept inflation basically in check, meaning interest rate movements have been small and incremental – and when there have been big moves it has favoured borrowers in the form of official cash rate cuts during the global financial crisis and during the early part of the pandemic. National and ACT are taking it to Adrian Orr and the Reserve Bank for letting inflation get too high, while the Greens and various unions are lashing the bank for potentially penalising low-income Kiwis through its sharp rate hikes and an engineered recession.