The election will be fought on the state of the economy and the rising cost of living. Basking in the success of the pandemic response is well and truly over for Labour
Opinion: In March 1991, after the conclusion of the first Gulf War, President George HW Bush’s approval rating with the American public reached an unprecedented – and still unmatched – 90 percent. Yet, less than 18 months later in August 1992, 64 percent of Americans disapproved of the President’s performance, foreshadowing his defeat in that November’s presidential election by the then little-known Governor of Arkansas, Bill Clinton.
A key explanation for this remarkable turnaround and evaporation of public support was provided by Clinton’s strategist James Carville who quipped “It’s the economy, stupid” when asked during a television debate about the top campaign issues. At that time, 10 million Americans were unemployed, inflation was rising sharply and the country was facing record deficits. The President’s foreign policy achievements, so strongly supported in 1990-91, had quickly lost their aura compared with the economic crisis facing American households, especially as the President now appeared to have no immediate answers.
Bush’s earlier success in the Gulf War actually compounded his problem. He had been so successful in dealing with the Gulf crisis that it was assumed by the American people that he would be similarly successful in solving the economic crisis. When he proved unable to do so, he was punished electorally all the more severely by an electorate that felt let down.
Some may be tempted to draw local parallels with Labour’s slump, coming off the record surge in support it attracted over its initial handling of the pandemic, but that would be going too far at this stage. For a start, Labour’s peak in support in 2020 was nowhere near as high as Bush’s ratings in 1991. Nor has Labour’s slump yet been as severe as Bush encountered in 1992.
Nevertheless, there are strong warning signs that Labour, and for that matter National, would be foolish to ignore or downplay. It is clear next year’s election will be fought on two basic, interrelated issues – the state of the economy and the rising cost of living. The pandemic and how it was handled will be a distant memory, with voters now more focused on rising prices and mortgage rates, and their impact on household budgets.
While many people understand that external influences – such as the war in Ukraine – largely beyond New Zealand’s control, are significant contributors to these rising costs, they still expect the government to be taking action to minimise the impact on their lives. The government’s problem is that if it does not “do something” or it takes actions that are ineffective (that is quite likely given the international scope of the problem), it will nevertheless be blamed by citizens for their plight.
Around the world, governments of the right and left, are all experiencing this reaction at the moment. Governments as diverse as the Biden administration (likely facing heavy losses in November’s mid-term elections), or the British Government (where unprecedented political ineptitude has compounded the country’s already dire economic problems) are equally facing the public’s anger.
While National’s tax cut plans are not nearly in the same league as Truss’ now-aborted plan, they risk being similarly ridiculed if National proves unable to satisfactorily explain how they will be funded
In New Zealand, moves taken earlier this year to soften the impact of the rising cost of living on households (the public transport subsidy, the cut in fuel excise tax, and the one-off $350 payment) are all coming to an end shortly. But the cost of living is still rising, and is likely to do so well into next year. So far, the Government’s response has been to point out what it has already done, and to keep emphasising that much of the bad news is because of circumstances beyond its control. But there have not yet been any hints it has further measures up its sleeve to ameliorate the impact on households. And that is what people are most interested to hear.
Already, the political impact is becoming apparent. Whereas during the first two years of the pandemic Labour was, according to the polls, rated far more strongly than National on economic management, that has now reversed. Recent polls show National is now viewed more favourably than Labour on inflation, the economy, housing and law and order. They also show that for the first time since Labour came to power, the majority of women are expressing support for National, almost certainly reflective of the impact of rising prices on the household budget, given that women are still far more likely to be doing the family shopping than men.
Carville’s mantra seems to be holding true again. It is apparently still all about the economy, and Labour is facing the almost impossible task of balancing expectations about what it can achieve with rapidly changing circumstances, largely beyond its control. The heady days of basking in the success of how well the pandemic response was handled are well and truly over.
But there are also strong warnings for National in this. Public impatience with the deteriorating economic situation mean there is also little tolerance for fanciful solutions, as Liz Truss quickly discovered in Britain. People are looking to politicians to provide real answers to the difficulties they are facing, so are not taking kindly to policies that defy credibility.
While National’s tax cut plans are not nearly in the same league as Truss’ now-aborted plan, they risk being similarly ridiculed (and not just by Labour alone) if National proves unable to satisfactorily explain how they will be funded, and who the winners and losers will be. They should not forget Sir John Key’s devastating “Show us the money, Phil” riposte that destroyed Labour’s 2011 campaign!
With public confidence waning and becoming increasingly brittle, restoring the economy has become the major focus for politicians on all sides, heading into election year. They should not forget, as George HW Bush found out in 1992, that talking about other issues or relying on past achievements when voters are more immediately worried about the economy and making ends meet will never be a winning strategy.