Rising prices to hit Labour

Skyrocketing prices are expected to hit the Labour Government hard this year, as a new poll shows almost half of the country expect the economy to get worse in the next year.

Prices rose by 5.9 per cent over the last year, the highest annual increase in inflation since 1990. Stats NZ said this was driven mostly by rental, transport and construction costs.

The growth in prices well outstripped the growth in wages, which rose by only 2.4 per cent over the last year. This will increase a sense among many New Zealanders, especially those hurt by the Covid-19 pandemic, that it is becoming harder to make ends meet.

It could also lead to further increases in interest rates, putting pressure on people with mortgages. The Reserve Bank will next meet on February 23.

Political commentators said the rise in prices was likely to hit the Government hard.

Consultant Ben Thomas, who worked for the last National government, said rising prices hurt incumbent governments even if it wasn’t really their fault.

‘‘This will be the first time a lot of voters have ever experienced rising prices of this sort, and inflation to this degree,’’ Thomas said. ‘‘In a lot of cases voting is just a referendum on how positively people feel about their lives and their future.’’

Almost half of people surveyed by TVNZ/Kantar said they expected the economy to get worse in the next year, with this measure up two percentage points to 49 per cent. The poll released yesterday meanwhile showed the number of people feeling optimistic about the economy fell seven points to 22 per cent.

Lawyer Brigitte Morton, who also worked for the last National government, said there was little Labour could do in the short term to help people hit by rising costs.

‘‘These cost of living increases hit the people who Labour say they care about the most,’’ Morton said. ‘‘National has already pushed quite hard into that cost of living rhetoric – that will be hard for Labour to push back on.’’

The TVNZ/Kantar poll showed National has enjoyed a slight boost under new leader Christopher Luxon, with party vote support rising to 32 per cent, but much of this rise came at the expense of fellow Right-wing party ACT. Labour remained well ahead on 40 per cent support, able to govern alongside the Green Party.

Luxon attacked the Government yesterday over the inflation spike, saying ‘‘wasteful’’ and ‘‘dumb’’ spending had led to price increases. ‘‘You have to get really clear right now about the nice to have stuff and the need to have stuff,’’ Luxon said.

Asked to identify this wasteful spending, Luxon pointed to a small list of policies that had cost around 0.1 per cent of the Government’s annual budget.

Finance Minister Grant Robertson said government spending wasn’t to blame for the price rises, noting that the average inflation rate across developed economies was roughly the same – 5.8 per cent for the OECD.

‘‘It is a global issue being experienced by most countries. Supply chain disruptions and rising international shipping costs are leading to higher building costs, oil prices and other imported goods prices,’’ Robertson said.