Forecasting anything in economics, let alone, politics is fraught with difficulty. Its a fools game. But that's not going to stop us. Last year, we argued the Kiwi election in 2023 would feature cost-of-living issues, which have only now made it into the mainstream media. This blog also forecast runaway inflation months before the Reserve Bank saw it coming. So we've got a pretty good forecasting record so far. On that note, here goes:
1. NZ's economy will likely slump in 2023. The supply-side problems which have arisen from our frozen borders have already put huge upward pressure on wages and prices. On top of these effects, the world is now witnessing an energy price shock due to the war in Ukraine. What's more, to throw fuel on the fire, our own Reserve Bank recklessly printed too much money as part of its Quantitative Easing Program these past years.
Consequently, and by law, interest rates are going to have to rise way higher in NZ to counter run-away inflation due to the combination of these factors. I say by law, since the RBNZ has a statutory mandate to achieve medium to long term price stability.
2. Due to the high chance that GDP growth will shortly stall, the next election will center on the terrible state of the economy, not on the virus. Labour will face a hard job to convince voters that it is the best "financial manager" in favor the National Party so will probably lose.
National's spin machine will, of course, promote their leader as being better at business & economics than his Labour counterpart, having had more "real world experience".
3. Assuming the economy will tank later this year and into 2023, even though it won't necessarily be the PM's "fault", Ardern will probably resign before the election. She can say that she did her "job", which was to keep us "safe" from Covid, so should be able to step down with her head held high. The alternative is losing an election and becoming unpopular, which is probably not her scene.