The economy a key focus for the 2023 election, Infometrics Misery Index shows
The economy is a key focus for the 2023 general election, with the high cost of living the most crucial reason the incumbent government could be viewed poorly by Kiwi voters, according to a new Infometrics analysis.
The Infometrics Misery Index suggests a more challenging economic environment for the incumbent government to retain power, having witnessed one of the worst changes in inflation in the last half-century.
The Misery Index, which examines the changes in economic trends in the latest electoral cycle and how these changes might influence how Kiwi households cast their votes, showed a weakly positive result of 0.6 over the 2020-23 period, within the +5 to -5 range in the index.
Stronger economic changes usually indicate that an incumbent government would be retained, and worse economic changes would suggest the incumbent is removed.
“Although the aggregate Misery Index score is positive, the result has one of the wider ranges in scores,” said Brad Olsen (pictured above), Informatics CEO and principal economist. “Despite various sides of the political divide either glossing up or drumming down economic trends, the reality shows that economic outcomes have been decidedly mixed.”
Olsen noted that the high cost of living has been ranked as the most important issue for New Zealanders in several public polls.
“Infometrics analysis shows that, since June 2020, average household costs (excluding mortgage repayments) have increased by around $240 per week, according to average household spending and the consumer price index (CPI),” he said.
The Infometrics analysis also noted how moderate economic performance has concealed bigger economic shifts.
The underemployment rate is currently near record lows at 3.6%. Economic activity has also been stronger in recent years as the economy bounced back from the challenges of the pandemic.
However, inflation in New Zealand peaked at 7.3%pa in 2022, which was the “third-worst inflationary change since the 1970s during a period of government,” Olsen said, adding that this rapid rise in inflation “came after more than a decade of price stability with much more lower price increases.”
The Infometrics economist said the deterioration in the current account balance (as a share of GDP) has been similarly rapid, increasing from -0.9% of GDP at the end of the 2020 term of government to a peak of -8.8% at the end of last year.
“It has recovered only slightly, to -7.5% of GDP, in the most recent data to June 2023,” Olsen said.
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