Ardern’s support crumbles with New Zealand’s economy

New Zealand Prime Minister Jacinda Ardern suffered another blow this week, with Roy Morgan reporting that her Labour Party coalition remained well behind in the polls, trailing the National coalition by 6.5 percentage points:

New Zealand voting intentions

New Zealand voters have abandoned Jacinda Ardern’s Labour.

As shown above, support for Ardern’s Labour Party began to fall in October 2021 after the Reserve Bank of New Zealand (RBNZ) commenced its rate hiking cycle. Since then, Labor’s vote has plunged a whopping 11.5%, meaning it would comprehensively lose office if an election was held now.

The surge in inflation, cost of living and interest rates has driven both consumer and government confidence to near record lows, suggesting Kiwis are extremely unhappy and blame the government for their plight:

New Zealand consumer and government confidence

Kiwis are unhappy, and they blame the government.

The collapse in consumer confidence is also a bad omen for New Zealand’s economy, given its historically strong relationship with household consumption – the economy’s biggest growth driver. As illustrated in the next chart from ANZ, consumption spending is likely to collapse to recessionary levels if past correlations hold:

Consumer confidence versus consumption spending

A consumption-driven recession on the cards?

This view is supported by survey data from economist Tony Alexander, which showed that a record net 27% of respondents plan on cutting consumption spending over the next 3 to 6 months. This comes off the back of a sharp fall in confidence about the future, with a record net 29% of respondents pessimistic:

New Zealand spending intentions

New Zealand spending intentions crash.

The RBNZ on Wednesday hiked the official cash rate (OCR) another 0.5% to 2.5%, which was the third double rate hike in a row. It also signaled further aggressive interest rate hikes in a bid to tame inflation, and recommitted to its ‘forward track’ guidance of a 3.9% OCR by September 2023, which would coincide with next year’s election.

Also on Wednesday, the Real Estate Institute of New Zealand reported that house price falls had accelerated and broadened to every major market.

The prospect of a deteriorating economy, rising mortgage repayments and falling house prices are a lethal cocktail for Jacinda Ardern’s Labour Government, whose biggest roadblock to re-election is now the RBNZ.

Unconventional Economist
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Comments

    • Hugh PavletichMEMBER

      What is concerning many New Zealanders is that leader Christopher Luxon anf the National Party are so incompetent and ineffective, that they (National) could lose the next what should be unlosable election later next year.

      They know full well New Zealand could not cope with a 3rd term of Labour. It was covid that won Labour the 2nd term October 2020.

      No wonder so many are keen to get out before the next General Election later next year !

  1. I’m sure there are plenty of opportunities for some photo op hugs and kisses yet! Not unlike the right wing loons, plenty of rusted on support for all the imaginary progress on offer from the princess of progressives.

  2. DingwallMEMBER

    Like us, the NZ “economy” (ie housing ponzi) needs a good unblocking and a couple of solid flushes……… it stinks

  3. If she wants to boost her popularity she should just arrange another mosque shooting so she can strut the national and international stages in a hijab, condemn terrorism etc etc. The MSM would be all over her, and her stocks would soar.

  4. Hugh PavletichMEMBER

    Cost of living crisis: New Zealand voted second worst country to move to … New Zealand Herald

    https://www.nzherald.co.nz/lifestyle/cost-of-living-crisis-new-zealand-voted-second-worst-country-to-move-to/A6QHYJL343H4HM7UVA5FLV6AVA/

    Employers and Manufacturers Association says NZ’s high cost of living, housing putting overseas workers off … Ireland Hendry-Tennent … Newshub (regrettably VIDEO not available outside New Zealand)

    https://www.newshub.co.nz/home/new-zealand/2022/07/employers-and-manufacturers-association-says-nz-s-high-cost-of-living-housing-putting-overseas-workers-off.html

    • SkepticviewerMEMBER

      SO where are you Australia – clearly Australia hasn’t imported enough non-English speaking uber drivers or crushed wages, and workers’ rights while not giving rats about health and safety, its a winning plan so why not. Also, Australia needs to overload its health system with dumped Grannies and fly-ins for free treatment. Australia has done a poor job. However with the new low-skill mass immigration about to kick in along with High energy costs – east coast – and zero rental properties being available. That together with increased climatic effects (due in part to crush loading urban areas with squeezing them in apartments) could change the position and it is a challenge– just a big effort and Australia should be able to make number 50 instead of number 9. Oz-e Oz-e Oz-e

  5. Albo’s future write large just because he can open the gates but can’t pull a trigger.

  6. NZ sentiment index going to get even worse & more & more people will switch from spending to saving/paying down debt. As Keen has illustrated when people do this en masse in a credit based consumer economy deflation can occur, will this change in mind set trigger deflation? And wouldn’t this “entrenched” mind set be worse than “entrenched” inflationary mindset?

    • Yet there are plenty of slow learners in Australia who still think Ardern is wonderful and worth emulating.

  7. Hugh PavletichMEMBER

    UPDATE … China’s Troubled Property Market Has Global Investors On Edge …

    China Property Market Shudders as Buyers Threaten to Stop Mortgage Payments (incl VIDEO) … Cao Li and Rebecca Feng … Wall Street Journal

    https://www.wsj.com/articles/china-property-market-shudders-as-buyers-threaten-to-stop-mortgage-payments-11657810077

    “The Damage Could Be Huge”: Chinese Banks Tumble, Swept Up In Mortgage Nonpayment Scandal As Borrowers Revolt … Zerohedge

    https://www.zerohedge.com/economics/damage-could-be-huge-chinese-banks-tumble-swept-mortgage-nonpayment-scandal-borrowers

    On Friday, shares of China’s banks extended their slide to a two-year low amid fears widespread mortgage non-payments would spark contagion within the banking sector (see “China On Verge Of Violent Debt Jubilee As “Disgruntled” Homebuyers Refuse To Pay Their Mortgages”) even after the local banking and insurance regulator said it will maintain continuity and stability of financing policies for the real estate sector. … read more via hyperlink above …

    Is China Stumbling Into Its Own Mortgage Crisis? … Analysis by Shuli Ren | Bloomberg … The Washington Post

    https://www.washingtonpost.com/business/is-china-stumbling-into-its-own-mortgage-crisis/2022/07/14/c2099a3a-0359-11ed-8beb-2b4e481b1500_story.html

    Homebuyers in China are boycotting mortgage payments, deepening the country’s real estate crisis and fueling fears of contagion … Richard Frost and Bloomberg … Fortune

    https://fortune.com/2022/07/15/china-mortgage-boycott-homebuyers-real-estate-property-debt-crisis-evergrande-contagion/

    • Hugh PavletichMEMBER

      China Mortgage Boycott Data Erased by Censors as Crisis Spreads … Bloomberg
      … behind paywall …

      https://www.bloomberg.com/news/articles/2022-07-15/china-mortgage-boycott-data-erased-by-censors-as-crisis-spreads?srnd=premium-asia

      China is censoring crowd-sourced documents tallying the number of mortgage boycotts spreading across the country, potentially hampering a key source of data for global investors and researchers tracking the property crisis.

      Shared files managed on platforms including China’s Quora-equivalent Zhihu Inc. and on sites like Kdocs and Wolai have been banned following reports that the number of homebuyers refusing to pay mortgages surged in a span of days. GitHub, a popular file-sharing site for coders, remains as a source for people to post documents.

      The file sharing has provided a key battleground for homeowners who are shunning mortgage payments for apartments that haven’t been built on time. The information also offered a gauge for global investors and banks from Nomura Holdings Inc. to Citigroup Inc. to measure the scale of the unfolding protests.

      Lenders have said the bad housing loans are controllable. But the spike in incidents is fueling concerns that the property troubles — which have largely centered on developers following a government crackdown on excess leverage — will engulf big banks and China’s middle class, who have an estimated 70% of wealth stored in real estate. … read more via hyperlink above …

  8. Hugh PavletichMEMBER

    United States housing; Metros with the largest price falls June …

    Zillow Reports BIG Home Price Crash in 10 Cities (50% in One Year) … Reventure Consulting … Youtube

    https://www.youtube.com/watch?v=zLWSXpAhIGY

    New data from Zillow is showing a big crash in Home Prices in 10 Cities across America. Yet another sign of the 2022 Housing Crash.

    Cities like Denver, Los Angeles, San Francisco, and Austin had Home Value Drops in June 2022 according to the Zillow Home Value Index (“Raw Mid Tier”). https://www.zillow.com/research/data/

    These declines were so big that they set records – even worse than the 2008 Crash. A trend that is likely to worsen in future months as the Federal Reserve and Jerome Powell continue to hike Interest Rates. Just as the US heads deeper into a Recession.

    The Top 10 Metros with the Biggest Home Price Crash are:

    10. Denver, CO
    09. Portland, OR
    08. San Francisco, CA
    07. Los Angeles, CA
    06. San Diego, CA
    05. Provo, UT
    04. Boulder, CO
    03. Salt Lake City, UT
    02. Austin, TX
    01. San Jose, CA

    They range from a -1.4% MoM decline in Denver to a -4.3% Drop in San Jose. Annualizing these figures reveals some crazy future home price declines if these trends hold.

    Demographia United States (188 markets) Housing Affordability Report Release … Wendell Cox … New Geography

    https://www.newgeography.com/content/007483-demographia-us-housing-affordability-2022-edition-released

    Demographia International Housing Affordability: All Editions

    http://www.demographia.com/db-dhi-index.htm

    Housing Median Multiples – Interesrt Co New Zealand .

    https://www.interest.co.nz/property/house-price-income-multiples#:~:text=Based%20on%20this%20official%20work,on%20the%20US%20housing%20market.

  9. Hugh PavletichMEMBER

    United States housing; Metros with the largest price falls June …

    Zillow Reports BIG Home Price Crash in 10 Cities (50% in One Year) … Reventure Consulting … Youtube

    https://www.youtube.com/watch?v=zLWSXpAhIGY

    New data from Zillow is showing a big crash in Home Prices in 10 Cities across America. Yet another sign of the 2022 Housing Crash.

    Cities like Denver, Los Angeles, San Francisco, and Austin had Home Value Drops in June 2022 according to the Zillow Home Value Index (“Raw Mid Tier”).

    These declines were so big that they set records – even worse than the 2008 Crash. A trend that is likely to worsen in future months as the Federal Reserve and Jerome Powell continue to hike Interest Rates. Just as the US heads deeper into a Recession.

    The Top 10 Metros with the Biggest Home Price Crash are:

    10. Denver, CO
    09. Portland, OR
    08. San Francisco, CA
    07. Los Angeles, CA
    06. San Diego, CA
    05. Provo, UT
    04. Boulder, CO
    03. Salt Lake City, UT
    02. Austin, TX
    01. San Jose, CA

    They range from a -1.4% MoM decline in Denver to a -4.3% Drop in San Jose. Annualizing these figures reveals some crazy future home price declines if these trends hold.

    Demographia United States (188 markets) Housing Affordability Report Release … Wendell Cox … New Geography

    https://www.newgeography.com/content/007483-demographia-us-housing-affordability-2022-edition-released

    Demographia International Housing Affordability: All Editions

    http://www.demographia.com/db-dhi-index.htm

    Housing Median Multiples – Interesrt Co New Zealand .

    https://www.interest.co.nz/property/house-price-income-multiples#:~:text=Based%20on%20this%20official%20work,on%20the%20US%20housing%20market.

  10. Hugh PavletichMEMBER

    Note the size of New Zealand’s economy … about 0.250% of the global one … with Australia’s and Russia’s about the same size.

    New Zealand’s economy is about 40% the size of Greater Houston’s … about $US250 billion New Zealand about $US600 billion Houston.

    The $100 Trillion Global Economy In One Chart … Zerohedge

    https://www.zerohedge.com/economics/100-trillion-global-economy-one-chart

    The $100 Trillion Global Economy in One Chart … Visual Capitalist

    https://www.visualcapitalist.com/100-trillion-global-economy/

  11. TailorTrashMEMBER

    I love the smell of negative equity in the morning …….It smells like ……???……( insert as you see fit ) …

  12. Hugh PavletichMEMBER

    New Zealand: OPINION … Damien Grant: We’re following in Sri Lanka’s footsteps …

    Damien Grant: OPINION We’re following in Sri Lanka’s footsteps … Stuff New Zealand

    https://www.stuff.co.nz/opinion/129269692/damien-grant-were-following-in-sri-lankas-footsteps

    … Sri Lanka’s history since 1948 Independence …

    The Economic Crisis in Sri Lanka … Asianometry … Youtube

    https://www.youtube.com/watch?v=g70ncHcaBiE&t=2s

    Even nediocre would be easier to bear: How NZ lost its mojo … Dr Oliver Hartwich OPINION … The Australian / The New Zealand Initiative

    https://www.nzinitiative.org.nz/reports-and-media/opinion/even-mediocre-would-be-easier-to-bear-how-nz-lost-its-mojo/

    … Today on Stuff New Zealand …

    New Zealand: Can we fix it? Not unless politicians grow up … Kevin Norquay … Stuff New Zealand

    https://www.stuff.co.nz/national/300637193/new-zealand-can-we-fix-it-not-unless-politicians-grow-up

    … extract …

    … “Nonetheless, we lag behind other countries in other areas,” says Secretary to the Treasury Dr Caralee McLiesh.

    “We have among the lowest housing affordability and highest teen suicides in the OECD, and lower average household incomes. And like most other OECD countries, we face longstanding challenges like climate change and an ageing population.

    “We are seeing worrying trends of high and worsening psychological distress, particularly among young people and women.”

    In our special report earlier this month – Slower, Dearer, Harder, is New Zealand broken – we looked at the perfect storm contributing to the feeling that New Zealand was broken. … read more via hyperlink above …

    … with New Zealand’s current housing bubble the riskiest within the OECD … according to Bloomberg recent research …

    World’s bubbliest housing markets are flashing warning signs … Enda Curran … Bloomberg