There will be no respite for any of us this year and National has no cure for it.
Anyone who thinks a National government will decrease inflation by cutting public spending is fooling themselves. No matter who is in government, the world is going to be unstable and it will continue to destabilise us. Even if United States inflation stabilises, many other factors will continue to hit us.
Some of the scale of public spending here is caused by the multi-billion multi-year post-Gabrielle (etc) flooding recovery. Some of it by higher overall state spending such as health, every year. More of it is pushed by highly demanding public sector union wage demands keeping unemployment very low and wage inflation high.
Nor is there any intervention a National-Act government might entertain that will bring supermarket prices down from their astronomical highs. Because we are a food exporting nation and food supply certainty is low in multiple commodities including grain, prices for foods here as in our exports will drive high.
But most of the uncertainty, as in 2022, is caused by the Russian invasion of Ukraine.
On July 17th the Russian government announced that it was pulling out of a deal to facilitate the export of millions of tons of grain from Ukraine ports. The arrangement had been in place since July 2022 and world prices had stabilised somewhat in that time. The United Nations chief had, back in June, worried that Russia would do this, and they did.
This is going to cause the same chaos as it did previously. The United Nations Secretary-General said: “At a time when the production and availability of food is disrupted by conflict, climate change, energy prices and more, these agreements have helped to reduce food prices by over 23 per cent since March last year.”
He noted that the U.N. World Food Programme shipped 725,000 tonnes to support humanitarian operations in Afghanistan, the Horn of Africa and Yemen, relieving hunger in some of the world’s hardest hit regions.
Russia has also heavily mined some of the richest grain producing areas in the Ukraine. It is using a very high density of mines to defend the territory it still retains because it does not have enough soldiers to otherwise defend the land it has taken.
Russia is also actively destabilising the largest nuclear powered electricity generator in Europe in Zaphhorizia. This will continue to destabilise energy supplies and energy markets across Europe for as long as this plant is under threat. This is deeply energy-price inflationary.
Russia has also actively destabilised European society with millions of Ukrainians, Belorussians and Russians leaving those countries for Germany and Poland.
Whether it is inflationary or not, Russia has also caused one of the largest environmental disasters Ukraine has faced by sabotaging the Kakhova dam, destroying many towns, and cutting most of the water to Crimea and much of the irrigated farmland that depended on that water.
Russia’s sustained invasion and effective stalemate with Ukraine is also viewed as a massive defence threat to Europe, with Finland and shortly Sweden about to join the NATO alliance. This will ultimately redirect higher spending to defence across both NATO members and others such as Japan and Australia, as much of this aligned world prepares for a wider war, a highly protracted one.
There is no sign that either Russia or Ukraine have the capacity to conclude this war inside 2024 nor any political will to even generate an armistice that might freeze actual armed conflict.
With or without the war, energy prices across the United States and Europe are going through the roof this northern hemisphere summer due in part to heat waves.
None of this is the fault of any New Zealand government be they Labour or National.
Global inflation will likely be led downwards by the aggressive rate rise interventions of the United States Reserve Bank, and it appears to be working.
Here, there is no no sign that interest rates are coming down soon, and there ain’t too many developers left who will build something for sale when prices according to Treasury at Budget 2023 will ultimately drop 21% below peak prices hit in November 2021. No one is going to make money because no one will be selling.
Our core protection from the instability of the world is to the 1.4 million New Zealanders who are heavily subsidised through different forms of welfare including NZSuper.
For the rest of us, we do not have the functioning life we used to and there is no going back to it.
So do not alter your vote on the basis that National will make life cheerier. It won’t.
I’d suggest voting for the party that has the record of keeping people and business highly subsidised by the state against the cruelty the world has for us all.
There will be no respite for any of us this year, except maybe the Barbie movie.
This continues to be Year of the Long Grind. The next Parliamentary term is more of the same.
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