We’re six months to the day from October’s election and the latest economic forecast from Infometrics paints a bleak picture for Labour’s strategists. 

Infometrics is forecasting high inflation will persist, stuck at 6.6% at the end of this year with a return to a one-to-three percent target not forecast until mid-2025. 

That’s a notably bleaker picture than the Reserve Bank, Treasury, and all the major bank economists have painted so far, although new data next week will give us updated CPI figures which may impact a few takes. 

The curious thing about the Infometrics forecast is that it underscores a growing sense that New Zealand’s inflation battle is diverging from comparable countries.  

CPI data in the U.S this week has a year-on-year rate of 5%, way down from the post-Covid high of 9.1%. The Eurozone went from 8.5% in February to 6.9% in March. And the head economist of Australia’s biggest bank is flirting with the possibility of mortgage rate cuts later this year. 

Meanwhile, Infometrics is forecasting New Zealand’s inflation will remain stubbornly high, and the cash rate could be raised another 50 basis points in the next few months. What’s more, the speed with which mortgage rates have risen will not be matched by the speed of cuts when we do reach the other side.  

So far, the government has blamed much or most of our inflation on international pressures outside of their control: supply chain issues, Covid, and the war in Ukraine. Much of that is fair. We’re hardly the only developed democracy with a cost-of-living crisis. But if New Zealand lags behind comparable countries in bringing inflation down, voters’ patience with that argument will deteriorate quickly.  

The government knows this. There is a reason Three Waters is now called the Affordable Water Reforms, even though it delivers fewer savings and is less affordable from a ratepayer perspective than the previous model. There’s a reason we’ll hear “bread-and-butter” over and over again. But slogans and branding will only help so much, and for now Grant Robertson is still planning a significant operating allowance in the budget next month.  

The Infometrics forecast make it crystal clear. Forget co-governance or education, climate change, mental health, or the All Blacks prospects at the World Cup, six months today the 2023 general election will be decided by voters with an intense focus on their back pockets. And if New Zealand isn’t making meaningful progress on taming inflation and other countries are, it’ll be that much tougher for Labour to win a third term.