Week in Politics: Inflation, inflation, inflation

6:18 pm on 22 April 2022

Analysis - The prime minister smiled her way through Singapore and Japan this week but back home the highest inflation rate in a generation wasn't something to be happy about.

The scale of the government's problem with the rising cost of living was starkly evident this week as the inflation rate spiked to its highest level in 30 years.

The Consumer Price Index (CPI) for the March quarter was released on Thursday - 6.9 per cent.

"High inflation is a lose-lose for Labour" was the headline on Stuff's commentary, with political editor Luke Malpass saying that short of handing out cash the only lever left on the table was cutting taxes and that wasn't on Labour's agenda.

The CPI increase had been widely anticipated and the blame game began on Tuesday.

On that morning Reserve Bank governor Adrian Orr, speaking to the International Monetary Fund, said all central banks faced the challenge of controlling inflation without causing a recession.

The Reserve Bank can't tell the government what to do, but Orr then appeared to suggest a changed approach to its spending would be helpful, Stuff reported.

"We are going to have to be very clear with our fiscal authorities around what we are doing and how they could assist with more targeted, effective fiscal policies," he said.

Fiscal authorities means governments and, put simply, Orr's comments were taken to mean spending should be reined in.

Governor of the Reserve Bank Adrian Orr.

Governor of the Reserve Bank Adrian Orr. Photo: RNZ / Dom Thomas

Later on Tuesday Finance Minister Grant Robertson held the post-cabinet press conference, standing in as Acting Prime Minister.

He faced numerous questions about what Orr had said and the rate of inflation.

Robertson didn't accept that government spending was fuelling it. He said it was an international problem caused mainly by the pandemic and then the war in Ukraine.

To prove that point, he said inflation in the US was more than 8 per cent and in the UK it had passed 7 per cent.

National Party leader Christopher Luxon chose different countries for the comparison when he spoke on Morning Report - Singapore's inflation rate was 2 per cent and Australia's 3.5 per cent, he said.

Orr's comments fitted well with National's tactic of blaming the government for the soaring cost of living.

Luxon said it was addicted to spending and was making inflation worse.

"We don't need cuts to spending and public services but we do need to make sure that any wasteful spending or any incremental new spending, we're getting a return from it and we haven't been doing it," he said.

When Robertson was challenged on that at his press conference, he said the government was always careful with its spending. "We do our job of making sure that the money we are spending is value for money."

Robertson said it would be "cutting off our nose to spite our face" if projects such as rebuilding the health service and rectifying the infrastructure deficit - which he blamed on the previous government - were cut to save money.

Deputy Prime Minister Grant Robertson

Deputy Prime Minister Grant Robertson Photo: POOL / Stuff / Robert Kitchin

He acknowledged inflation and the Reserve Bank's response to it - raising the OCR - was going to cause a lot of pain to first home buyers who had taken out low-rate mortgages. Some could have to sell their homes, he said.

There seems to be little doubt the crunch is coming and that's bad news for the government.

Robertson was asked at the press conference whether he thought Kiwis blamed the government for inflation, and he said he didn't. Everyone could see the headlines every day about what was happening elsewhere in the world and the international pressures, he said.

However, with some help from National it's a fair assumption that many people do blame the government for what is happening.

A question asked in some polls is whether respondents think the country is heading in the right direction or the wrong direction. Politicians pay a lot of attention to that because it's a strong indicator of voter intentions.

When the majority of voters think the country is heading in the right direction, a government is usually safe. When they don't, it isn't.

A Taxpayers' Union Curia poll published on April 7 asked the question and the result was an almost even split. "There are slightly more New Zealanders who believe the country is heading in the wrong direction," the Taxpayers' Union said.

It was against this background that Prime Minister Jacinda Ardern spent the first half of the week in Singapore and the second half in Japan.

Prime Minister Jacinda Ardern and Japanese Prime Minister Fumio Kishida had their first meeting in Tokyo on 22 April 2022.

Prime Minister Jacinda Ardern and Japanese Prime Minister Fumio Kishida had their first meeting in Tokyo on 22 April 2022. Photo: Supplied by official photographer

The NZ Herald's Thomas Coughlan said she had probably expected a great deal of public interest in her first overseas since the borders were closed.

"Instead, the trip appears to have vanished into a vacuum of disinterest," he said. "On the domestic front, the trip has been squeezed out by the issue that's squeezing everything else: inflation."

He was right in saying it was overshadowed on the home front, but it was a significant and widely reported trip. Ardern was also leading a trade delegation to two of New Zealand's important customer countries.

RNZ's reports covered it throughout as Ardern met Singapore's Prime Minister Lee Hsien Loong and Japanese Prime Minister Fumio Kishida.

In Singapore she announced the launch of a working group on supply chain issues, including data sharing. "By working together we can we can improve the entire supply chain resilience for New Zealand exporters," she said.

While she was there the Solomon Islands signed the security pact with China which until then had been a draft agreement.

It allows China to send police and armed forces to the island nation and warships to a port off its coast, TVNZ reported.

Speaking to reporters, Ardern said there was no need for the agreement. "We have been present, we have been on the ground, we have demonstrated an ongoing willingness to support the Solomons," she said.

There was room for countries like China to collaborate and work together but the presence of warships would signal "a militarisation of the region (that) is a very clear line".

Australian Prime Minister Scott Morrison said the deal was a sign of growing Chinese influence in the Pacific. "This is a very serious issue."

In Tokyo an information-sharing agreement on security issues was on the agenda, without any details being revealed.

"The global strategic environment is volatile and we face unprecedented challenges," Ardern said. "Japan and New Zealand will work together to support economic recovery from Covid-19, combat climate change, promote peace and stability in our region and uphold the global rules-based order."

No caption

MIQ facilities Photo: RNZ / Marika Khabazi

Something else widely reported this week was RNZ's revelation that top health officials agreed in November last year that MIQ was "no longer justified" for most returnees.

The report was based on a document which RNZ said the Ministry of Health tried to keep secret.

"It took another three-and-a-half months, almost 40,000 MIQ stays and seven voucher lotteries before most incoming travellers could enter freely," the report said.

The ministry document showed the Director-General of Health, Dr Ashley Bloomfield, and the Director of Public Health, Dr Caroline McElnay, agreed in November it was time to shift to home isolation.

They had decided international arrivals no longer posed a higher risk of spreading Covid-19 than locals.

The response was outrage from some New Zealanders who hadn't been able to come home because they couldn't get places in MIQ.

One woman, forced to have a traumatic birth alone in Australia late last year, said she went through 10 unsuccessful MIQ voucher lotteries and two rejected bids for an emergency allocation.

"It's disgraceful. So many people desperately needed to get home for whatever reason," said the woman, who wasn't named in the report.

"It's insane. It's really upsetting. It just makes me angry."

Covid-19 Response Minister Chris Hipkins delivers the Covid Update from the Beehive Theatrette on 9 March 2022.

Photo: Pool / Stuff / Robert Kitchin

Covid-19 Response Minister Chris Hipkins told Checkpoint the government didn't ignore any health advice.

"The memo in question didn't actually come to the government… the advice that came to the government was that we should start to remove restrictions," he said.

"And we set out a timetable to do exactly that in a way that was proportionate to the level of risk."

Hipkins said the Omicron outbreak delayed the staged and managed removal of MIQ requirements as it became apparent that two doses of the vaccine weren't going to be sufficient to combat the variant.

National's Covid-19 spokesman Chris Bishop told Morning Report very few infected people were coming through the border in November and he understood the frustration of those who were fully vaccinated and couldn't get in.

Bishop said it was outrageous that it had taken so long for the document to be released.

The ministry initially refused to release it under the Official Information Act and it was given to RNZ after a review by the Ombudsman.

The question of compensation for those who had to pay for MIQ after November came up, but Robertson ruled it out. "What we wanted to do was make sure that our transition away from it was a careful one and I think the right decision was made," he said.

*Peter Wilson is a life member of Parliament's press gallery, 22 years as NZPA's political editor and seven as parliamentary bureau chief for NZ Newswire.

Get the RNZ app

for ad-free news and current affairs