Inflation and wages gloom weigh heavily in New Zealand’s high-stakes election contest

New Zealanders go to the polls tomorrow as a tightly fought and sometimes tense election campaign winds to a close.

It is a high-stakes contest for Christopher Luxon, who is desperate to hold on to power and avoid the ignominy of becoming the first conservative prime minister to be ousted after just one term in office.

His challenger, Christopher Hipkins, is hoping he can seize back the job he held for 10 months in 2023 when Jacinda Ardern resigned — even though it has only been three years since the Labour Party was unceremoniously turfed by voters.

History might suggest that Mr Luxon will sneak back over the line, given Kiwis tend to give almost all their governments a second chance.

But the prime minister will have to overcome some formidable challenges.

He is not just facing a fragmented and increasingly disenchanted electorate: he is also struggling to infuse New Zealand with a sense of optimism as it grapples with global uncertainty, an exodus of young people, high inflation and a sluggish economy.

Gloom in the suburbs

When you talk to people on the streets of New Zealand, it is immediately obvious their key preoccupation is the economy and cost of living. Followed by daylight.

Public polling backs this up. Almost two-thirds of voters nominate the cost of living or inflation as one of their three top issues. Almost one in three also nominate the economy or petrol prices.

The reasons are obvious: New Zealand might not be in recession, but its economy is anaemic and sickly, with inflation outstripping wage growth.

Everyone has stories of everyday families — including ones on middle-class incomes and heavy mortgages — turning to foodbanks and charities to stay afloat.

This malaise is hardly unique to New Zealand, but unsurprisingly, it is fuelling anger and frustration in the suburbs, with some voters giving up hope in politics altogether.

The ABC meets Kevin at a bus stop near the Queensgate Mall, in the heart of the electorate of Lower Hutt — a key swing seat north of Wellington held by one of Mr Luxon’s top ministers, Chris Bishop.

Kevin is struggling to find work after spending decades as a truck driver. He thinks the economy has gone to pieces. And he is angry with the Luxon government.

“He promised all this stuff three years ago,” he says.

But he is no fan of Labour either. He says politicians are all out for themselves, and he cannot remember the name of the “other chick running it” when Labour was last in power.

When asked if he means Jacinda Ardern, his contempt is obvious.

“Is that her name?” he asks.

“Yeah. That clown.”

Gloom in the city

A sense of gloom is not limited to middle suburbia — in the heart of Wellington’s downtown, not that far from parliament, business owner Mike Ny sits in his beautifully appointed café and wine bar, Glou Glou.

He is much less despairing than Kevin, but says business in Wellington has been hard for years.

“We had COVID, then we had a recession. Then we had the public service cuts. It’s been tough,” he tells the ABC.

The price of everything is going up: “Produce, beans, labour, fuel.”

His younger staff members are also bearing the brunt of rising rent and grocery prices, and are asking him to help out by hiking their wages.

Mike says he sympathises and would love to help out — but the business simply cannot afford it.

“But we just don’t have the margin to do it — we can only push up our prices so much.”

Faced with grim economic prospects, many Kiwis have also been voting with their feet — with significant numbers flocking across the ditch to Australia, drawn by higher wages and a rosier economic outlook.

This has not gone unnoticed by those who choose to stay.

Mikey Venimore, 28, meets the ABC at her central Wellington store, Preloved Charlies, a funky retail space where she sells vintage clothing to young women.

She is optimistic about the trajectory of her business. Her online sales are growing, even though she is worried that the city has lost its spark and has got more of a “sad aura” as young people lose spending power and stay at home more often.

She has also seen a lot of her customers leave the country, lured by the promise of bigger salaries and economic opportunity.

“As soon as they graduate, they are off to Australia, or Europe,” she says.

She says young people talk about moving to Australia and doubling their salaries — and admits the thought of leaving has floated across her mind as well.

“I’m happy that I’m in Wellington, my life here is great … but I do sometimes have thoughts (that) maybe I should have gone to Australia,” she says.

“I’m not going to! But the thought has hit me, that’s the truth.”

So what does that mean for Saturday?

In this climate, re-election looks harder than usual. Much like in Australia, incumbency is a curse.

Labour has hammered the prime minister over his record, saying if voters are feeling dismal about New Zealand’s future, then Chris Luxon should take the blame.

But Mr Luxon is still pitching himself as a business leader who can turn the Good Ship NZ around, nourishing dormant enterprising spirits within the Kiwi community while cracking down on crime and overhauling the country’s struggling education system.

He has acknowledged many Kiwis are doing it tough but argues — with some evidence — that New Zealand has been held hostage to global events, like the war in the Middle East.

Mike Nye sympathises with Mr Luxon — at least on this front.

After all, New Zealand has been buffeted by economic and political forces vastly beyond its control, and its government has limited fiscal firepower.

One thing he would like, however, is a bit more clarity from those in power about what might be coming down the road.

He points out that the government assured businesses that fuel prices would drop earlier in the year, only to watch helplessly as they surged once again due to the conflict in Iran.

“We don’t know what the economic climate is going to look like … I know they can’t control that, [but] more information … would give us more confidence to keep trading,” he says.

He is also buoyed that customers and business owners alike are — perhaps — a little bit less fixated on what the government can — or cannot — do to help them, and are focusing on building their own resilience.

Mikey Venimore sees things slightly differently. She wants to see Luxon replaced by a left-wing government, and will vote that way on Saturday.

She thinks it is “crazy” that New Zealand does not have a capital gains tax, and says the country is much more individualistic than Sweden, where she grew up.

“This country is lacking that ideology that we are a community. This government is very ‘fight for yourself,’ which is not what I believe in,” she says.

“I want [the government] to have an idea on how we build a better future for Kiwis so they want to stay here and have families and actually want to be the future of the country.

“Because right now, they are leaving.”

“And that’s kinda shit.”

Small parties surge

So what does this all mean for the election result on Saturday night?

What is striking is that Labour is not really prospering from the frustrated and uncertain mood in the electorate.

In fact, it is New Zealand’s minor parties that look set to have a great night on Saturday, as they continue to sap votes from the two big players.

Some polls suggest the smaller parties’ combined vote could top 40 per cent of the total at this poll — well up from the 31 per cent last election, and more than double the 18 per cent from the election before that.

New Zealand’s electoral system is also quite different to Australia’s.

Unlike Australia, it has one house of parliament, rather than two, but it has two ways of electing Members of Parliament (MPs), with voters not only electing a local member for their electorate but also registering a vote for a party.

It is very rare for a governing party to win a majority in its own right, and there is zero chance either will get close to that this time around.

And if the result is extremely close, then both Chris Luxon and Chris Hipkins will likely enter into long — and potentially very difficult — negotiations to see who can secure enough support from the other players.

That will not just include the usual suspects like ACT New Zealand, the Green Party and New Zealand First — but could well include newcomers like the Opportunity party led by fresh-faced newcomer Qiulae Wong.

In the last election it was very quickly obvious that Labour was not going to be returned to power and that National would be in a prime position to pull together a new coalition of conservative parties.

It still took time and plenty of wrangling for Mr Luxon to pull together that governing coalition, but the result was not really in doubt.

This time around, it could be quite a bit messier.

There is every chance that the smaller parties will want to wait until the final results come in, including special votes from Kiwis living overseas, before they even agree to kickstart formal negotiations.

Political watchers are predicting that process could drag on for weeks, with one party insider even privately warning there was no guarantee a new government forms before Christmas.

That is unlikely to be welcomed by an already weary and irritable electorate.

But in today’s fraught climate, nobody is going to be surprised by the prospect of yet more political uncertainty.