$27 a week and still no further ahead

If $27 a week was the answer, what is the question? ‘‘How do we tackle record inflation when New Zealand food prices are already among the most expensive in the world?’’ Maybe ‘‘how do we fix New Zealand’s housing crisis when our house prices are already among the most unaffordable in the world?’’ Or ‘‘should the Government keep shovelling money out the door after two years of a pandemic that has already seen eyewatering spending and soaring levels of Government debt?’’

Presumably not, since $27 a week doesn’t answer any of those questions. According to some back-of-theenvelope calculations by economist Brad Olsen it barely even answers the question ‘‘can I afford to pay for both groceries and petrol this week?’’ for those who are struggling the most.

According to Treasury forecasts, Olsen calculates inflation will add about $89 to the average household’s weekly bill by the end of this year. Given that the $27-a-week cost-of-living payment has a shelf life of just three months, it seems unlikely there will be much of a payoff for the Government in the form of gratitude from its 2.1 million recipients.

Inflation is settling in for the long haul. Mortgage rates and petrol prices are all headed in the same direction – up. And anyone with KiwiSaver is watching their weekly contribution disappearing into a black hole, and no expectation of return to growth anytime soon.

Those things will still be hurting three months from now. They may actually be worse. It doesn’t seem like great politics to give people something that you’re only going to take away before the problem is fixed.

To give credit where credit is due, other components of the Government’s $1 billion cost-of-living package have already made a difference – cutting bus and train fares has had an immediate and significant effect on transport costs, and has the added benefit of being good public policy. Slashing taxes on petrol, meanwhile, helps those in rural and regional New Zealand who don’t get to access public transport subsidies.

But the Government may have misjudged the public mood. Voters know the Government’s books have been stretched thin by two years of extraordinary circumstances, including those that were beyond its control. Confidence in the Government and economy have turned sharply negative; New Zealand exceptionalism, which ran rampant during zero Covid, has been replaced by a weary acceptance that all is not well in the country right now. The haves are getting richer and the have nots are getting poorer; the future we can offer to young New Zealanders is not enough to compete with the likes of Australia and overseas, and deep-seated problems – soaring house prices, low wages, gangs and crime – have been exacerbated by the pandemic.

Whatever problem needs fixing at the moment, it’s not clear that voters accept any more that it can be fixed by shovelling money out the door in short-term cash injections. Certainly the Treasury doesn’t agree, warning that it will just stoke inflation.

We could see a return to the post-GFC days when the size of the national debt became a very useful bogeyman for National in the 2008 and 2011 elections.

We are paying the price now for those years of ‘‘zero Budgets’’ and under-investment in infrastructure that were the result.

But separating good debt from bad debt is going to take a sales job from Finance Minister Grant Robertson.

And he might find that doling out cash handouts is going to make the sales job that much harder.

The Government may have misjudged the public mood.