Mortgage rate relief could bring about a breakthrough in the polls that has otherwise eluded Prime Minister Christopher Luxon

When the US Federal Reserve finally started cutting interest rates this week, most Americans were celebrating. But not former President Donald Trump, for him it was a political problem. 

“I guess it shows the economy is very bad if they have to cut it by that much, assuming they are not just playing politics, but it was a big cut,” he told reporters.

This contrasted against the views of Fed Chairman Jerome Powell, a Trump-appointee, who said the US economy was in “good shape” and growth was continuing at a “solid pace”.

The double-whammy rate cut he delivered on Thursday was intended to maintain this strong economy and get ahead of any emerging weakness in the labour market.

New Zealanders would kill to be in the same position. The Reserve Bank has also begun easing monetary policy but under very different circumstances. 

Gross domestic product figures this week showed the economy hasn’t grown in the past two years and has contracted more per capita than after the Global Financial Crisis.

Meanwhile, US gross domestic product grew 3.1% in the year ended June. However, the public have not really appreciated this strong growth, as they have been fixated on rising prices and the ‘vibecession’.

This created an opportunity for Trump, who has accused President Joe Biden and his deputy, Kamala Harris, of “destroying the economy” in an effort to win votes. 

Stable prices and falling interest rates may be a nightmare scenario for his campaign.

Room to move

Back in New Zealand, politicians on the centre-right are hoping that lower mortgage rates and on-target inflation will encourage voters to ignore anaemic growth and rising unemployment.

It has been almost a year since the election and, despite plenty of news and controversy, there has been very little movement in the polls. 

Labour and NZ First have both gained a few points on their election result, while National has slipped slightly. This has narrowed the gap between left and right but not by much. 

Inflation and the cost-of-living has long been the number one issue for voters and any progress on that front should pay dividends for whomever claims credit.

There have been three polls taken since the Reserve Bank first cut interest rates in August and, while they were broadly favourable for National, they didn’t show an obvious bounce.

Labour remains within striking distance of a majority. It would only take a 4% swing in the polls to change which Chris occupies the Beehive’s ninth floor, according to our average.

However, other signals in a recent Taxpayers’ Union (TPU) poll should hearten National, and its coalition partners, as they may be in a stronger position than horse race polling suggests.

But first a disclaimer: the pollster Curia recently resigned from the professional polling body, Research Association New Zealand. Founder David Farrar said in a blog post the complaints process had been “weaponized” against him and he couldn’t cope with the stress.

Some readers may take the view that this makes Curia’s polling less trustworthy. Personally, I take all polling with a hefty grain of salt and will continue to pay attention to Farrar’s results.

The two pollsters with the best track record for voter preference polls are Curia and Verian, which polls for TVNZ, and I don’t expect that to change because of Farrar’s resignation. 

End of disclaimer, and on with the column!

Approval ratings 

Earlier this month, the TPU released its most recent Curia polling report in full. It contained some interesting nuggets which hint at a stronger base of support behind the blue team. 

For example, National picked up more support than other parties when undecided voters were asked to say which way they were leaning.

Luxon has become slightly more popular and was the only politician included in the poll who secured a net positive favorability rating. However, this is a low bar and he is still one of the less popular Prime Ministers in recent times.

Labour leader Chris Hipkins has a net negative rating in opposition, as he did when Prime Minister, and also has weaker support among his own party relative to other leaders. 

David Seymour and Winston Peters were both very popular within their respective parties but unpopular with the general public. The more the public sees them, the harder it will be for National to win everyday voters. 

One encouraging signal for opposition parties was that only 42% of respondents approved of the Government’s performance, with 35% opposed and 19.5% neutral. 

While it does appear that many voters think of Luxon’s National Party as being the best of a bad lot, the public broadly believes it best placed to tackle most big issues. 

The Taxpayers’ Union–Curia poll even put them ahead on health, housing, and the environment! This should be safe Labour territory. 

Remember, this is only one poll. An Ipsos survey from a similar period showed Labour was preferred on health, poverty, and unemployment. Ongoing job losses and healthcare crises will be big vulnerabilities for the Coalition for the remainder of this Parliamentary term. 

That said, the cost-of-living continues to be the top issue for voters and National was rated the best party to fix it in both polls. Tax cuts don’t seem to have moved the dial, but lower mortgage rates will make a much bigger difference to many household budgets. 

Just as Trump worries falling interest rates may scupper his chances at a second term, Luxon hopes mortgage rate relief will bring the polling breakthrough which has so-far eluded him.