How living costs, jobs and housing are shaping New Zealand’s election

WELLINGTON – Tens of thousands of New Zealanders are leaving their country each year, many crossing the Tasman in search of better opportunities in Australia.Departures are running close to their highest level in more than a decade – a sign of the economic pressures facing the country that politicians are being forced to confront ahead of the Nov 7 general election. Even though New Zealand emerged from a deep recession in 2024, households are still grappling with a high cost of living, below-average economic growth and a weak job market.On top of that is a healthcare system under strain from an ageing population and a volatile global environment adding to the challenges.That leaves the next government with a difficult task ahead: To lift living standards, improve public services and ultimately make New Zealand a more appealing place to live and work.The main contest is between Prime Minister Christopher Luxon’s centre-right National Party and the centre-left Labour Party, led by Chris Hipkins. Both are promising to grow the economy, generate jobs and reduce pressure on households, but they differ on how to get there.National is focused on constraining government spending and getting the books in order, arguing that this will help keep interest rates lower, stimulate hiring and push up wages.Hipkins, on the other hand, wants a Labour government to invest more in new housing and healthcare and to put a greater focus on creating jobs, including through support for more apprenticeships.Labour also wants to change the central bank’s monetary policy mandate, requiring it to consider employment alongside inflation when setting interest rates.Smaller parties will also play an important role in determining who governs.The Greens, which traditionally support Labour and want to significantly boost government spending, have proposed a wealth tax and a 45% income tax rate on high earners to pay for it.New Zealand First, which has supported National for the past three years, wants to create a government-owned bank and lower taxes for small businesses.Here are some of the biggest issues for voters that are set to shape the election.Rising cost of everyday essentialsThe financial pressure facing households has been a central issue in recent elections around the world, as wars in the Middle East and Russia’s invasion of Ukraine have put pressure on food and energy prices.But in New Zealand, the rising cost of everyday groceries has been particularly stark: Bread costs 64% more than three years ago, butter is up 57%, ground beef costs 35% more and milk is up 30%.“The cost of living is top of mind for a lot of households,” said Brad Olsen, principal economist at Infometrics.“Clearly at the moment there are some pretty big pressures, particularly around fuel costs that are really biting. The last time we had a big cost-of-living pressure build-up around that last election we also had such a tight labour market that wages sort of were broadly keeping pace with changes in costs,” he said.Rising cost of everyday groceries is top of mind for voters in New Zealand. PHOTO: BLOOMBERGSuch price increases have prompted politicians across the spectrum to propose significant market interventions aimed at improving competition and lowering costs.National and New Zealand First have proposed splitting one of the two dominant supermarket chains, Foodstuffs, to create a third competitor in order to give consumers access to cheaper goods.Labour wants to make it illegal for big companies to charge excessive prices for essentials including groceries, fuel, banking and insurance.The Greens, meanwhile, want to tackle the supermarket duopoly by buying existing supermarkets and establishing a state-owned chain called KiwiMart.High power billsElectricity has become another pressure on household budgets – and a major election battleground.Prices have risen nearly 9.5% in the past 12 months and 22% in two years, largely because of higher network costs as grid operator Transpower and local lines companies have passed on the expense of replacing ageing infrastructure. Weather can add to the pressure.New Zealand generates most of its power from renewable sources such as hydro, leaving the system vulnerable to dry periods.When reservoir water levels fall, the country relies more heavily on expensive gas- or coal-fired generation, pushing up wholesale prices that can ultimately flow through to households and businesses.In 2024, dry conditions contributed to a dramatic spike in power prices, forcing several businesses to close, including two Winstone Pulp mills.Meeting electricity demand is another, longer-term challenge.Demand is set to surge 68% over the next 28 years, according to grid operator Transpower, as the economy becomes increasingly electrified.It could rise even faster with significant artificial intelligence investment and more data centres.Power companies – most of which both generate and sell electricity – are investing heavily in new projects, including solar and wind farms, to meet that growth.There is broad agreement that New Zealand needs more electricity, but parties differ significantly over how it should be provided, the role of fossil fuels and whether the power market itself needs an overhaul.New Zealand First and the Greens want to break up the power companies to separate their generation businesses and ensure a more competitive supply.National wants to relax planning rules to speed up development of renewable projects, while also establishing an LNG import terminal to ensure security of supply in dry years.Labour proposes a Future Fund that would invest alongside private capital to improve generation and transmission.Not enough jobsNew Zealand’s unemployment rate has climbed to 5.6% – the highest in 11 years – as businesses, faced with rising costs and falling earnings, have become reluctant to hire and expand.Young people have been hit particularly hard, with unemployment among those aged 15 to 24 at about 17%.The New Zealand Institute of Economic Research has described youth unemployment as being at “crisis” levels, pointing to a “perfect storm” of factors including a sluggish economic recovery, rapid technological change and greater reliance on temporary migrant workers in sectors that traditionally employ young people.The economy added 33,000 jobs in the 12 months through June, but there were 47,000 more people over the same period looking for work.Many are part-timers seeking extra hours or second jobs as incomes are squeezed. The slack in the labour market has kept a cap on wages, with average ordinary-time earnings for private-sector workers rising just 3% over those 12 months.Taking a longer view, the median hourly wage has risen 14% since 2023, slightly outpacing the 11% increase in overall consumer prices. The minimum wage has increased just 5.5% since then.Creating more jobs and lifting wages are consequently key priorities for political parties at this election.Labour has proposed programmes to boost home building and infrastructure projects that it says will create jobs, alongside funding to help more school leavers train for roles in trades and construction.National argues its plans to boost capital investment and support private businesses will create more jobs, and wants to encourage more people on welfare to apply for them by tightening benefit obligations.Unemployment rate among young people aged 15 to 24 is at 17%. PHOTO: REUTERSStrained healthcare systemAccess to basic care has deteriorated as the nation’s population grows and gets older, increasing pressure on hospitals and general practitioners.Workforce shortages have compounded the problem, with nurses and doctors heading overseas for better pay and career opportunities.Getting an appointment with a general practitioner has become particularly difficult. More than a third of patients surveyed in May by the Health Quality and Safety Commission had to wait more than a week to see a GP, compared with around 10% just six years ago.Hospitals are also under pressure, reflecting staff shortages, ageing facilities and rising demand.There have, however, been some signs of improvement: 72% of patients received non-emergency treatment within four months of being accepted for care, up from 55% two years ago.The major parties have promised to address staff shortages and improve access to care.Labour wants to offer interest-free loans to help doctors buy into local clinics. It has also promised to accelerate repairs to ageing hospitals and guarantee jobs in the health system for around 2,400 graduate nurses each year.The National-led government, meanwhile, is building a new medical school and the party has proposed additional funding for local doctors.New Zealand First wants to introduce a hospital waitlist reduction fund, so general practitioners can directly arrange treatment, including with private providers.Falling house pricesNew Zealand is experiencing its most prolonged residential property slumps in decades. House prices began falling more than four years ago and remain around 19% below their early 2022 peak.Several factors are at play.House prices began falling more than four years ago and remain around 19% below their early 2022 peak. PHOTO: BLOOMBERGHousing supply has increased after planning changes in major cities encouraged more multi-density development, while a sharp decline in net migration has weakened demand. High unemployment and elevated mortgage rates are also keeping buyers on the sidelines.Falling prices present a dilemma for politicians at this election.Lower prices, in theory, improve affordability, but a prolonged property slump can also weigh on the broader economy. That is because falling property prices can make homeowners feel less wealthy and less inclined to spend on renovations and major household items, dampening both construction activity and consumer spending.That leaves both main parties trying to improve housing affordability without further weakening the market.Labour is proposing a capital gains tax that could reduce demand from investors, while also expanding access to low-deposit loans to help more first-time buyers onto the property ladder.National, meanwhile, wants to maintain tax incentives for investors, arguing that will stimulate demand and more house building. BLOOMBERG