As the unemployment rate hits 5.4%, the highest jobless rate in a decade, PM Christopher Luxon may be regretting his choice of “Fixing the Basics, Building the Future” as his party’s campaign slogan this year. In Auckland, where our elections tend to be decided, the jobless rate is even higher than the rest of New Zealand, at 6.4%. Clearly, the basics remain very much unfixed.
In the December quarter 165,000 New Zealanders were out of work, an increase of 4,000 in three months, and 10,000 more than a year ago. The current rise in unemployment is being widely attributed to people thinking that things are getting better and therefore returning to job seeking…but, apparently, without success. If so, that makes all the premature chatter about the green shoots of recovery seem like a rather cruel deception.
On that point, the under-utilisation rate – i.e. the combined total of the unemployed and the under-employed– remained at its 5 year high of 13%. Young people are bearing the brunt of it, with youth unemployment sitting at 16.5%. The one bright spot in yesterday’s figures was that 15,000 new jobs were created in the preceding three months. However, even these gains have to be regarded as only a limited catch up – given that the New Zealand economy now contains 30,000 fewer jobs than it did two years ago.
Finally, the annual wage growth of only 2% is a five year low, and well beneath the annual 3.1% inflation rate, which all signs suggest is on the rise. Meaning: on average, wage earners are going backwards in the face of the cost of living crisis that the Luxon administration was elected to fix.
Dutifully though, much of the media coverage keeps on cheerleading the signs of a recovery that is allegedly imminent, while also refraining, as one business reporter on RNZ put it, “from pouring cold water” on the prospect of an improving economic outlook. Yes, there are weak positive signs in services, construction and manufacturing, but it is unclear whether these tentative trends will strengthen significantly. Even if they do, which income groups are likely to benefit if and when the recovery finally arrives, and which groups are likely to be left behind? By and large, the “recovery” talk is limited to the 10-20% of income earners who have income left over to indulge in discretionary spending.
Even optimists would have to concede that there is much lost ground on job creation to be made up, within a growing population. That’s even before the job-killing potential of AI is taken into account. If you believe Public Services Commissioner Sir Brian Roche, wider and faster adoption of AI is the path to improved productivity in public service delivery, despite the implications this would have for employment.
Can Luxon credibly promise that by election time, the New Zealand economy will contain more jobs than it did when his government came into office?
Muddling along
Luxon keeps saying that his government inherited a “mess”. This is simply untrue. Somehow the alleged “mess” has repeatedly escaped the notice of the international credit rating agencies. On the eve of the last election, the main credit rating agencies – e.g. Standard & Poors, Moodys, Fitch – all found much to praise in the recent record of stable economic management under Labour and National governments alike:
Global ratings agency Standard & Poor’s (S&P) has affirmed New Zealand’s AAA local currency and AA+ foreign currency credit rating, saying the outlook for the country is stable… “Net general government debt will stabilise at a level that is modest compared with that of most highly rated sovereign peers…”
As recently as mid-2025, the Fitch credit rating agency re-affirmed New Zealand’s very high credit rating, on the basis of the economic policies pursued by successive governments. As the NZ Herald noted at the time:
Fitch praised National and Labour’s “strong longer-term fiscal record”, which included a commitment to prudent fiscal policies across New Zealand’s political spectrum” as evinced by periods of long fiscal consolidation after big shocks.“The incumbent National Party and opposition Labour Party have both emphasised fiscal responsibility,” the commentary said.
Overall, there is no evidence to support the claim that the centre-right inherited an economy in bad shape, and has since been a better manager of the economy. One could argue the reverse. The inflation rate for example, was already declining during the December quarter in 2023 in which National came to power. Currently, inflation is on the rise again.
To the extent that signs of recovery may be glimmering on the horizon, this could be taken as a tribute to the dogged resilience of the business cycle. In the meantime, add it up: we have rising unemployment, major labour under-utilisation, fewer jobs, rising inflation, a flat housing market, looming interest rate hikes, a record number of business liquidations, and a year of massive out-migration by New Zealanders who agree that “building a future” is possible, but only if they build it somewhere else.
Footnote One: Throughout last year and into 2026, firms have been going broke at a rate unseen since the aftermath of the GFC 15 years ago. In 2025, there were 2,867 to 2,934 reported company liquidations, marking a 13% increase on 2024. Reportedly, 60 more firms went belly up in the first 10 days of this year. Some of these business collapses have been caused by the IRD cracking down on Covid-era loans and outstanding tax debts. It also seems that many “zombie” firms that were hanging on for survival during the long recession have finally called it a day.
Footnote Two: In the same week that the unemployment figures were released, the Warehouse announced that over 250 head office jobs would be cut or contracted out, as the retail sector continues to struggle. Obviously, consumers need to have both job security and wage increases above the inflation rate before they can go out and spend on anything beyond the bare essentials. Otherwise, the retail and hospitality sectors will be waiting until hell freezes over before they can expect to see a significant rebound in consumer spending.
Regardless, the government (and the business news pundits) appear to believe the public can be talked into feeling the “confidence” to spend up significantly in retail outlets, cafes and restaurants, even though the income stream of most of the potential customers is (a) inadequate and (b) in constant jeopardy. That being the case, a wave of consumer spending is not only unlikely, but would be nigh on suicidal.
Footnote Three: Among the commentariat, the arrival of better times for those fortunate enough to be in paid employment is said to be almost here, or coming in mid 2026, or due (fingers crossed) sometime this year. Meanwhile, the numbers of rough sleepers are said to be increasing “spectacularly “in the streets of the capital. (A similar trend has been evident for some time even in provincial cities.)
As Wellington City Missioner Rev. Murray Edridge told RNZ this week:“There is no question in my mind that the need we are seeing in our community and the desperation of people’s circumstances are greater than we have ever seen before.” Even so, the government seems to be intent on devising new“ move on” laws aimed at removing the homeless from public sight.
Footnote Four: Given the plethora of signs that any recovery will be (a) weak (b) delayed and (c) of prime benefit to the more affluent…why is the current government not facing the same barrage of sceptical/negative media coverage as was directed at its predecessor?
Footnote Five: Patience, please. As we’re also repeatedly told, job growth and wage growth always “lag.” ( Why should that be?) On that same point: the government’s planned raft of industrial law changes will tilt the power balance in the workplace even further in favour of employers, thereby making the “lags” in job creation and wage growth even longer in future. The future being built is one in which workers rights are going backwards.
Footnote Six: In the interests of fairness, perhaps political accountability should be guided by the principles of the government’s new industrial relations policy. Under the proposed Employment Relations Amendment Bill, employers will be virtually able to fire workers at will, with little or no access to the personal grievance safeguards against unjust dismissal.
Luxon and his team have been in office now or over two years. That’s eight times longer than the 90 day trial period in which new workers are expected to prove their worth, or be fired. By the standards it expects of others, the coalition government should be held accountable for its failure to resolve the cost of living crisis – and dismissed.
Sharon Van Etten’s new friend
Eric Bachmann duetting with Sharon Van Etten? Great idea. Bachmann used to be the writer/lead singer of Archers of Loaf, an indie band that ranked in the early 1990s with Pavement and Yo La Tengo as innovators, in everything from ballads to noise pop. For the past decade or more, Bachmann has been performing as Crooked Fingers, and Sharon Van Etten brings her A-game to their joint new single “Haunted.”
All up, there were three key Archers of Loaf albums (VeeVee, Icky Mettle, and All the Nation’s Airports) and one excellent EP (Vs The Greatest of All Time.) This piano-based ballad comes from the Airports album, and the lyrics treat the oceanic depths as an arena of grim forebodings: