Source: ASB Bank
New analysis from ASB economists challenges the widely held view that Kiwi businesses and households put financial decisions on hold in an election year. While confidence does weaken pre-election, business and household activity tends to be more resilient, ASB’s research finds.
ASB economists drilled into business and consumer data including GDP, business investment, filled jobs and vacancy growth, house sales, household spend and discretionary spend, one year each side of general elections from 2005 to 2023.
“Every election year, there’s a narrative that businesses and households sit on their hands, waiting for clarity before cracking on with plans. But economic data across seven election cycles shows this doesn’t stack up,” says ASB Senior Economist Mark Smith.
“In most recent elections, business investment, recruitment, and consumer spending grew faster before, rather than after the election. We didn’t find clear spending bursts post-election to suggest activity had been paused until the results were clear.
“Contrary to the view that businesses freeze hiring and investment in an election year, total business investment grew in the lead up to five of the past seven elections.
“And, despite businesses saying they would hold back on hiring pre-election, employment has usually kept rising in the lead up to voting, except during the GFC and Covid pandemic.”
ASB found business investment, spending, hiring, and household activity in the 12 months pre-election was consistently stronger than sentiment scores alone would suggest.
This resilience could reflect an understanding that standing still has a cost, particularly for businesses, says Mark. New Zealanders have become more experienced in managing volatility, and election uncertainty will likely be outweighed by bigger economic challenges.
“History shows that when our economy has stalled around an election, it’s because of events far bigger than domestic politics,” Mark says. “The only clear election-year activity downturns came in 2008 and 2020, when New Zealand was dealing with the GFC and Covid-19 pandemic. Arguably, the US-Iran conflict and wider global volatility are a much greater threat to New Zealand’s current economic recovery than the outcome on 7 November, and even these pale in comparison to the more significant events that NZ has had to endure.”
While it’s a common belief that sellers wait to list, and buyers wait to act until after an election, ASB’s analysis found little evidence of an election-related slowdown in real estate activity. House building and sales were largely unaffected, and house prices generally unchanged through election periods.
“Housing decisions are usually shaped by life and family changes. People don’t tend to put a house move on hold just because of an election.
“Elections matter, and the policy that follows matter, but they’re only one of many things businesses and households weigh up. The current election race is tight, but history tells us New Zealanders are more pragmatic than the election uncertainty narrative gives them credit for.”