Pain in the pocket

Tracy Watkins is a real cheer-germ with her front-page piece in this morning's Dom-Post. Under the headline "Prepare for Pain in the Pocket" she begins with this sobering statement:

"Householders should brace for prolonged pain as power and petrol prices rise, and with little relief in sight from punishingly high mortgage rates.
On a day of gloomy economic news yesterday:

* The Reserve Bank refused to hold out hope of a drop in interest rates till the second half of next year at the earliest, despite a housing slump and warnings of a deteriorating economy. And it warned that higher interest rates were "the new reality" due to world events.
* The Government unveiled its first operating deficit in 15 years - $394 million - after falls in world stock markets contributed to a $4.2 billion turnaround in the forecast headline surplus.
* It was revealed a drop in tax revenue, $700 million below forecast, will not affect the Government's plans for tax cuts - but they may have to be phased in more slowly."

This is not the news that the government will want New Zealanders to hear around eight months out from an election. Cullen, whose "prudent fiscal management" had allowed him to amass a massive "war chest" for vote-inducing spending this year remains upbeat, but warns that "the Government might have to tighten its belt as well, but reiterated that his tax cuts would go ahead in the next Budget". Perhaps, but with the tide already going out on Labour, more hits in the voters' pockets will onkly seal the government's fate.