NO POLLING DIVIDEND FOR LABOUR FROM 2008 BUDGET

UNCLAS SECTION 01 OF 02 WELLINGTON 000174

SIPDIS
SENSITIVE

STATE FOR STATE FOR EAP/ANP
PACOM FOR J01E/J2/J233/J5/SJFHQ

E.O. 12958: N/A
TAGS: PGOV PHUM KDEM NEW ZEALAND
SUBJECT: NO POLLING DIVIDEND FOR LABOUR FROM 2008 BUDGET

REF: WELLINGTON 168

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1. (SBU) Summary. Recent polling showed that the Labour
Government's 2008 budget failed to provide any boost to its flagging
popularity. In fact, Labour lost ground in all three post-budget
polls as the opposition National Party gained support. PM Helen
Clark also lost ground to National Party leader John Key in
preferred Prime Minister polling. Although some of the Government's
support parties, the Greens and New Zealand First, received a
post-budget bounce, Labour's anticipated tax cut program was not
enough to appeal to voters. With the economy foremost in voters'
minds in 2008 and National delaying presentation of its own economic
package, the election outcome is by no means decided, but
increasingly Labour's prospects and options are narrowing. End
Summary.

Labour Gets No Bounce for Budget 2008
--------------


2. (SBU) The results of three separate polls, the first after the
Government's free-spending, tax-cutting May 20 budget, were a
disappointment for the governing Labour Party (Reftel). Contrary to
previous elections, the polls all show that Labour failed to receive
any bounce from its election year budget goodies. In fact, Labour
actually lost ground to the opposition National Party. In
minimizing the bad news, Prime Minister Clark predicted that voters
will not make up their minds until just before the election, when
they realize that National will not be able to afford its economic
policies.

Labour More Popular Before the Budget
--------------


3. (SBU) In the May 30 Herald Digi-Poll, where two-thirds of
respondents were polled before the budget and almost one-third
afterwards, the overall party vote showed that Labour dropped one
point to trail National 51.5 percent to 36.2 percent. In this poll,
Labour was actually more popular pre-budget than it was post-budget,
dropping 1.2 percent in that period. PM Clark even dropped 3.6
points in the wake of the budget and continued to trail National
Party leader John Key in the Preferred Prime Minister stakes.


4. (SBU) The June 1 Colmar Brunton poll, the country's most
prominent political survey, also found that the plethora of new
spending programs and long-waited tax relief in the Budget did
nothing to arrest Labour's downward trend, as it crashed six points
to a very low 29 percent. National, on the other hand, ticked up
one point to 55 percent. This 26-point gap is the biggest between
the parties in the last seven years. Clark also suffered in
personal polling dropping one point to 28 percent where Key gained a
point to grow his lead over her to 8 points.


5. (SBU) The 3 News - TNS poll, also released on June 1, echoed the
previous two surveys in recording a drop in support for Labour.
This poll showed Labour registered a drop of three points to 38
percent, while National gained two points to 50 percent. Asked
their choice of PM, 35 percent of respondents choose Key (up six
points) with 29 percent preferring Clark (down three points).

Support Parties are Budget Beneficiaries
--------------


6. (SBU) Although Labour did not get any post-budget bounce, two of
its support parties did better. The polls showed that Foreign
Minister Winston Peters' party, New Zealand First, was rewarded with
an increase in post-budget voter support after it took credit for
extra spending for the national superannuation scheme and law
enforcement. The Green Party was also the recipient of some
post-budget support after it claimed success for new environmental
spending.

Comment
--------------


7. (SBU) Labour's poor polling in the post-budget period, where
past governments have traditionally recorded a bounce, is one more
worrying sign for the struggling Labour Party. This is especially
troubling as polls consistently show that the economy is the
electorate's most important issue in this election year. The
National Party has not yet divulged details of its economic policy
and the size of its much anticipated tax cut program (Senior
National MPs have told us, they will only be released closer to the
election scheduled for October/November). National's challenge will
be to convince the public that they can manage the economy better
than Labour by providing more tax cuts while not cutting back on

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popular government social programs or borrowing. At the moment,
however, National is not feeling too pressed for details and
continues to benefit from the Labour Party's inability to do
anything to captivate the public's imagination. One pundit recently
quipped that Helen Clark could announce a cure for cancer and it
still would not push Labour up in the polls. With five months left
before the election deadline, the outcome is by no means decided,
but increasingly Labour's prospects and options are narrowing. End
Comment.

McCormick