The double downgrade is exactly what the government didn't want eight weeks out from an election. But is it really so bad? Or does it speak to a larger narrative?
While today the men of New Zealand have joined the women in their fascination with Daniel Carter's groin, the New Zealand economy is looking like it's pulled a muscle as well, after the double downgrades on Friday. Neither are good news for a government hopeful of an easy run-in to November's election.
But neither are as bad as you may think.
Bill English had every reason to feel as sick as Graham Henry when the Finance Minister appeared on Q+A this morning. He's under pressure as voters ask whether National is fleet-footed and open-minded enough to adapt to what's going on around the world. But he was typically stoic.
Like George W. Bush on Iraq, his message was simply "stay the course". (Although we all know how that unfolded.)
Since the double-whammy news hit on Friday, the government's public response to the downgrades has been to downplay their significance (and Carter's headline-hogging injury does them an immense favour in that regard). Reasonably enough, ministers keep pointing out that we're still in better shape than much of the developed world.
But behind the scenes the government is seriously worried, both economically and politically.
A credit ratings downgrade - let alone two - is a rare issue that National has unequivocally and openly fretted about in the past. Look at the quotes Labour is drawing out of its quiver:
- "Our primary focus for this Budget is to avoid a credit rating downgrade because we think that would add about 1.5% to mortgages for New Zealand homeowners." (John Key, May 2009).
- If a downgrade were to happen, it would add 1-2% of interest on the amount the government borrows, which is around $600 million each year. This, says Key, is to be avoided at all costs. "That's every homeowner, every business, everybody paying 2% more. That would be irresponsible in my view for the government not to act." (Bill English, May 2009.
- “The No. 1 way to see New Zealanders down the road from their jobs is if their businesses cannot be funded. That is what happens when we have a credit downgrade." John Key, June 2009)
- “There is no doubt that a credit downgrade would generally lead to somewhat higher interest rates". (Bill English, March 2011)
There's really nothing good to say about it. No way to dodge. National said a downgrade must be avoided, and they've failed. That's given Labour hope.
Despite that last quote from March, on Q+A English couldn't decide what he thought the downgrades would mean for interest rates in this country. He said "we don't know where it will come out", but that he didn't expect rates to go up as predicted in 2009, before conceding that there would be "upward pressure".
So a good slection of yes, no and maybe in there.
He seemed a little more certain that compulsory KiwiSaver was looking too expensive, which creates another clear line between National and Labour heading into the election campaign. National has been toying with compulsion, but now looks set to reject it. Labour is expected to come out in favour, and will now be able to point to the credit ratings agencies' worries about our private debt and lack of retirement savings as a form of independent support.
All of which puts the heat on National's "muddling through" approach.
John Key misread the economic situation when he took power, predicting that New Zealand would grow "aggressively" out of the recession back in 2009/10. The Prime Minister followed the conventional wisdom, expecting the global recession to act like a conventional recession. English, in his Eeyore fashion, painted a grimmer picture and has been proved the more astute observer.
But whatever was picked, voters are going to start asking what precisely they have done about it.
Answer: The tax switch. And if English is right that $800 million has been taken out of the housing market as a result, that's not something to sneeze at. But the brutal, unspun fact is that the ratings agencies didn't see that as sufficient.
So what else has Key's crew done to kick-start savings? Nothing. That's despite Key's promise in his opening speech to parliament this year that savings was his top priority.
Sadly, National's obsession with tax cuts seems to have blinded them to any other approach; the KiwiSaver cuts, putting the Super Fund savings on hold and selling profitable assets now look like a much greater political risk.
National's conservative approach relies heavily on Australia and China, with English again this morning saying how great it is that the Aussie mining boom is going to need 170,000 more workers. It's just unfortunate for him that 170,000 is the same number of new jobs National has promised to create in the next three years.
Sad no-one told them we wanted them created in New Zealand!
Really, English's approach looks terribly complacent for a party that campaigned in 2008 on stopping workers fleeing the country. He said:
"I think we should be positive about that boom.
His point was that we can create jobs here off the back of that growth, but I suspect all people at home heard was, "We should be positive, New Zealand has lots of skilled workers trained and ready to head off and service that Australian mining industry. Bye bye".
So, on the surface this all looks bad for National. Yes, National is more exposed than it was last week and Key and English's "steady as she goes" reputations have taken a hit. Even though household debt is our fault, it's their problem. And they don't look like they're on top of it.
But that only tells you half the story. And it's not the important half.
Turn the page and you realise that National's polling numbers have stayed at record levels through three years of economic misery.
Why? People are scared. And when they're scared, they get conservative. When they're saving, scrimping and keeping their heads down, they want a cautious government. They certainly don't want change.
National's crucial strength is that voters don't blame it for their economic woes.While the world looks such a mess, it's been easy to deflect that elsewhere. Labour MPs are desperately trying to make something - anything - stick. And eventually they will. But voters, I suspect, think that if it's beyond the likes of Barack Obama and the EU to fix this, we can hardly expect more of the Key government.
So as Labour sees hope in this week's bad economic news, Steven Joyce is probably quietly smiling to himself as well. The more Greece buckles, Italy wobbles and the US stalls, the better it is for National.
The irony is that in this campaign, unlike almost any other, bad economic news is good news for the incumbent.
And Dan Carter? Don't worry, Weepu will get us home.