Cabinet sources are telling media today that Bill English has a clear majority of support within the National caucus ahead of next Monday's vote.
But it's clear the contest has opened up a fault line over the issue of tax cuts and a sense of impatience on the back-bench about the long-running dominance of John Key's 'kitchen cabinet' of English, Steven Joyce, Gerry Brownlee, Murray McCully and (latterly) Paula Bennett in policy decisions.
Both Judith Collins and Jonathan Coleman have come out against using the growing surpluses for plain tax cuts, and would instead prefer a more targeted family package and more health spending respectively. Both have talked about the need for generational change and of the back-benchers' eagerness to get more involved in the big decisions.
Collins was specific in pointing out the bank bench outnumber the cabinet in a caucus vote where each vote is equal.
"I think the backbench vastly outnumbers the cabinet and I think that for most people in the backbench this is their very first time involved in a leadership contest. I think many of them are very excited by it," Collins told reporters yesterday in Parliament.
"And I also think many of them are actually very unsure because it's their first time," she said.
The issue of how to spend the fast-growing surpluses will be in even sharper focus later today when Treasury's publishes its Half Yearly Economic and Fiscal Update (HYEFU) at 1.30 pm.
Another faultline in caucus
Collins also referred to caucus unease over RMA reforms that would give iwi more of a say in consenting decisions.
"I think iwi have a right, as does anyone else, but I think this country needs to think very carefully about the economic results of being able to say that one particular group can stop anything," she told Isaac Davison in an interview published in the NZ Herald.
Elsewhere, the field narrowed with Simon Bridges and Paula Bennett both indicating their willingness to go for the Deputy Prime Minister role, with Bennett seen as having the inside running to be English's deputy.
"He's a Southland farmer and I'm an Auckland city girl and I think we would make a great combo," Bennett said.
"I think we've got a nice difference in personalities, if you like. I've got my strengths and I've got my weaknesses and he does as well, and together we would make a great team," she said.
Some have suggested there is a chance English could appoint Judith Collins as deputy, but I think that's very, very unlikely given their respective chemistries. English openly criticised Collins in the wake of the publication of Dirty Politics in 2014.
'Housing correction main domestic risk'
Meanwhile, Graeme Wheeler made his final scheduled public statements for the year this morning, giving a speech to Development West Coast in Greymouth on New Zealand's economic expansion.
There was no 'new news' for Official Cash Rate watchers in the speech because he reiterated the bank's November 10 Monetary Policy Statement view that the OCR was likely to be on hold at 1.75% until at least the end of 2019.
"At this stage these developments do not cause us to change our view on the direction of monetary policy as outlined in the November MPS," he said.
"We expect monetary policy to continue to be accommodative, and that the projected policy settings will help generate sufficient growth to have inflation settle near the middle of the target range."
One highlight for interest rate wonks (like myself) was his confirmation that the Reserve Bank's neutral interest had fallen below 4% for the first time.
He highlighted the length and relative weakness of the current New Zealand GDP expansion phase, pointing out it was the second longest in the last 40 years, but also the weakest.
"The overall expansion, now entering its eighth year, is weaker than other post-WWII expansions. GDP growth on a per capita basis has been slow and labour productivity growth has been disappointing," Wheeler said.
"House price inflation is much higher than desirable and poses concerns for financial stability, and the exchange rate is higher than the economic fundamentals would suggest is appropriate."
Risks to GDP growth of 3.75% over next 18 months
His discussion was useful around the risks to the current expansion continuing.
"The main risks to the current expansion lie with future developments in the global economy, and a deterioration in the imbalances in the domestic housing market," he said.
He pointed to the economic and political risks around the new Trump administration and Europe's political turmoil, and also potential financial disruption in China, which is laden with corporate debt and high numbers of bad loans in the formal and informal banking sectors.
Wheeler highlighted various measures showing New Zealand's house values were inflated relative to usual valuation indicators, including that New Zealand's house price inflation was the third fastest in the IMF's measures of 64 countries in the last year to June 30.
"New Zealand also had the greatest deterioration in the median house price to median income ratio of 31 advanced countries in the period 2010 to mid-2016. OECD data indicates that, relative to their long-term averages, New Zealand has the highest house-price-to-rent ratio, and the second highest house-price-to-income ratio among the OECD economies," he said.
He pointed to research showing half of all housing booms ended with busts that lasted four to six years, and that soft landings were rare. He didn't predict a bust in Auckland, but noted a moderation in recent inflation.
"Even though it is too early to be sure, there are some indications that house price inflation in Auckland and other regions may be moderating," Wheeler said.
"This may be a result of the increase in loan-to-value restrictions, higher funding costs being experienced by banks, and tighter credit criteria being applied by banks in connection with financing apartment development and house purchases by offshore residents."
'Low point for CPI probably passed'
Wheeler was more confident in his comments about inflation having finally troughed.
"The low point for CPI inflation has probably passed and, supported by the improvement in global commodity prices in recent months, we expect the December quarter 2016 CPI data to confirm that annual CPI inflation is moving back within the 1 to 3 percent target band," he said.
"As has been the case in several other countries, monetary policy has been made more challenging in New Zealand by low global inflation and zero or negative policy rates in several major economies," he said.
"This has put downward pressure on our interest rate structure and contributed to asset price inflation and upward pressure on the New Zealand dollar. This trend may finally be turning."
Quotes of the day:
John Key after waiting for Judith Collins to finish talking to journalists on his way into Parliament yesterday, and after waving Winston Peters through as well in an unusual bout of bonhomie between the pair:
"Welcome to irrelevancy."
Republican consultant Dennis Culloton advises media on handling Donald Trump (17 million followers on Twitter), in an echo of Mark Twain's famous advice to politicians to "Never pick a fight with people who buy ink by the barrel."
"Never pick a fight with someone who buys tweets by the barrel."
Republican aide John Feehery on Trump:
"He tweets, therefore he is."
Tweet of the day:
"If the press would cover me accurately and honorably, I would have far less reason to 'tweet.' Sadly, I don't know if that will ever happen!"
Have a great day