Government risks being overwhelmed by race - Thomas Coughlan

Prime Minister Christopher Luxon and Deputy Prime Minister Winston Peters lead the government delegation onto the marae at Ratana Pa. Photo / Mark Mitchell

THREE KEY FACTS:

• An electricity price spike has seen some firms warn they might close down production facilities.
• Northland iwi Ngāpuhi walked out of a National Iwi Chairs Forum meeting with Prime Minister Christopher Luxon citing dissatisfaction with the Government’s policies on race relations.
• Markets are pricing in a cut to the official cash rate next week.

Thomas Coughlan is deputy political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.

OPINION

Every politician loves to say “I told you so”, and the past couple of weeks have provided plenty of opportunity for the Government to do just that.

Kiwis are currently receiving their first post-tax cut pay cheques. The argument mounted against the cuts is that they were unaffordable and inflationary. Fast-forward a year and markets think there’s a good chance the Reserve Bank will cut the official cash rate (OCR) next week, just 14 days after the tax cuts took effect.

That doesn’t actually mean the cuts are disinflationary, and there’s still a good chance the bank will hold off cutting the OCR till later this year (still earlier than currently forecast), but what it does mean is that the cuts weren’t big enough to impede the national fight against inflation – a win for Finance Minister Nicola Willis.

Move a couple of seats around the Cabinet table to Simeon Brown in the energy portfolio. For six years National and Act had argued the offshore oil and gas ban combined with the Lake Onslow battery project had disrupted the energy market by frightening the crucial gas sector away from investment in New Zealand, while encouraging renewable energy providers to hold off building consented generation, fearful the Lake Onslow project would make them uneconomic or not economic enough.

Previous electricity price spikes in 2021 and earlier this year were less convincingly blamed on these conditions (bad luck and scheduling seemed to be the culprit there). The spike this week, which is likely to see workers laid off, is not so easily brushed aside.

Major electricity users have complained of years of rising prices. More workers could be laid off, households will face higher bills, and New Zealand will export less, exacerbating our terrifying current account deficit which will make more expensive the imports relied on by households to keep inflation low, all thanks to quite unnecessary intervention in the electricity market. Price signals beat virtue signals every time.

Despite factories and households being slammed as a result of these green changes, it’s a good time to be a polluter. Labour’s unusual, unexpected intervention in the Emissions Trading Scheme settings saw the cost of ETS units fall from over $80 a tonne to closer to $50 (National criticised this but hasn’t exactly been falling over itself to fix it).

Move around the Cabinet table again to infrastructure. The Government has begun publishing quarterly infrastructure reports which began in 2022 as a way of keeping Treasury and the Finance Minister appraised of cost and timing challenges across the infrastructure pipeline. These were collated and published annually under Labour, but a change under the coalition, driven by Willis and Chris Bishop, means these will now be published quarterly.

Gas production

The first such report makes grim reading. Projects have blown out by $6 billion (in pre-Covid times this would be the equivalent of more than 10% of New Zealand’s entire national debt). Build times had blown out too, with 40% of all projects in delivery delayed by 20% or more. One mental health facility is 1800% overdue.

These crises, all from the past couple of weeks, are a miracle for a new Government. They confirm the good judgment of voters who picked them over the other lot. Labour benefited from them too. Remember its howls of “nine years of neglect”? That was based on a tactical laying bare of the effects of National’s miserly approach to significant public infrastructure.

The Government is trying to tell this story: Labour made infrastructure cost too much and take too long; it put up energy bills and forced firms to lay off staff, and Labour was wrong to say the tax cuts would be inflationary.

Why then does the public appear so disinterested?

It doesn’t help that at times the Government appears disinterested itself.

The Government is losing control of the conversation on race. Photo / Marty Melville

Parts of the Government are obsessed with race, often to the detriment of its broader agenda. Act and NZ First seem never to miss an opportunity to discuss race relations, with National often stuck in the middle. Public attention is a zero-sum game and time spent talking on one issue means less time on another. The divisive race conversation risks cannibalising public attention which the coalition would be best served by focusing on efforts to rebalance the economy and plug the infrastructure gap.

Or would it?

There’s an argument to be made that Act and NZ First are quite well served by the focus on race relations. Those two parties are often locked in battle with Te Pāti Māori rather than with Labour and the Greens. NZ First, Act and Te Pāti Māori probably all benefit, but National (and Labour too) clearly lose out.

Five of Act’s 12 most recent press releases relate to race, discoursing on matters like Māori wards to hate speech. NZ First doesn’t put out nearly as many press releases, but of Winston Peters’ past 10 tweets, three relate to transgender issues and four relate to Māori affairs. Hardly mainstream stuff.

The reaction has been severe. Leaders from the country’s largest iwi, Ngāpuhi, walked out of the National Iwi Chairs Forum meeting with Prime Minister Christopher Luxon. The forum was, in the Key era, the Government’s main vector for collaborating with Māori. If relations break down further, the Government could find it difficult to push through parts of its agenda, particularly in areas like resource management, where Māori have a powerful voice, mandated by three decades of Treaty settlements. If it is unlucky, the Government may find the time and energy spent on its Māori agenda impedes its ability to govern.

Labour has seen an opportunity. For the first time in a year or more, leader Chris Hipkins is leaning into conversations about race, inviting media to watch an extended speech setting out his vision for a Crown-Māori reset. It’s unclear how successful this will be. The coalition’s approach may be controversial, but voters weren’t exactly crawling over themselves to support Labour’s approach to race relations either.

Part of the problem comes down to the way the Government was formed. In areas like tax, resource management, health and education, the coalition agreements central to its formation read like a single platform created by synthesising the three parties’ manifestoes. On Māori issues, all three parties seemed to get what they wanted. The result creates the feeling that it’s not just one Government bearing down on Māori, but three.

This will reach its nadir on the issue of the Treaty Principles reforms, where both Act and NZ First got policies over the line. We don’t have either of these policies yet, but the Government’s current problems regarding Crown-Māori relations are but a taste of what we’re likely to see when we do.

Act and NZ First have hit upon a real problem.

There is the perception the current state of race relations has moved beyond its democratic mandate. Polling on issues like the Māori wards, the Māori Health Authority, co-governance, and bilingual road signs showed only 19-37% of voters backed them, making them some of Labour’s least popular policies.

Labour behaved underhandedly in legislating them too. Its Māori wards legislation was not campaigned on and later rushed through Parliament; to this day, Labour has yet to offer a detailed explanation for its inclusion of hefty co-governance elements in its Three Waters reforms.

The problem isn’t just the last Government. The courts have frustrated many MPs, past and present, for what they perceive as an increasingly activist approach to Māori issues (many in the legal fraternity argue those MPs are doing a poor job of reading their own legislation).

Māori have since the 1970s come to rely on the courts to have their back, correctly deducing that a majoritarian legislature was never likely to.

The coalition was elected as these views collided. A majority of the public seemed to demand the Government seek a renewed mandate on race relations. Māori realise that if this mandate extends to a radical redefining of the principles, it could curtail their ability to advance through the judicial system, as they have done for nearly half a century. A significant phase in the history of the Treaty will come to an end.

Making matters worse is the Government lacks a voice that is able to convincingly articulate a vision on race and lead the pubic through what is inevitably a fractious conversation. On race, Christopher Luxon resembles one of his heroes, former British Prime Minister David Cameron, whose Conservative Party blew into office on the wings of furies unleashed by anxiety over the European Union. It was only at the end that Cameron realised those furies could never be controlled, much less governed.