Dark clouds are gathering on the economic horizon, but can the new government do more than simply complain about the past regime and repeal its efforts to fix the country’s big problems?
This year began with the end of Ardernism: her resignation, the post-Ardern policy bonfire, the progressive dream that you can change the world through the power of good intentions consigned to the flames yet again. The year ends with the beginning of Luxonism which – thus far – is just anti-Ardern, anti-Hipkins, anti-Robertson, anti-their achievements of the past six years. What the old government has joined together the new one will put asunder.
There’s a logic to the relentless destruction of Labour’s legacy. In place of Ardern’s transformational change Christopher Luxon offers us “the turnaround”, a political metaphor in which the nation is a struggling business that can be saved via the effective leadership of a plucky former airline executive. And you can’t turn the plane around if it’s still flying in the wrong direction. Hence the urgency of the 100-day agenda, the high-profile infrastructure cancellations, the last-minute mini-mini-budget.
But a lot of this is marketing. There is an economic storm front bearing down on us: vast and terrible black clouds illuminated by the lightning flashes of Treasury forecasts. Inflation is not expected to return to the target band until the end of next year, interest rates will remain high, unemployment will rise. Economic growth will be driven by immigration – assuming this stays high, GDP per capita will go backwards for the second year in a row.
Most New Zealanders are worse off than they were in 2022, and they’ll be worse off again in 12 months’ time. They’ll look to blame the government, and much of National’s energy is devoted to directing responsibility towards their predecessors rather than themselves.
A day before the mini-budget, Housing Minister Chris Bishop announced an independent review of Kāinga Ora, the state’s housing provider. This will be headed by Sir Bill English who is advising the new government on its transition, so “independent” is a relative term. Bishop is a shrewd political operator: he’s not appointing a former prime minister for this role because he thinks English will be a prudent and impartial investigator. He believes there are bodies buried in the finances, debt and procurement practices of the social housing provider and he knows English will be a devastating prosecutor if he can bring them to light. There will be further reviews. National’s negative campaign against Labour will continue well into next year.
All of this puts the Labour Party in an impossible position. They have to defend their legacy - but they did just suffer a serious election loss so there will have to be some public reckoning, an acknowledgment that their second term in government was less amazing than it might have been. But most of the former leaders of that government still run their party and they believe that their ministry was more amazing than they’re given credit for: the Covid response was world-beating, inflation was not their fault and so on. Internally, the party is litigating whether or not the failure to introduce a wealth tax cost them the election. Eventually, they will have to confront a more difficult question and the more proximate cause for their loss: Covid aside, why weren’t they very good at governing the country?
In the main, Labour lost the Auckland suburbs to National, the urban centres of Wellington and Auckland to the Greens, and the Māori seats to Te Pāti Māori. These are three very different constituencies. Which of them are they addressing as they oppose the current coalition government? In the short term, it would make sense to concede the Māori seats, and perhaps even the Green inner-city ascendency and concentrate on winning back support from National. But over the long term, that could relegate Labour to a mid-tier political entity, a demotion our nation’s oldest political party will be reluctant to accept.
Can Luxon and his ministers do more than whine about their predecessors? Can they execute a triumphant corporate turnaround and pilot our nation’s fragile plane out of the storm and into the sunlit uplands? It’s not impossible. Luxon turned his own party around in just under two years. Their new intake of MPs seems to be reasonable people (at least by parliamentary standards) rather than the parade of sociopaths and predators it presented to the public during its early period in opposition. Their front bench seems competent and clever (parliamentary standards). As National has flourished under Luxon, why not the nation?
Corporations and political parties want to be saved. Most of New Zealand’s dysfunction benefits some vested interest or another and they’ll fight to keep things broken. Many of Labour’s policies were clumsy and often misguided attempts to fix difficult, long-term challenges that required hard trade-offs: funding and delivering water infrastructure (Three Waters), low wages and low productivity (Fair Pay Agreements), building anything (RMA reform). All of these solutions – flawed as they may have been – have been rolled back. The hard problems remain.
At the end of this year, Inland Revenue was supposed to report to the government on the efficiency of the tax system: the bill mandating that has just been repealed under urgency. Which is an odd thing to do if you’re turning the nation’s fortunes around. Wouldn’t you want to know if the state’s primary revenue stream works properly?
The coalition government knows that it doesn’t, and that they have no intention of fixing this: the dysfunction benefits their donors and core voters. So instead of turning the plane around we end the year flying without instruments, the engines coughing and the lights dying as we glide over the distant landscape and into the incoming storm. Merry Christmas.