One of the recurring themes in recent New Zealand politics is governments that overpromise then underperform. The Ardern government announced things it could not deliver. The current one pledges reforms in sectors it doesn’t really want to change but pretends it does to placate an increasingly irritated and impatient public.
This year, we’ve seen minor tweaks to the banking and grocery sectors and the peculiar spectacle of Finance Minister Nicola Willis promising to confront the head of Fonterra about the high cost of dairy only to be told the price is set by the market.
Instead of the regional entities and lower water bills promised under the Local Water Done Well initiative, many households can expect significant bill increases.
In recent weeks, the coalition has publicly examined its stance on recognising a Palestinian state and announced a close-to-non-existent response to the nation’s energy crisis.
The first of these is a fraught topic. Hamas and Israel’s coalition government have both committed horrific crimes and to favour either side gives the appearance of endorsing their atrocities. But we’re nearly two years into Israel’s occupation of Gaza and many governments around the world, including that of our closest partner Australia, have signalled their horror at the mass civilian casualties, near-total destruction of infrastructure and restriction of aid by acknowledging the existence of a sovereign Palestinian state.
It’s purely symbolic. The formation of a separate state has never looked less likely, but it’s the most effective way to censure Israel’s leadership, which is enraged by the notion that its enemies are a people with “the right to rights” and self-determination. So, when the government announced it was reconsidering its position, it seemed to signal a shift. Only a few weeks earlier, Christopher Luxon had been sharply critical of Israeli Prime Minister Benjamin Netanyahu, saying he’d “lost the plot”.
The revelation that the Cabinet’s decision would be made public by Winston Peters in a speech at the United Nations during leaders’ week was another obvious sign: a change was coming … and then it wasn’t. In his speech, Peters explained we would not recognise Palestinian statehood because there was not a viable state to recognise. Our position remained the same.
Why did any of that happen? There are various theories: that we were going to recognise but were bullied by the Americans, or that David Seymour – fiercely pro-Israel – threatened to bring down the government. The government denies any of this is the case. This was merely a process, it worked through it, and this is where we are, back where we started.
Energy flagging
The dire state of the energy sector is arguably the nation’s most pressing challenge. During 2024’s winter crisis, then-energy minister Simeon Brown announced the government would act “with urgency” to legislate consents for an importation facility to bring liquified natural gas into the country. Nothing happened. In February, it commissioned a report from Frontier, a global energy consultancy. This was delivered in late May and published on October 1.
The government is ignoring most of the advice in the report but is going ahead with building the LNG terminal. Or rather, it will enter a procurement process so a business case can be developed and then enter a budget phase, with the very ambitious goal of having the terminal in place by the winter of 2027.
National’s theory of the energy sector is the market works well but there’s been a lack of investment in “firming power” – sources that can deliver when hydro, wind and solar are low. This is allegedly because of the mixed ownership model, so it has committed to investing government money in building new assets for the energy companies. National sees the major crisis as being the gas shortage, which it blames on the previous government’s ban on oil and gas exploration. It might not be wrong – prices have surged since 2023 as domestic supplies have dwindled. But the ban, which was reversed in July, came after decades of decline. The last major gas field discovery was Pohikura in north Taranaki 25 years ago.
Does the rest of the market work well? It depends who you ask. If you’re a major shareholder in one of the large gentailers, then yes. The market value of the three part-government owned power companies surged by $700 million in the hours after the reforms were announced. If you’re a householder struggling to pay ever-increasing energy bills, switching the heating off in winter because you can’t afford to keep your home warm, the news that the government will use taxpayer funding to help out gentailers is not likely to spark joy.
Even some inside National consider this a high-risk option. By delaying then merely tinkering, it has made itself a hostage to fortune. If it’s a dry year in 2026 and there’s another crisis, the coalition will lose the election and win a place in history as one of our worst governments.
Unwilling coalition
This inability to respond to unexpected challenges seems to be systemic. This is our first three-way coalition, and it’s made up of parties that are conservative, or at least inclined towards the status quo across many policy domains. If a problem emerges and the solution is not spelt out in the coalition agreement, the way forward requires consensus across a rather fractious and discordant three-party cabinet. At least one faction will have a constituency or donor group that wants to keep things the way they are. They’re like three people trying to build a house but their hands are all tied together and none of them is inclined to help each other.
New Zealand First plans to make energy reform a major policy issue next year. It’s probably delighted by National’s inertia on energy. It’s already surging in the polls, feeding off the major party’s weakness. But it will still need Act to form a majority with National, and another three-way coalition would recreate the same dysfunction: a country that needs to move forward led by a government that primarily moves in circles.
