Prime Minister Christopher Luxon finds right balance on geopolitical tightrope

Prime Minister Christopher Luxon has walked a tightrope when it comes to striking a balance by aligning New Zealand with partners such as Nato and the United States on security at the same time as protecting New Zealand’s economic interests with its largest trading partner, China.

But 72% of respondents to the NZ Herald’s 2024 CEOs survey believe he has struck the right balance; 8% say he hasn’t and 20% are unsure.

Luxon went to Washington DC in July for the Nato meeting where he chaired a meeting of Indo-Pacific Four (IP4) countries — Australia, Japan, the Republic of Korea and New Zealand. The Prime Minister has yet to make an official visit to China. But this year he hosted Chinese Premier Li Qiang for a successful visit.

Li Qiang, Premier of China, with New Zealand Prime Minister Christopher Luxon. Photo / Dean Purcell/POOL

“Communicating clearly to both China and our Western allies that New Zealand is an independent state that has multilateral interests is critical,” says NZ Windfarms’ Craig Stobo.

Together with Foreign Minister Winston Peters and Defence Minister Judith Collins, Luxon has repositioned New Zealand closer to traditional security partners.

“New Zealand has long had to manage this difficult balancing act, and I think the PM has got it about right,” said a major retailer. “His approach is pragmatic on maintaining peace and stability in the Asia-Pacific, while noting the co-operative and enduring relationship we have — and must continue to have — with our largest trading partner.”

Barfoot & Thompson managing director Peter Thompson said there is no harm being part of each camp as both major countries play a significant part for New Zealand. “We can be independent when certain issues rise and but still maintain credibility with trade negotiations.”

But companies with exposure to China were more unequivocal.

“He does need to be careful to play too much to US interests,” said an exporting chair.

Craig Bonner, who runs the Cordis hotel in New Zealand, said Luxon was “too hawkish”.

Aukus or not?

CEOs are less certain when it comes to the big question of whether New Zealand should join technology-based Aukus Pillar 2. A bare majority — 53% — support New Zealand collaborating in the second phase of a defence partnership between the US, Australia and the UK, 12% are opposed and 35% unsure.

The Defence Capability review, expected to be in front of Cabinet in the early part of 2025, will likely look at the benefits to New Zealand.

Air New Zealand chair Dame Therese Walsh is in favour: “We are too small to lose the protection of these nations”.

Foodstuffs North Island CEO Chris Quin agrees: “With the shifting power dynamics globally and in our region, stability has never been more important. We’re also dealing with new threats like cyberterrorism that could impact both our economic and social interests.

“Joining this alliance would give New Zealand access to cutting-edge technology and intelligence, which is crucial for managing our security and keeping our people safe.”

“Definitely not without an FTA with the US and a security guarantee,” urged a trade organisation chief.

A major exporter noted: “I do think overall this is the right thing for New Zealand to do; however this needs to be carefully managed given the importance of China as our number one export market.”

Increase defence spend?

Some 64% of CEOs believe that New Zealand should increase its defence spend given the security outlook; 23% don’t and 13% are unsure.

Many see a heightened risk to regional security which is also reflected in the fact that CEOs rated geopolitical instability the most significant international risk to business confidence.

Said Foodstuffs’ Quin: “While we’re a long way from any regional conflict, it’s important that New Zealand has a well-resourced defence force and partnerships that can act as a deterrent and do its bit supporting peace and crisis elsewhere in the region and the world — the way we hope our friends and allies would support us.

“Defence is also a pathway to a good career for many of our young people — giving them skills, values and a sense of purpose that benefits them, their communities and the wider economy.”