Ardern manoeuvred through one crisis after another but had less success confronting persistent challenges that have hobbled successive governments.
A racist attack on two mosques that left 51 people dead. A deadly volcanic eruption. The coronavirus pandemic.
Over nearly six years in office, Prime Minister Jacinda Ardern skillfully weathered one sudden catastrophe after another and cruised to reelection in 2020. But in the background, New Zealand’s long-standing economic issues — like expensive housing and a high cost of living — continued to simmer.
Now, with national elections less than nine months away and days after her shocking resignation, the future of Ardern’s liberal Labour Party will hinge on how voters perceive she and her government tackled those problems. And with economic momentum falling, interest rates rising and inflation cutting into household budgets, critics, including those in the opposing centre-right National Party, will seek to place the blame at her door.
The weight of those problems is expected to fall on incoming Prime Minister Chris Hipkins, the current education and policing minister, who was nominated at a caucus Saturday to lead the party and, thus, the country. The nomination was formally endorsed Sunday.
“The government’s legacy seems, depending on who you talk to, to either be completely abysmal or the most golden, amazing thing ever,” said Brad Olsen, the principal economist at Infometrics, a consulting firm. “The truth is a bit more between those two marks.”
On Thursday, when Ardern announced her plan to step down, among her detractors was Ben Buist, 49. Speaking in downtown Christchurch, New Zealand, he told of struggling with the country’s cost-of-living crisis and trying to get affordable housing.
“Where’s all the houses she said she’d build?” he said, referring to a flagship campaign promise to construct 100,000 new homes, a pledge that helped bring Ardern to power. Only a fraction of those houses were built during her tenure.
When Ardern notched her surprise upset victory in 2017, New Zealand’s economy was much in the middle, globally speaking, said Brian Easton, an independent economist in the country. “And it is still, today — except the world economy is functioning less well, and so is New Zealand’s,” he said.
The country has a small, open and not especially competitive economy. Its moniker — the “shaky isles” — is an accurate one: at the mercy of global events, highly susceptible to changes in the Chinese economy and at constant risk of natural disaster because it is situated on multiple earthquake fault lines.
As Ardern prepares to step down next month, critics say little has changed economically. Relative to income, New Zealand is the 12th most expensive country in the world to live in, with expensive housing a major concern. Private debt — which includes household debt and student loans — sits at about 147 per cent of gross domestic product, compared with 154 per cent in the United States and 133 per cent in Australia.
Addressing child poverty, which Ardern promised to make a personal priority, is trending downward but remains higher than in comparable economies, especially for single-parent households. Inequality remains stubbornly unchanged, with the top 10 per cent of New Zealanders still holding approximately half of the country’s household net worth.
Ardern’s opponents point to an abundance of new problems and what they see as inadequate solutions for the old ones. But economists say that, especially on questions of inflation and the threat of a downturn, governments do not always hold the answer.
“There’s always that kind of tracking temptation to draw politics into the economy, but the economy doesn’t really care who’s in power,” said Shamubeel Eaqub, an economist based in Auckland, New Zealand’s largest city. “The cycle of the economy is not the job of the government. That is just plain silly.”
But that will be cold comfort to voters squeezed by pocketbook concerns. Ardern’s government has tried to claim credit for record-low unemployment without taking responsibility for inflation, instead pointing out that, at 7.2 per cent, the rate is largely in line with that of comparable economies.
“The average Kiwi doesn’t care if our inflation is lower than what it is in the United States or the United Kingdom; they just care that it’s hitting them,” Olsen said. “A lot of the time, most people don’t actually care what the root cause is; they just want to see it fixed.”
As of December, polls showed support for Labour was at 33 per cent, compared with 38 per cent for the National Party.
Ardern campaigned on a platform of “transformational change” that many pundits say she has not delivered. She has ruled out potentially powerful policy levers such as imposing a capital gains tax and raising the retirement age.
Most of the government’s economic policies have come not directly from Ardern but from Grant Robertson, the country’s deputy prime minister and finance minister. What progress in transforming the economy has been made has mostly been in more unflashy areas, where it could take years or even decades to see their beneficial effects, Eaqub said.
In housing policy, for instance, Ardern’s government has overhauled a long-standing law to promote the construction of apartments and essentially ban zoning for single-family homes in large cities.
“With the benefit of hindsight, I think the reforms that are in housing are going to be seen as transformational,” Eaqub said.
But in the short term, homeowners in New Zealand have more pressing concerns. Home prices in New Zealand fell 12 per cent last year, after surging for years. Previous governments — both Labour and the centre-right National Party — had also failed to rein in the galloping housing prices, a problem that dated back to the early 2000s. For overleveraged borrowers, especially those who must tighten their budgets as interest rates rise, the threat of further home price declines is deeply worrisome.
“There’s a legacy of people paying too much for their housing,” Easton said. “Particularly with low interest rates now rising, it means that there are now people who are really struggling with paying off their housing debt.”
Some analysts credit Ardern’s government on the housing front, saying her administration still led a historic effort that succeeded in actually building more housing, said Morgan Godfery, a political commentator and senior lecturer at the University of Otago in Dunedin, New Zealand.
“Her government has built more houses than any other government since the 1970s,” he said. “These are achievements that have passed without much comment.”
Perhaps Ardern’s greatest legacy, economic and otherwise, was her government’s quick-fire response to the coronavirus pandemic, both in terms of the public health response and the economic support offered to New Zealanders and businesses.
“New Zealand came out better than most. We had stronger economic growth, lower unemployment rates,” Eaqub said. “But we’re experiencing now the same issues as other countries. And the underlying issues in our economy are coming through.”
Whoever wins the planned October election will have to tackle the same hurdles faced by successive governments, including Ardern’s.
Housing, inequality, poverty and health care were issues that kept cropping up and could not be ignored by leaders, said Olsen of Infometrics.
“I just don’t think that’s an option,” he said.
This article originally appeared in The New York Times.
Written by: Natasha Frost
©2023 THE NEW YORK TIMES
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