Prime Minister Christopher Luxon is intensely focused on economic growth. Photo / Mark Mitchell
Prime Minister Christopher Luxon is intensely focused on economic growth. Photo / Mark Mitchell
Opinion by Thomas Coughlan
Thomas Coughlan, Deputy Political Editor at the New Zealand Herald, loves applying a political lens to people's stories and explaining the way things like transport and finance touch our lives.
On Thursday, Finance Minister Nicola Willis released an economic growth plan, saying a growth focus would give New Zealand the economy we want, and pay for the public services we need.
On Friday, Kinleith Mill announced it would shut down paper production, losing 230 jobs.
Those might have been the only things New Zealanders remember about this torrid week for the Government, had it not been for some even bigger distractions in the form of a three-day news cycle sparked by Act leader David Seymour ill-advisedly driving a vintage Land Rover up the steps of Parliament and scrapping with the Prime Minister over a letter written in support of Philip Polkinghorne in 2022 when he was a murder suspect following his wife Pauline Hanna’s suspicious death (he was later found not guilty).
Ordinarily, a Government blasted by two polls on the same day showing it would lose office might try to be on its best behaviour, but this Government, it seems, was not listening.
By the time the next round of polls come around, voters may decide to send the message a little louder.
David Seymour starts to drive a Land Rover up the steps of Parliament. Photo / Act Party
Seymour’s Land Rover stunt was a harmless photo-op for a good cause, but his rudeness to the Parliamentary security guard inexcusable. Coming when it did, at a time of immense economic pain, the sight of that poor car wheezing its way up those famous granite steps risks becoming a symbol of a Government that has lost its way. If this Government is a one-termer, images of Seymour hunched over the wheel of that Land Rover may well illustrate the cover of books that tell its very brief story.
For a Government whose Manichean vocabulary of A and B listers expresses a deep concern over who is winning and who is losing, the coalition’s tendency to get distracted, occasionally gives the feeling it’s actually not that focused on the biggest “win” of them all… that being, you know, winning the 2026 election.
It is not a good time for the Government - and especially not for its leader, Prime Minister Chirstopher Luxon. He’s had a bad summer. Autumn and winter might be worse. The May Budget will include more spending restraint (translation: cuts), and households and businesses will be stung by expensive electricity bills. The electricity futures market hasn’t budged since last year, suggesting higher bills for households and higher costs for businesses (electricity problems are one of the reasons many observers think 2026 will be an unusually late election - with September, a previously favoured month, now a risky bet thanks to the possibility of spiking power bills and brownouts).
All of that is a mighty headache for Luxon, who needs to turn National’s polling around. None of his MPs appear to be openly campaigning against him - rolling a sitting Prime Minister is among the riskiest gambits you can play in politics, the transaction cost is simply too high - but his position may become more precarious if National’s party vote continues to decline, as it may well do during the winter.
The party is also turning inward, angsting over Climate Change Minister Simon Watts’ new Paris Agreement target. Despite it looking unambitious from an emissions reduction perspective (it barely shifts the previous target set by his predecessor, James Shaw), rural MPs are under pressure from Federated Farmers, Act and NZ First, who are taking a harder line and may even campaign on pulling out of Paris altogether.
Which brings us to the focus on growth - and the Government’s belief it might be carried into office on the crest of a great economic boom.
That’s partly true. One of the most likely scenarios of how the next election will play out is that growth, fuelled by lower interest rates and rising house prices, unleashes a wave of positive sentiment that sweeps the Government back into office.
Labour is looking across the Tasman and the Pacific to Australia and the US where incumbents are or were under trouble despite presiding over impressive economies, at least from the perspective of growth and employment indicators.
But that neglects the fact that in both those countries, indicators that benefit incumbent governments - inflation, and its corollary, interest rates - remain stubbornly high. In New Zealand, inflation is now below inflation in Australia and the US. The market is pricing in a monetary loosening cycle so steep that it has begun to price in rate hikes, yes hikes, in late 2026 (which may actually benefit Labour).
There are other reasons Labour shouldn’t be measuring the curtains of the Beehive just yet. In 2026, Labour is going to have to find a way of running a progressive campaign without there being much, if any, money to spend. It’s been a long time since a left-wing coalition has campaigned from a position of such scarcity.
In 2017, Labour ran on $16.9b of new operating spending promises by cancelling planned tax cuts, hiking a handful of taxes and going a little bit easier on surpluses and debt repayments. Growth and bracket creep did a lot of heavy lifting - tax revenue increased $5b in just three years without the Government having to do anything. This time around, with deficits stretching out to the 2030s, Labour has no such luxury. Most spending commitments will need to be of the “keeping the lights on” variety.
There’s no easy money to be found. Any new spending above what’s forecast will need to come from new taxes - it’s a tough argument, but one Labour has decided it wants to have.
Luxon’s growth agenda should be taken seriously. While the agenda is mostly a repackaging of previously announced policies, a pivot towards foreign investment could carry significant upside for New Zealand if done right.
There is also a rhetorical agenda at work. Luxon has inherited a rhetorical landscape in which addressing a policy problem tends to mean spending more money on it - sometimes by creating a whole new ministry. The wellbeing agenda socialised the responsibility for making people’s lives better, making people’s wellbeing significantly the Government’s responsibility.
The growth agenda reverses this, partly privatising the responsibility for wellbeing back to people and businesses. It tells voters that while one way to improve lives is to spend more public money to buy that wellbeing, another way is to grow the economy more and make people wealthy enough to buy it for themselves. Wealthy countries are often happier ones, to a point.
Kinleith Mill in Tokoroa, where job losses were confirmed this week. Photo / Mike Scott
And wealthier countries have more money to pay for public services. New Zealand spends more on health, as a percentage of GDP, than most OECD countries (8th in the OECD as of 2022). Part of the reason this doesn’t feel like enough is when a country’s GDP isn’t as large as it should be. This isn’t as much money as it sounds - particularly when you’re having to compete with far wealthier countries for the same workers.
One of the rhetorical victories Grant Robertson won in Labour’s first term was successfully arguing, after the heady growth of the Key-English, that wealth isn’t always wellbeing.
Luxon is trying to argue that, actually, sometimes it really is.
His ability to win that argument might not just depend on the strategy actually working. The policy agenda so far is a laundry list of centre-right policy: deregulation, maybe cutting corporate taxes, loosening labour laws, encouraging foreign investment, loosening environmental laws, and potentially floating privatisation.
Taken together, yes, those policies are likely to grow the economy. But what’s in it for the average New Zealander who is protected by labour laws, doesn’t pay corporate tax, rather likes the environment, and can barely afford a house, let alone stump up the money to buy a stake in the SOE that values them? Making growth real for people is difficult.
“Trickle down” is exactly that: a trickle. And a trickle will hardly carry the Government to victory in 2026.
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.
