ANALYSIS
Latest polling trends show New Zealand First holding the balance of power and National and Act unable to hold a parliamentary majority without Winston Peters.
It might seem an unlikely trinity, given that National has talked about the possibility of a second election if talks between the parties fall short of agreement after the election.
Throw in Act leader David Seymour’s talk about supporting National on confidence and not supply (in a National-Act arrangement), which would force National to negotiate government spending on a case-by-case basis. Does that look like anything resembling stability, with NZ First in the mix as well?
But this is much more about posturing than any actual chance of a three-way Mexican stand-off forcing everyone back to the polls, which would likely see those parties punished for making everyone endure another election.
And if you remove all the noise, Christopher Luxon, Seymour and Peters would be more likely than not to find enough common ground to cobble together a government. Seymour says Peters isn’t trustworthy, but in the next breath he says he’d work with whatever the voters deliver, while Peters says he would happily offer his experience.
What this three-way government would look like depends on how the numbers fall, and how hardball the respective leaders want to play.
The Herald’s senior political correspondent Audrey Young has already drawn the possible Venn diagrams where National and Act overlap.
If NZ First is part of post-election negotiations, it would mean National would have less weight to throw around than if it was negotiating only with Act.
Based on the Herald‘s poll of polls, National would have a 77 per cent share of the National-Act pie, but this would fall to a 69 per cent share of the National-Act-NZ First pie. This would give more heft to any issue where Act and NZ First aligned - two tails wagging the dog - compared to if Act was pushing its agenda on its own.
The change to power dynamics also flows both ways.
While Act might have made an argument for National to compromise on partial asset sales, its bargaining position is weaker with NZ First in the mix, which joins National in opposing such sales.
National and NZ First also want more police (National by 300 officers over four years, NZ First by 500 officers in 18 months), while Act wants policing resources to increase according to population increases. And National and NZ First also want a four-lane highway from Whangārei to Port Marsden (which isn’t in NZ First’s manifesto but was a priority in Peters’ speech in Whangarei in July).
Expect Peters to extract a high price for his support.
In 2017, Peters emerged from coalition talks with Labour with concrete commitments to raise the minimum wage, hire more police, and establish a $3 billion Provincial Growth Fund. He campaigned on some of these, like 1800 more frontline police, extracted more than what he campaigned on in terms of the minimum wage, and plucked the PGF from a much vaguer promise for the regions not to be overlooked.
NZ First released its 2023 manifesto last week, and while it might not necessarily show what Peters would prioritise in post-election talks, it gives a flavour of what he wants.
There would be some alignment among all three parties on issues such as welfare and law and order, but others where Peters may refuse to budge, such as the age of superannuation eligibility of 65.
Keeping it at 65 for Peters is a “no ifs, buts or maybes”, though this may not raise any immediate issues due to National pushing its wish to lift the age to 2044.
Peters and Seymour have indicated they don’t think National’s tax package is credible, and Peters has demanded to see the costings and assumptions that National has repeatedly refused to release.
Peters has also been vehemently opposed to foreign buyers eating into the residential housing market, which National wants to bring back in order to fund its tax cuts (along with other revenue-gathering measures). National has also pledged to implement its tax cuts with or without its proposed foreign buyers tax on homes worth at least $2 million - Nicola Willis has even staked her job on doing so.
But there might be potential holes in the books due to revenue from the tax falling short of expectations (which economists say it would, by about $450m a year) or from Peters blocking the new tax altogether (which would leave a $740m shortfall a year).
Peters is also opposed to National’s plan to raise revenue from taxing online gambling through offshore operators, which National says would add $179m per year to government coffers. NZ First’s manifesto says the tax is not credible and, if implemented, the revenue should go to racing, sporting and community initiatives. It adds: “These online operators do not have the ‘problem gambling harm minimisation’ requirements of New Zealand operators and will prey on the most vulnerable.”
Even if National manages to introduce this tax, Labour claims it would bring in $132m less a year than National expects.
National also used 2021 figures to calculate how much revenue it would lose by reinstating interest tax deductibility for landlords (a move supported by Act and NZ First); Labour says using the most up-to-date figures would dig a deeper hole in the books by $100m a year.
Any revenue shortfall - and there is no certainty on whether there would be any - could be made up by trimming the public service beyond what National has planned for. This would also put more downward pressure on inflation, all other things being equal, which might work in National’s favour given the Goldman Sachs analysis of its tax package potentially pushing interest rates higher.
Act wants to cut the public service to 2017 levels, which would mean slashing 15,000 jobs, while also cutting whole agencies or ministries including Women, Pacific Peoples, Māori Development), Ethnic Communities, the Office for Māori-Crown Relations Te Arawhiti, and the Human Rights Commission.
Even Labour thinks the public service has too much fat and is counting on finding 1 to 2 per cent savings every year. Where National and Act (and Labour) differ is over how much can be trimmed without having a negative impact on how New Zealanders experience public services.
NZ First also thinks there is room for trimmings, but hasn’t put a figure on it. Its manifesto says it wants government “must haves” not “nice to haves”. And it wants zero central government spending on light rail or cycle lanes while there are still potholes, as well as a “root and branch review of every spending line”.
If National implements its tax cuts - at a cost of $14.6b over four years - there may be little left in the kitty for the pricier items on Peters’ wishlist: $925m a year for a GP waitlist reduction fund, $1.3b a year for life-changing medicines by an agency replacing Pharmac, and $1b to $1.2b a year for rates rebates for some seniors up to a maximum of $1600 a year.
Peters also wants to fund 2000 new standard residential care beds, and prepare a bid to host the Commonwealth Games in 2026, though part of the bid would be asking “the Commonwealth for financial help”.
National has, however, budgeted for $9.9b over four years in unallocated operating spending, which could well be used to appease governing partners.
Act and NZ First both want to defer their respective proposed changes to the income tax regime until the Government’s books are in better shape. NZ First aligns with National in wanting to adjust tax brackets in line with inflation but says it makes more fiscal sense to make the first changes in 2027.
Peters, who says he would be a handbrake on a “hard lurch to the right”, would probably find little support from National or Act for no income tax on the first $14,000 (which he wouldn’t phase in until 2027), or a $25 minimum wage.
He has also dropped his policy of removing GST off fresh food, instead wanting a select committee inquiry to examine its merits (the party manifesto includes multiple select committee inquiries).
All three parties want a more punitive approach to criminal justice, and for beneficiaries who aren’t meeting their work-ready obligations, though their philosophies overlap more than their specific policies.
They all want harsher penalties on gangs, serious young offenders, and those convicted of crimes. They all want to restrict how judges can discount sentences by restricting - or scrapping, in Act’s case - the use of cultural reports.
National and Act want a return of Three Strikes, and while this particular law isn’t mentioned in the NZ First manifesto, there is specific support for “mandatory minimum sentences for serious violent and sexual offenders”. Peters also blocked Labour’s wish to scrap the controversial law while in government with Labour.
Like National, NZ First also wants to include gang membership as an aggravating factor at sentencing, which is already applicable under the Sentencing Act. NZ First also wants a review into low-level offending with an increase in fines for shoplifting or texting while driving.
An area they may disagree on is whether to abolish the firearms registry, as Act wants, or to keep it, as National wants. NZ First wants an independent firearms authority, though it’s unclear what this would mean for the registry.
All three parties also want to take a tougher line on beneficiaries, though with different policies. National wants more punitive measures on beneficiaries who do not meet their ready-for-work obligations, while Act wants drug addicts who refuse treatment to lose their benefit.
National wants to index benefit levels to inflation rather than average wage growth even though this would leave them more out of pocket, something that isn’t Act policy but Seymour has said he isn’t opposed to.
NZ First hasn’t stated a position on what benefit levels should be, but it wants a two-year limit on the JobSeeker benefit over one’s lifetime.
Act and NZ First could end up pushing National on climate change. Neither Act or NZ First want agricultural emissions to be priced unless it is adopted by trading partners.
But this wouldn’t necessarily be an issue in a first term for National, which doesn’t want to include agriculture in the Emissions Trading Scheme until 2030.
Both National and Act want to raid the Climate Emergency Response Fund (Cerf - Government revenue from the Emissions Trading Scheme, the ETS) - to help fund tax cuts or give taxpayers a tax credit. NZ First wants this money (as well as funds earmarked for buying overseas carbon credits) to be used for emissions reduction mitigation, such as low methane genetics, and low methane-producing animal food.
National and Act also want greater use of GM products to help reduce emissions.
Act wants to dump the Zero Carbon Act and the Climate Commission, both of which National wants to keep. The NZ First manifesto doesn’t mention either.
Peters has also claimed that human activity is responsible for 3 per cent of carbon dioxide in the atmosphere, but experts say it is actually closer to 33 per cent. Luxon has said of climate sceptics: “Give it up, I mean we’re in 2023. There’s no doubt about it. You can’t be climate denier or a climate minimalist.”
All three parties agree on reducing the regulatory burden on farmers and allow for more and easier water storage, which has been criticised by environmental groups as weakening environmental protections.
They also want to roll back Labour’s scrapping of the Resource Management Act. While National has not set out exactly what it would place the interim RMA with, Act wants heavier emphasis on private property rights. Similarly, NZ First wants make it harder for the public or a third party to halt projects.
National and Act have common ground on several policies such as disbanding Te Aka Whai Ora - Māori Health Authority, repealing Three Waters reforms including an iwi-council committee to appoint the water entity board, and abolishing laws allowing councils to set up Māori wards. Neither party wants to see government services provided on ethnic grounds, believing that a needs-based system would address the inequitable outcomes that have long plagued minority groups.
NZ First agrees with all of this; Three Waters isn’t mentioned in the NZ First manifesto, but Peters has voiced his opposition to it in public meetings around the country.
Act would also remove all references to the Treaty of Waitangi from legislation and has a policy to hold a referendum to define the principles of the Treaty. The referendum has been a priority for Seymour but his hand might be weaker if Peters is in the post-election mix - neither he nor Luxon support it.
The NZ First manifesto does not mention the Treaty, but Peters said last month: “The Act party is out there, with the media as its accomplices, of course, saying they have got a plan for the Treaty of Waitangi. They’re going to legislate about its principles - there are no principles in the Treaty of Waitangi!”
Peters has form on this; in 2005, Peters’ Treaty of Waitangi Deletion bill would have removed all references to Treaty principles from legislation, were it not defeated.
The NZ First manifesto supports “devolution of central government decision-making and resources to the regions to counter the ‘Wellington Knows-All’ approach”.
It’s unclear whether this would include “by Māori, for Māori” programmes, which Luxon wants to increase support for as long as they’re delivered under one public service system (i.e. not via the Māori Health Authority).
Act has long railed against what it calls corporate welfare, which allows ministers and/or officials to pick winners by giving companies or projects taxpayer-funded subsidies. The most significant in recent years was the PGF, which was downscaled in Labour’s second term.
There is no mention of another PGF in NZ First’s manifesto, which calls for a Regional Infrastructure Fund but without any specific funding attached to it or where any such funding would come from.
The NZ First manifesto includes some funding mechanisms for the regions, such as transferring half of Crown Minerals royalties to the regions they came from.
Act also wants to pass more money from central to local government, but by giving councils half of the GST taxed on the construction of newbuild homes.
National also wants to prioritise regional infrastructure but isn’t specific about how to do so beyond meeting with local government representatives and thrashing out priorities and how they might be funded. It also has $8b in unallocated capital spending that Luxon has said could be used for regional infrastructure.
Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery and is a former deputy political editor.
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