On last night’s results, it would appear that New Zealanders have elected a National-led government.
Just what that means for the country is complicated by the fact that while we have a good idea of the shape of the likely next government and the parties it includes, the three parties it will likely comprise haven’t even struck a governing deal yet.
Depending on how the final results play out, it’s not yet clear is Winston Peters and his NZ First party will even be needed, although it looks likely Luxon might include them because he wants a more comfortable margin. We won’t know for sure until the final results including special votes, are declared on November 3.
A couple of things seem likely. Prepare for a mini-Budget by Christmas, possibly in December; you’re in for a tax cut, and say goodbye to Three Waters, the new RMA, and the Māori Health Authority.
There are some points of contention: what happens to the age of eligibility for superannuation. NZ First wants it to stay where it is, National wants to raise it from 2044, and Act wants the age to rise almost immediately.
The future of the Zero Carbon Act, and the Climate Change Commission is also in doubt, as is the firearms register - the parties disagree on these considerably.
All of these issues will be thrashed out during coalition negotiations - potentially sooner rather than later. NZ First is ready to fly to Wellington on Monday to begin talks. Luxon and Seymour have been keen to stress that they are personally close and have been in communication during the campaign, suggesting talks between the two might progress quite smoothly.
This might be overselling things. Act is often National’s fiercest critic, and Seymour has not been afraid to threaten things like confidence-only deals if things go ill (he later walked this back). Seymour will obviously be the lead figure on Act’s negotiating team, alongside chief of staff Andrew Ketels, and Deputy Leader Brooke van Velden.
National is likely to put up Luxon, chief of staff Cam Burrows, and deputy Nicola Willis. Senior MP Gerry Brownlee gets on well with Peters and may feature in talks. Peters has also recently talked-up his relationship with Todd McClay, who might also be called up.
Campaign chair Chris Bishop will need a role. He gets on well with Seymour. The pair have known each other since before politics, so he may have a role there. Bishop has antagonised Peters on the campaign, however, and for that reason, he may be kept distant from talks with NZ First.
NZ First has a reputation for being mercurial during negotiations. It’s a fool’s game to predict how these may go. Peters will clearly be the key negotiator. He’ll likely be joined by number 2 on the list Shane Jones and former MP Darroch Ball who has been a key figure on the campaign.
Tax cuts almost certain - but how much and when?
The parties of government have all promised tax relief. Based on recent precedent, it’s the major party whose tax promise is the one that eventually gets implemented.
What you get depends on your circumstances. People who earn median incomes thanks to the IETC, would get a $10 a week tax credit which substantially increases the overall impact of the tax cut. Someone on $60,000 a year will get $25.50 a week.
Act wants to go further, flattening the income tax brackets so that there are fewer rates of tax. This would mean people on higher incomes paying less, and people on lower incomes paying more - although lower income earners would see increased tax cancelled out by a tax credit so they would be no worse off.
The bump in the road is Peters, who wants one of the biggest tax cuts of all, a tax-free threshold for income earned up to $14,000. However, Peters is also concerned about fiscal sustainability so he wants this delayed until 2026.
There’s clear support in the governing parties for income tax cuts of some kind. Precedent suggests National will get its way, though it also suggests anyone brave would be foolish to guess Winston Peters’ intentions.
All parties want income tax reduction of some kind - but what and when it’s actually delivered is unclear.
The income tax changes have been costed to begin on July 1 2024, the beginning of the fiscal year, meaning that unless National is feeling particularly flush with cash, they will be included in its first full budget in May.
Some changes, however, will be made earlier: the beginning of the tax year on April 1 2024.
One thing all three parties agree on is reinstating landlords’ ability to deduct interest costs from their tax bills - an effective tax cut for landlords.
National has costed this to begin on April 1 next year. Act’s plan is similar, though not exactly the same - the party costed the removal of deductions as if it began on April 1 2023. NZ Frist’s plan does not include a start date.
… and more tax cuts
There are two other big changes National has promised to implement, which it has also promised to bring in prior to the next budget.
The first is a $25 boost to the In-Work Tax Credit taking it to $97.50. This is a Working for Families tax credit available to 160,000 low-income families who are not on a benefit. Labour also promised the tax credit boost. Working for Families tax credits, unlike benefits, are not automatically adjusted for inflation and this change simply adjusts for the last time since the credit was lifted.
National also promises to revert benefits to being indexed to CPI inflation rather than wages, also triggering on April 1 next year. Based on current economic forecasts, it would mean beneficiaries losing out on $416 over the course of the year, with the basic jobseeker rate going to $350 a week on April 1, rather than $358 a week.
Interestingly, Act has not included an IWTC boost in its alternative budget, and does not support changing the way benefits are indexed, so it is possible one or both of the policies are dropped in coalition talks. NZ First does not have a position on the IWTC, or on indexing benefits, although it voted in support of the current wages index in 2019, when it was part of the Labour-led government.
A mini-Budget by Christmas
The July 1 changes mentioned above can probably wait until National’s first proper budget in May.
If Nicola Willis is the next finance minister (there has been speculation Peters may want the role of Treasurer, putting his hands on the purse strings) she will need to deliver on her promise of delivering a mini-Budget by Christmas.
This would probably need to include the April 1 changes mentioned above (interest deductibility, IWTC rise, changing benefit index to CPI inflation).
The best date for a mini-Budget is probably when Treasury publishes its Half-Year Economic and Fiscal Update, or HYEFU (Labour’s 2017 mini-Budget was also unveiled at HYEFU). The HYEFU date hasn’t been set but it is usually mid-December.
Alongside the changes above, Willis has said she would be wanting to crack on with National’s cuts to public sector spending before Christmas too. National has promised 6.5 per cent cuts to “back office” spending in the public service totalling $2.3b over four years and contractor savings worth $400m a year or $1.6b over four years.
Both of these are booked to begin on July 1 next year, after the first Budget, but Willis has indicated she would like to crack on with them sooner, in the mini-Budget.
The Auckland Regional Fuel tax is also in line for repeal. National said it would get rid of this 10c a litre (11.5 thanks to GST) tax on petrol sold in Auckland ever since it was introduced by Labour early in its first term. The revenue goes to Auckland Council for transport projects in the city, rather than the Crown, so it’s not necessarily mini-Budget material. Nevertheless, the Nats say the tax needs to be gone in the first 100 days of a new government, and the mini-Budget might be a good opportunity.
The Clean Car Scheme, which subsidises the purchase of EVS with fees collected on polluting cars, which National calls a “ute tax” will be gone by the end of the year, according to National’s plan.
Act is also keen on reducing public sector expenditure. It wants to issue “stop work” notices as soon as possible after taking office.
The “stop work” idea works by asking ministers to take proposals to Cabinet to immediately “stop work” on projects Act disagrees with (Seymour acknowledges this would not happen the first day of the government being formed, but early on in the government’s life).
He thinks he could save about $1b with the idea. Act has said the idea behind the policy is to reduce public sector headcount, so some fairly large-scale redundancies can be expected.
Act wants to reduce the public service headcount to 2017 levels (with some exceptions) requiring a reduction of more than 10,000 staff.
Once Cabinet agrees to axe those projects, orders are issued to government departments to immediately “stop work” on them. Staff are then posted elsewhere in the department or made redundant.
Money that had been appropriated for those projects but unspent would be returned to the centre - Wellington-speak for banking the unspent money.
Seymour said ministries would be able to reallocate staff “if there is a legitimate thing for them to do”.
However, he said that was “unlikely because the objective is to reduce the headcount”.
The Great Repealing
Also in National’s 100-day plan is to repeal Labour’s Three Waters reforms (Labour would say these have already been replaced by Affordable Water Reform), repeal Labour’s Resource Management Act reforms, and to introduce legislation to get rid of the Maori Health Authority, Te Aka Whai Ora.
Act and NZ First are fairly aligned with National on all of this, so expect it to happen with relative ease.
All three have also said they would get rid of the Auckland Light Rail project, with National promising to axe it within 100 days of taking office. For NZ First, it will be the second time they killed the scheme, having vetoed it at the end of their coalition with Labour in 2020.
The Medium-Density Residential Standards (the 3x3 “sausage flat” law) would also be gone in the first 100 days, with work beginning on its replacement.
National has also promised it would introduce legislation to disestablish the Te Pūkenga polytech merger in its first 100 days.
Workplace relations
Labour’s Fair Pay Agreements, which allow unions to strike industry-wide deals that establish a “floor” in terms of pay and conditions, will also be gone. National and Act despise them, and NZ First frustrated their development during Labour’s first term in office. National wants the legislation establishing them gone within 100 days of taking office.
Also returning in the first 100 days will be 90-Day trials, making it far easier for employers to sack new employees in their first 90 days of work.
Law and order
National has pledged to axe taxpayer funding for section 27 cultural reports that are used in sentencing. It wants these gone in its first 100 days, so expect to see movement on that soon.
It also wants to introduce legislation to ban gang patches, stop gang members gathering in public, and stop known gang offenders from communicating with one another, again within its first 100 days.
Act wants to introduce “Gang Control Orders”, which would allow the Police to apply to the Courts for an injunction against an individual on the National Gang List.
The injunction order could then be used to prohibit that person from being in a particular location or associating with particular people.
One point of contention in coalition talks will be firearms. Act has particularly strong support from the firearms community, and wants to scrap the firearms registry, established as part of the reforms following the March 15 2019 attacks. National backs the registry. The register aims to monitor and track every firearm legally held in New Zealand. Act says it targets licensed firearm owners, rather than criminals.
Climate change
One of the biggest struggles for National and Act during coalition talks will be over climate change.
National supports the Zero Carbon Act, and the Climate Change Commission it established. It also supports the Government’s domestic emissions reductions targets, which were established by the Zero Carbon Act, although it disagrees considerably about how to reach them.
Act wants the Zero Carbon Act repealed, and its emissions targets replaced with a target that ties New Zealand’s emissions cap to our trading partners’ emissions. This could be something of a challenge. One major trading partner, China, is allowed to have its emissions increase for a few more years because it is still a developing economy. If this allows New Zealand’s emissions to increase too, it could see the Government fail to meet its Paris emissions pledges, which both National and Act support as a matter of international law.
National has said it would kick any agricultural emissions pricing to 2030. Act has not backed any agricultural emissions price. If one were to be implemented, it has said it should match our five closest trading partners.
NZ First
NZ First’s manifesto, released towards the end of the campaign, contains a host of other proposals that it is difficult to see National and Act agreeing to.
Peters wants a Royal Commission into the independence of the media, and to hold an additional Covid-19 inquiry that could eventually see the Government compensating people who lost their jobs due to Covid-19 mandates and those proven to be injured by the vaccines.
NZ First has a history of disappointing some of its more fringe supporters by being a fairly cooperative force in Government. Policies like these will probably fall by the wayside, but Peters will probably need to give these supporters something.
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.
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