The National Party campaigned hard on giving New Zealanders tax cuts - but getting those across the line could prove more challenging than expected.
To form the Government, National leader Christopher Luxon needs Act’s David Seymour, whose focus has been on reducing costs to stabilise the economy.
“The tax package is the crux issue at the negotiating table,” NZ Herald senior political writer Derek Cheng tells The Front Page podcast.
“We saw throughout the election campaign that a bunch of National’s revenue predictions were in question. National refused to release the details, and David Seymour said that he can’t say if the tax package is credible because he hasn’t seen the numbers.”
Analysis from Goldman Sachs in the lead-up to the election showed that National’s proposed tax plan could actually push up interest rates - which would heap further pressure on New Zealand families.
Cheng says that getting the tax plan across the line will ultimately depend on compromises from both National and Act.
“Act really wants to trim public services a lot more than National wants to, and that would create a lot more savings in the Government’s books - and enable those tax cuts to be paid for without borrowing. That is the sort of middle ground that might come out of the negotiating, and that would also put downward pressure on inflation.”
The other long shadow hanging over this is New Zealand First leader Winston Peters, who will delight in his role as kingmaker yet again.
“Winston Peters will not stomach the foreign buyers’ tax, and he also said that the online gambling tax, another one of National’s new taxes, is not credible,” says Cheng.
This could remove two sources of revenue that Luxon was hoping to rely on to boost the Government books.
The challenge here will be getting all these parties to agree on a plan that’s reflective of the nuances in their thinking.
With Seymour and Peters at the negotiating table, there are also questions about how far Luxon will be pulled to the right by his coalition partners. While he ran a centrist campaign, his potential partners definitely lean further to the right on some key issues.
“All elections are won in the centre, and Luxon, much like Sir John Key before him, really latched on to the centre. Jacinda Ardern wanted to keep that centre, but she failed to do that. So I think Luxon will ultimately hold on to that centre as much as possible.”
So what could the Cabinet under Luxon look like? What ministerial positions could Seymour and Peters get from negotiations? And who could be New Zealand’s next Speaker?
Listen to The Front Page to hear Derek Cheng’s full analysis of the shape of politics to come.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. It is presented by Damien Venuto, an Auckland-based journalist with a background in business reporting who joined the Herald in 2017.
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Treasury expects the desired $2b in savings will be extremely hard to achieve.