The OECD is the latest organisation to highlight our dysfunctional economy but neither National nor Labour seems capable of delivering change.
The art historian Kenneth Clark put it like this: “If I had to say which was telling the truth about society, a speech by a minister of housing or the actual buildings put up in his time, I should believe the buildings.”
Much political discourse focuses on political speech and any gaffes or errors in it, the Opposition reaction, legal threats responding to the speech or perceived media bias in the coverage of it.
Voters generally believe the buildings – currently, how much it costs to live in them, and how rapidly the companies that construct them are going into liquidation.
For most New Zealand households, real wages have been going backwards for three years, and even though inflation is lower, higher interest rates mean higher mortgages and rents. We are living through a sustained period of national impoverishment.
So, voters aren’t joking when they tell pollsters they’re concerned about the economy and cost of living, and they’re probably not kidding when they indicate a willingness to vote out the current coalition if an election were held tomorrow.
Whenever households are defaulting on their mortgages and paying the grocery bill with their credit cards, the incumbent government is in trouble – even if everything else is running smoothly.
And everything else is far from smooth. Popularity is also driven by events: every now and then, a story or scandal breaks through the background drone of political life, dramatically shifting public perceptions.
The parties and major media organisations can see this happening in real time via their media monitoring tools, and they can gauge the sentiment around breaking stories on social media.
In 2021, Labour’s decision to fund a drug rehabilitation programme run by the Mongrel Mob validated every negative stereotype of the Ardern government. In 2023, the resignation of justice minister Kiri Allan confirmed that Labour’s caucus was falling apart. And early this year, the revelation that Christopher Luxon claimed an accommodation supplement to live in his own apartment seemed to corroborate the electorate’s reservations about his wealth, entitlement and general obliviousness in contrast to their own dire straits.
When the major parties lose votes, their support partners generally benefit: the Greens feed from Labour; Act and New Zealand First from National. But all members of the coalition are down. New Zealand First always declines in government – there’s too great a disconnect from the issues it campaigns on.
Last year, it was gangs, “Māorification”, transgender rights, Covid conspiracies, cracking down on the supermarkets and Aussie banks. But once in power, the focus has been on foreign affairs and support for the tobacco, racing, forestry, mining and fishing industries. In response to the recent poor poll results, leader Winston Peters quickly attacked a Māori legal academic and criticised an inflammatory speech by a Te Pāti Māori MP.
Act enjoyed strong support at the beginning of the year: there’s a large constituency for David Seymour’s Treaty Principles Bill; less affection for his new Ministry of Regulation – isn’t Act supposed to make the state smaller, not larger? – and his public musings about the school lunches programme.
Budget blues
This deepening unpopularity is the backdrop to the coalition’s first budget on May 30. Finance Minister Nicola Willis has inherited the worst economic and fiscal conditions of any incoming government since the early 1990s.
When National took over from Labour in the wake of the global financial crisis, Willis’s mentor, Bill English, faced a sharp recession but enjoyed low inflation and very low government debt, courtesy of his predecessor, Michael Cullen. Willis’s Labour predecessor, Grant Robertson, has passed on recession, high debt, high inflation and a structural deficit, which means the debt will keep on growing without tax increases, spending cuts or a combination of the two.
The Government is locked into its pledge to cut taxes rather than raise them. Not only was this an election promise, it’s the only thing it can do to halt the savage decline in real wages that is killing it in the polls. Willis insists she will not be borrowing to pay for these cuts – they will be funded by reprioritising spending and “new revenue measures”.
She’ll still be borrowing to fund existing spending, though. The spending cuts required to balance the books would be massive, and Willis believes that delivering them in one grand sweep – mother-of-all-budgets style – would cause more harm than good. Fiscal discipline will be restored gradually, across multiple parliaments.
National traditionally gets three terms in office. Once, it even managed four. It is beyond appalled that voters could even contemplate putting Labour – the party that created this mess – back in charge of it all so quickly. But oppositions don’t win elections, governments lose them – and Labour has been very shrewd in adopting a small-targets strategy early in the political cycle.
Disciplined approach
The period after an electoral defeat – especially of such magnitude – is traditionally a time for recrimination and blood-letting, and some factions within Labour are keenly interested in visiting both upon the party leadership. But Chris Hipkins and his deputy, Carmel Sepuloni, have imposed extraordinary discipline on their caucus – unglimpsed when they were running the country. They refuse to interrupt their enemy while it is making mistakes – and there have been a lot of mistakes.
The next election is more than two years away. If Willis can halt or reverse the decline in real wages she’ll get to enjoy the extended tenure in power the nation likes to grant her party. But this may be difficult to achieve. Our economy is very dysfunctional – an OECD report highlighting public spending and uncompetitive markets and recommending significant changes to our tax system is just the latest in a long line of near-identical critiques.
Neither Labour nor National seems inclined to deliver the changes required for genuine economic growth. They prefer to speak about the buildings rather than build a functional economy. Perhaps we’ll keep voting them in and out again until the mood of the nation improves.
