Labour's chance to distance itself from Te Pāti Māori
As highlighted by Herald Business Editor at Large Liam Dann, this matches BusinessNZ's latest data suggesting both manufacturing and services went backwards in May and June, with services continuing its decline since February.
The overall economy doing so poorly is especially alarming given the agricultural boom.
Westpac observes that households' after-tax disposable incomes increased just 0.9% over the past year despite the tax cuts, while consumer prices increased 2.5%.
Stats NZ reported yesterday that food prices were up 4.6% over the last year, and ASB thinks overall inflation is already back above 3%.
Local and international inflation fears suggest just one more cut to the Official Cash Rate this cycle, although households moving off fixed mortgages before the election will benefit from earlier cuts.
Bond markets remain worried about New Zealand's creditworthiness, with yields on 10-year bonds still stuck around 4.6%, nearly 7% higher than the 4.3% Nicola Willis' debt-servicing estimates assume.
Westpac thinks yields will increase to nearly 5% over the next two years, suggesting Willis must find around another $1.5 billion a year for debt servicing alone. Assuming health, education, law and order and defence aren't cut, there's no prospect of a balanced budget this decade.
While even the most pessimistic forecasts indicate that 2026 will feel better for voters than 2025, that'll be off the back of two recessions in two years, not quite what National promised in 2023.
Nor would two recessions be evidence, to use Christopher Luxon's words, of his Government 'turning the joint around', however much 'blimmin' hard work' he says he's doing.
New Zealand's results certainly compare unfavourably with Argentina, where President Javier Milei and Finance Minister Luis Caputo inherited a complete basket case from their left-wing predecessors at the same time as Luxon and Willis.
After the kind of urgent and robust fiscal and regulatory reforms Luxon and Willis say aren't viable in New Zealand, Argentina's economy is booming at nearly 6% a year.
Its books are in surplus, inflation has been subdued, exports are growing, private-sector wages are rising faster than prices, Milei's favourability rating is touching 50%, well ahead of poor Luxon on around 30%, and his Libertad Avanza Party is set to win this October's parliamentary elections.
National, Act and NZ First supporters will never know what might have been had Luxon and Willis rejected the politics-first incrementalism recommended by their mentors Sir John Key and Sir Bill English and quickly implemented Milei-style reforms instead.
That's all speculation. The relevance to the byelection is that, without an economic boom, National relies even more heavily on its scare campaign against TPM.
Sadly for Labour, TPM seems to be doing everything it can to help National, with its co-leader Rawiri Waititi now revealing his political hero is Burkina Faso's Marxist military dictator Ibrahim Traore, who opposes democracy, seized power in a coup, butchered civilians, criminalised homosexuality, cracked down on public dissent and freedom of the press, and removed civil liberties generally.
Labour must win the byelection decisively to demonstrate electoral power over TPM. At least as important, it must campaign hard in doing so, belying Luxon's suggestion the byelection could be a mere 'pillow-fight' between two allies and differentiating itself not just temperamentally but ideologically from its radical opponent.
Among major party activists, there's sometimes a tendency to concede the moral high ground to smaller allies. Labour or National activists can be caught saying that, of course, they really agree with the Greens or Act, but – unlike them – they must sound more moderate to not scare off median voters.
That's exactly the wrong way for Labour and National activists to think of their parties. They should instead define themselves positively for what they stand for, not just position themselves as paler and more cynical versions of the real thing.
It doesn't help Labour when Willie Jackson – its fifth-ranked MP – declares that he 'loves' TPM but that 'a little bit of compromise could help the situation'. To win back the 60,000 swing voters from National it needs, Labour must demonstrate that it's not just TPM's tactics it opposes but its objectives.
That shouldn't be too difficult even for Jackson. He sent his kids to Te Kōhanga Reo for primary school and then King's College for secondary school so they would be deeply immersed in both sides of the Treaty partnership. You won't hear any Labour MP express admiration for a butcher like Traore.
Labour strategists say the issues concerning Tāmaki Makaurau voters are the same as those worrying everyone else: jobs, health, homes and the cost of living – the very things at risk from Luxon's failure to get the economy booming as promised.
They point to their candidate, Peeni Henare, being very much a traditional Labour man, with a strong whakapapa to the Māori Battalion and even the National Party and its Reform Party parent, as well as to a number of Ngāpuhi iwi plus Whakatōhea, Ngāti Kahungunu and Rongowhakaata.
The strategists say Henare speaks better te reo than anyone in TPM but thinks a roof over the head, food on the kids' plates and a decent local primary school are more important than academics' latest theories about the 1840 translations of kawanatanga and tino rangatiratanga.
While Henare supported TPM's parliamentary haka against the Treaty Principles Bill, he also saw that it breached Parliament's tikanga and had the mana to apologise.
Insiders say the former Minister of Defence, ACC, Tourism and Forestry would be a senior minister in a new Labour Cabinet, to which Hipkins prefers to appoint only Labour ministers rather than add-ons from the Greens and TPM.
Strategists point out that a Henare win would also bring Labour's 39-year-old Georgie Dansey into Parliament, whose whakapapa includes not just Ngāti Tūwharetoa but also the Māori Battalion and Māori All Blacks.
With the economy in trouble, a fierce battle between Labour and TPM rather than Luxon's pillow-fight would undermine the second of National's re-election pillars. Henare has a major opportunity to prove his worth to his leader and party.
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Newsroom
19 hours ago
- Newsroom
Luxon goes back to the future on China
Analysis: With Chinese naval ships in the Tasman Sea, a key Pacific partner signing a controversial strategic partnership with Beijing, and open letters from former politicians accusing the Prime Minister of positioning the country as an adversary of China, it has been a tough year for New Zealand's relations with the Asian superpower. But a successful – and drama-free – state visit can work wonders, if the tone at this year's China Business Summit is anything to go by. With last month's trip to Shanghai and Beijing still fresh in his mind, Christopher Luxon kept his rose-tinted glasses on, describing China as 'a vital part of New Zealand's economic story and … a key partner in our pursuit of growth, resilience and opportunity'. Echoing his remarks before his closed-door meeting with Chinese President Xi Jinping, Luxon emphasised the country's global influence as a permanent member of the United Nations Security Council and the world's second-largest economy. And for all that his Government has drawn criticism for allegedly neglecting the relationship with Beijing, there was an element of Sir John Key – arguably New Zealand's most China-friendly leader – in how Luxon spoke about the economic opportunities offered by the Chinese market. 'You've got a country there with 500 million middle-class people living middle-class standards of life – huge opportunity. We've got an economy growing at 5 percent a year, which is adding essentially an Argentinian economy to it every single year – huge.' Directly addressing Chinese ambassador Wang Xiaolong, the Prime Minister said New Zealand accounted for just 0.3 percent of China's overall trade. 'The opportunity for us is actually to say, 'Well, if you get it from 0.3 to 0.4, you're actually growing our business 25 percent.' There were some notes of caution. Luxon reiterated the Government's desire for greater trade diversification, while emphasising the policy wasn't about choosing other markets over China but instead increasing economic resilience. A question about the Government's efforts to build closer security ties with the US attracted a bit of snark – 'I've seen commentary from politicians and stuff, and that's lovely' – but also a reiteration of his previous line on the matter. 'We can't have prosperity if we don't have security: these issues are now linked, you can't have them in separate buckets, like we've previously done.' But Beijing would likely be pleased with Luxon's overall tone, along with his pledge to have 'a good number of ministers cycling through China' for the rest of the coalition's term. Chinese ambassador Wang Xiaolong said New Zealand and China had 'no conflict of fundamental interest'. Photo: Sam Sachdeva Luxon's positivity was picked up by Wang, who said New Zealand had 'mostly been at the forefront of China's relations with Western developed countries, bringing tangible benefits to the people of both nations'. There was no repeat of Wang's warning last year that any New Zealand involvement in the Aukus security pact would be seen by Beijing as taking sides; he may judge silence is the best approach for now as rumours swirl about whether the Trump administration will seek to substantially amend – or even withdraw from – the alliance. Instead, the ambassador emphasised 'tectonic shifts' in the international landscape, with the shift towards a multipolar world becoming unstoppable as developing nations turned into major players. 'Gone is the era when the world was dominated by one or a small number of countries, which used to monopolise international rule-making and unfairly reaped disproportionate, if not exclusive, benefits of development.' But if power is becoming more distributed among states, China still wants to lay claim to its fair share. Wang spoke about his country's contributions to cutting-edge technology like satellite technology, quantum communications and artificial intelligence, while arguing there was significant potential still to be unleashed in domestic consumption. 'For any nation, decoupling from China is giving up on one-third of global growth opportunities, on nearly half of the world's innovations, and on access to critical resources and capabilities needed for addressing common challenges.' China and New Zealand had 'no conflict of fundamental interest', he said, emphasising the need for mutual respect in the years ahead. 'Our common interests far exceed our differences, which, through common efforts, must not be allowed to be blown out of proportion or get in the way of our cooperation.' There is clearly some residual anxiety about the state of New Zealand-China relations, particularly among Kiwi businesses operating in China. Speaking about the NZ Business Roundtable in China's annual business outlook survey, board director David Boyle said 70 percent of those surveyed felt the bilateral relationship with China was strong – a 14-point drop on last year, and the lowest result since it began. The top recommendation for the Government? 'Continue to clearly articulate New Zealand's independent foreign policy and support for the international rules-based order.' Responding to such unease from Kiwi exporters, while maintaining the linkages between prosperity and security that he has spoken of, will continue to be a challenge for Luxon and his Government.
NZ Herald
a day ago
- NZ Herald
Government ponders radical power reforms as prices rise
Back then, the person leading the prosecution was none other than Willis herself, and she was ruthless in her disallowance of Grant Robertson's excuses. Pressing Robertson on skyrocketing mortgage costs, Willis asked the following: 'Is it seriously his position that international factors are to blame for this growth in a core component of New Zealanders' cost of living?' The answer then, as it is now, is sadly yes. The international factors that were responsible for a third or more of the post-Covid inflation spike, according to Treasury research, are much the same as the factors weighing on Willis' growth prospects in 2025. These have caused Treasury to revise its forecasts for GDP growth in the coming year from an impressive and possibly election-winning 3.3% to a less impressive 2.9% at the most recent Budget. That follows revisions to its GDP estimates for the year to the end of June, which Treasury tweaked from a gloomy 0.5% growth to a decidedly grim 0.8% contraction. Voters may be slightly more forgiving of first-term Willis than they were of second-term Robertson – but only slightly. Like frustrated parents, voters tend to care less about who made the mess than they do about who will clean it up. National, a party elected on a mandate of getting New Zealand 'back on track', will begin the election year presiding over an economy that's on the same high inflation, slow growth track voters rejected in 2023. There's not a lot of space for the Government to move. Witness the performative outrage over butter prices, which Willis will raise in a meeting with Fonterra boss Miles Hurrell when she meets him next week. These high prices are the result of a good thing: high commodity prices that are buoying rural economies. The problem is that incomes are so low people cannot afford to pay them. The Government knows these prices are a good thing (Willis certainly does, having spent five years at Fonterra) and so does most of the Opposition. As recently as April, it celebrated them, with Prime Minister Christopher Luxon then telling the Taranaki Chamber of Commerce the economic recovery was being led by farming. 'What has been exciting to see is dairy prices are hitting an all-time high,' he said. Finance Minister Nicola Willis applauds the regional economic recovery but has to manage the high consumer prices that have followed it. Photo / Mark Mitchell Fonterra may be being naughty, potentially fattening the margins of its consumer products to make that side of the business attractive for sale, but the key driver of those prices is the high value of commodities at the moment – and that's a good thing for the country. You can slightly forgive the Government for not saying this. Celebrating high butter prices does have a Marie Antoinette-ish aspect to it. However, they perhaps did not need to point the finger so vigorously in the other direction. The problem with affordability is only half to do with prices. The other half is wages. While it seems an affront to our identity that people of a dairying nation like ours cannot afford butter, the more serious question is why New Zealand incomes struggle to keep up with those of international consumers who are willing to pay for our products. There's a reason why everyone turns their guns on Fonterra and the farmers for high prices, and that's because it's easier to blame producers than it is to solve the manifold crises that have held back New Zealanders' wages. Act Party leader and Deputy Prime Minister David Seymour at a rally last weekend. Photo / Alex Burton This browbeating of corporate New Zealand is becoming a coalition issue. Deputy Prime Minister David Seymour had a go at critics of the supermarkets and banks in his rally speech last Sunday. 'It would be the easiest thing in the world for me to give a speech saying they're crooked and need to be punished somehow. They should be taxed somehow, have their businesses broken up, or be watched over by even toothier watchdogs. It's the curse of zero-sum thinking,' he said. The remarks were not just directed at Labour and the Opposition, but at the rest of the coalition, which, since coming into office, has engaged in enthusiastic supermarket bashing. In the backdrop to all of this is a looming cost-of-living decision that will likely be made in the next few months and could have a big influence on the election campaign. In February, Energy Minister Simon Watts and his Associate Minister Shane Jones selected offshore economics consultancy Frontier to be the lead reviewer of the electricity market (the review was announced in November 2024). The terms of reference are bold, saying the firm needed to look at foundational parts of the market such as generation investment incentives, efficiency, and effective wholesale and retail markets. The report came back some weeks ago and is sitting on the desks of ministers. Watts has told media a decision can be expected before the end of September. One idea is to revive Contact Energy's 2021 Thermal Co plans. Frontier has worked with Contact before, writing evidence on the firm's behalf for its proposed acquisition of Manawa. That idea would be for a company, 'Thermal Co', to own, operate and eventually retire the major power companies' thermal generation assets. The price of thermal energy sets the price for the rest of the electricity market. This new entity, potentially with a large Crown stake, would have a large influence over prices and over the incentive for firms to bring forward renewable generation, the only long-term fix to the predicament of high prices. The move would be incredibly interventionist, which is perhaps why NZ First seems so keen on it and why no one in the Act Party seems to know the report is back. National is caught in the middle. It knows something is wrong in the market but wonders whether radical reform is quite what's needed to fix it. After all, six years of radicalism from the oil and gas ban, to the 100% renewable electricity generation target, to Lake Onslow are at least partly responsible for the mess the market's in at the moment. Those decisions were unhelpful. Labour's own appointed working group told the Government in 2019 the 100% target would lead to 'large increases in retail electricity prices from today's levels' and would undermine decarbonisation efforts by putting up prices – advice that turned out to be prescient. Do we really want another few years of radicalism? National may seek to make a virtue out of mild, stable reforms that bring stability to the market and encourage private investment in more generation. The challenge here is that this new generation needs to be in firming and, in the short to medium term, there's a good chance this will involve fossil fuels (Jones floated the idea of a new coal station in the House this week). That's going to be unpopular. Other ideas floating around the coalition include changing ETS settings to reduce the Government-imposed cost of burning coal, a cost that is reflected in the wider electricity price. That might fix one broken market by undermining another. Something needs to happen and not just because high prices are weighing on households. The coalition, or at least the National and Act parts of it, appears ready to campaign on asset sales at the next election. That argument is going to sound a lot less persuasive if the gentailers, part-privatised in the last major asset selloff, are squeezing consumers. Treasury papers gush about the fact that the mixed-ownership companies, Air NZ, Genesis, Mercury, and Meridian, are basically the publicly-owned companies that are performing well. Consumers, feeling fleeced by all of them, probably disagree. And that's the trouble with this economic recovery. It might look okay from the Beehive – even good. The recovery is under way and it's a good one. For once, we are seeing an economic recovery driven by exports and not immigration and house prices, which continue to fall. As Chris Bishop said this week, New Zealand would be a better country were it to 'destroy' the idea that the economy is linked to growing house prices. He's right, the country would be better off if we did. Sadly, the record of the electorate is that house prices, where two-thirds of New Zealand households have stashed the vast bulk of their wealth, seem to be the main indicator they care about. The Key Government, often remembered as a time of relative economic prosperity, presided over years of high unemployment. The unemployment rate didn't fall below 5% until the quarter before that Government was voted out of office. Inflation, however, was almost always below 2% and house prices were rising. House prices made people feel richer. It wasn't good, but it worked – and it wasn't just Key, the Ardern Government turned a blind eye to unsustainable house prices too. Unfortunately for National, this is probably the 'track' many households are keen to get back on – and not the one currently being taken by the coalition. You can hardly blame them for feeling the surest sign of economic recovery is in their own balance sheets. The Government's challenge is to persuade people that its own 'track' is the better one.
Scoop
2 days ago
- Scoop
Do People Earning $200,000 Need Help With Childcare?
Government "choices" mean some of the families now receiving Family Boost payments for their early childhood education are among the 10 percent wealthiest in the country, an economist says. A revamp to the Family Boost programme means those with household incomes up to $229,100 a year are now eligible for support with their childcare fees. The available rebate is also increasing to 40 percent of fees paid, or a maximum of $1560 a quarter. The change applies to fees paid in the September quarter, and from then on. But Craig Renney, policy director of the Council of Trade Unions and an economist who was previously a senior economic adviser to then-Finance Minister Grant Robertson, said there were "choices" being made. He said those on the highest incomes, in the top 10 percent according to the Stats NZ Household Expenditure Survey, were benefiting the most from the change. "If your household earns $60,000 a year, you can get up to an extra $2340 annually in new support. If your household earns three times that, $180,000 - you will get an extra $3440 annually. That's 47 percent more. For exactly the same thing - having children in early childhood education." The difference was because the higher earners were previously not eligible at all. Renney said data also showed higher-earning households tended to spend more on early childhood education anyway, which meant they would have larger fees to claim rebates on. Most were already spending the money without the government's assistance, he said. It could have been better used to help make early childhood education more affordable or accessible to low or middle-income earners, he said. "Instead of having a 40 percent cap across the piece that could be claimed, you could have said for very low income households we'll make it 50, 60 or 100 percent. "Because this is a rebate scheme, those on low incomes don't have the money to be able to afford it in the first place to then get the rebate. "I'm not saying these families don't need the money but I'm saying if you were making choices about where to spend, for a government that's focused on value for money - you may get better outcomes for your dollar if you were actually spending it on expanding ECE provision in low-income communities." Asked whether the adjustment would affect the number of families who could receive the full $250-a-fortnight relief that National campaigned on before the last election, as a combination of the Family Boost package and tax cuts, Finance Minister Nicola Willis said that data was not available. "The National Party campaigned on a tax relief plan that included multiple elements - shifting tax brackets to compensate for inflation, expanding tax credits to reach more modest income earners, increasing Working for Families tax credits and introducing the FamilyBoost childcare tax credit. "We delivered on these policies in our first Budget. We made clear that the impact of these policies would vary according to family circumstances and encouraged people to use our tax calculator so they could find out what it would mean for them." She said the $250 example was a family with a household income of $120,000 split across two earners spending at least $300 a week on childcare. "We did not model how many families would match that scenario. "Inland Revenue is not geared up to calculate how many people would have matched that scenario in the past 12 months or will match it in the coming years. This is because some elements of the tax plan are calculated on an individual basis while others, including FamilyBoost, are calculated according to household income. Inland Revenue does not routinely collect information on household incomes." She said about 60,000 families had received the full FamilyBoost payment they were entitled to. With the scheme expansion, she said, about 16,000 more families would probably benefit. "The amount of rebate they receive will vary according to the fees they pay and the income they earn each quarter. The maximum a family can now receive from FamilyBoost is $240, an increase on the $150 that National campaigned on. "To receive that amount, a family would have to be spending at least $300 a week on childcare and have a combined family income of less than $140,000 a year. Inland Revenue does not calculate how many families find themselves in that circumstance." Rebate most flawed part - advocate Child Poverty Action Group spokesperson Isaac Gunson said his organisation's position was that the rebate was the most flawed part of the Family Boost programme because it relied on families having the money in the first place to pay the fee then wait to claim it back. "The direct fee refund model, which IRD is looking into, is where we see the real solution being. Placing the responsibility on the profit-driven providers to claim the money back lifts the burden off low-income families who need the support the most. "While larger rebates would deepen the support available to low income families, it doesn't really address the accessibility of the support, whereas a direct fee refund model would solve the issue the rebate presents to many families: they don't have the money and can't wait that long to see any of that money come back in."
