It is difficult to make sense of the Luxon Coalition Government’s economic management.
This end-of-year review about the state of economic management – the state of the economy was last week – is not going to cover the National Party contribution. Frankly, like every other careful observer, I cannot make up my mind.
Certainly Christopher Luxon and Nicola Willis are doing things, but there appears little coherence in what they are doing (after implementing the expenditure and tax cuts promised during their election campaign). The Post senior editors ranked the two’s performance in the bottom half of the cabinet. (The top rankers were Chris Bishop, Simeon Brown, Todd McLay, Mark Mitchell, Winston Peters and Erica Stanford; the Lambton Quay rule is that it is rare for more than five cabinet ministers to be outstanding performers.) We may see from the 2025 Budget Policy Statement (early next year) whether the government’s economic management is struggling with a contracting economy or just plain struggling.
Instead, this column focuses on ACT and NZF, the two wing parties in the Coalition Government who have quite different economic visions.
ACT was founded by neoliberals and on the whole has followed their approach. For instance, its election manifesto tried to slip into its Treaty Principles Bill a neoliberal reinterpretation of the second article of Te Tiriti based on the its account of property rights. Their approach was so anachronistic that the bill before Parliament has replaced it with something which is closer to what was the thinking at the signing.
However sometimes ACT policies can be puzzling. David Seymour is minister for Pharmac and announces major public funding initiatives. No doubt that goes down well with the public but it is unclear how greater public funding fits in with a neoliberal vision of a health system. A conspiracy theorist might argue that the cunning plan is that while the additional spending is not very effective, it chews up public healthcare spending which could be used more effectively (such as reducing waiting times and earlier prevention) and so drives people into the private healthcare sector and private insurance.
ACT’s Ministry of Regulation is even odder. It was to be funded by closing down the Productivity Commission, which was established as an ACT initiative during the Key-English Government. Presumably ACT’s thinking has shifted from the need for an independent assessment of the impact of government interventions to one which was more ministerially driven.
The Ministry is going to be about twice as expensive as the Commission. One reason is that it will be paying the highest remuneration in the public service. Seymour’s group working on charter school is also more generously remunerated than average. So much for the neoliberal vision of small government.
Even more strangely, Minister Seymour has chosen agricultural and horticultural products, Early Childhood Education (ECE) and hairdressing for the first regulatory reviews. One doubts that improvements there are going to make a lot of difference to economic performance. (The review of building regulations by National’s Minister for Building and Construction, Chris Penk, will have a far great impact, although it is to be hoped they will not repeat its mistakes which led to the leaky building saga.)
An even stranger story is that neoliberals in general and Seymour in particular have a passion for a Regulatory Standards statute. In Opposition they twice introduced a bill into Parliament – both times it failed – and plan to again. However, in an interim regulatory impact statement the Ministry of Regulation said that while it supports the overall objectives, the legislation isn’t needed. Its preferred option is to build on, and strengthen, an existing regime based on Labour’s legislation passed in 2019.
One is left with the uneasy feeling that, as with the Treaty Principles Bill, ACT is not showing any of the political skills that were so admired in the delivery of the End of Life Choice Act.
If ACT is the successor of Rogernomics, NZF is the successor of the economic management paradigm that it replaced. Yes, Winston Peters is Robert Muldoon's successor. The media does not like Peters. Nor did they like Muldoon, both of whom treated them with belligerence. (In any case the Establishment is always uneasy with populists.)
While it is easy to criticise Muldoon's second period as Minister of Finance (1975-1981), his first period (1967-1972) was widely admired. In the later period Muldoon was beset with economic problems which, he could not solve because of the politics. But the interventionist economic paradigm developed in the 1930s and 1940s had proved successful for four decades. (Not in Narrow Seas explains why it became obsolete, although it probably can be adapted.)
Peters made no great mark as Minister of Finance (1996-1998) but he adamantly rejected ‘neoliberalism’: ‘[t]he truth is that after 32 years of the neoliberal experiment the character and the quality of our country has changed dramatically, and much of it for the worse’. His occasional mention of economic issues – like at this year’s party conference – would be supported more by Muldoon than by Seymour.
This stance is reinforced by NZF’s number two, Shane Jones, who is the Minister of Resources (and Minister for Oceans and Fisheries and for Regional Development). Like Peters, he is a populist and belligerent towards the media. Jones may be overqualified for a politician, with enormous Māori mana and a Harvard degree, and having worked as a university teacher, a public servant, in commerce (including chairing the Treaty of Waitangi Fisheries Commission) and in diplomacy.
Jones left the Labour Party, where he had been a minister, in 2014 because it was not sufficiently committed to the private sector, but his promotion of the Fast Track legislation and other development initiatives shows that he is also highly interventionist. It is a mix which politicians from the pre-Rogernomics era would recognise. Fast Track is an example of the ‘think big’ approach which goes back to Julius Vogel over 150 years ago. (Muldoon gave the approach a bad name but previous programs had often been successful.) Think Big is anathema to the neoliberals.
Jones is an Associate Minister of Finance, as is Seymour (and National’s Chris Bishop), Willis being the minister. Economic policy discussions within the Luxon Coalition Government must be rather tense because while with Luxon, National has a majority, the politics of coalition enables both Jones and Seymour to wield a veto. Perhaps that it is why it is so hard to fathom what Luxon and Willis actually stand for.