Republished with Permission
Bryce Edwards
Political Analyst in Residence, director of the Democracy Project, Victoria University of Wellington.
While support for ACT and New Zealand First has remained fairly steady over the last 12 months, the average of the last five public polls shows National declining from an election result of 38.08 down to 32.94. This is a significant fall. Most commentators identify three key liabilities for National. Its leader, Christopher Luxon, has poor communication skills and poor judgement, the economy appears to be deteriorating under his watch, and the public does not trust the government to manage the public health system.
National has had a busy year. They’ve delivered on many of their campaign promises, including rolling back most of the Labour Government’s policies, cutting taxes and increasing transfer payments, laying off public servants and redirecting funds to the ‘frontline’ of the public sector, and cracking down on gangs.
They’ve introduced the Fast Track Approvals Bill (discussed in previous democracy briefings) and established a National Infrastructure Agency. They’re making changes to the education curriculum, have banned cellphones in schools, and begun work on 15 new “roads of national significance”.
National can, therefore, point to significant policy achievements after only a single year in government. So, why aren’t voters happy with them?
Why Christopher Luxon is not ‘sorted’
The most savage attacks on the prime minister came from right-wing commentator Matthew Hooton, who recently published a widely shared column in the New Zealand Herald questioning Luxon’s capabilities. Hooton believes that Luxon’s long absence from the country, from 1995 to 2011, means he has little understanding of the nation’s economic, social, and ethnic challenges and displays little capacity to learn.
Hooton cites the prime minister’s obliviousness in agreeing to support David Seymour’s Treaty Principles Bill through first reading because he simply didn’t understand the background of the Treaty debate. Hooton also suggests Luxon has alienated some of his caucus colleagues by gossiping about them behind their backs.
He argues that Luxon’s inability to take the public with him comes from a lack of intellectual substance, writing, “Luxon’s language is often derided as business-speak, but no genuine businessperson uses so much corporate twaddle. His language more resembles a cheap self-help book. Extraordinarily, he communicates even less substantively in the media and in person than the lamentable Dame Jacinda Ardern.”
A similar line of criticism came from Post journalist Andrea Vance, who wrote “His lack of loyalty to his own ministers (and staff) is a frequent topic of gossip and speculation around Wellington’s pre-Christmas parties. A prime minister who is so unpopular with the public is not one who can afford to be so cavalier with his caucus relationships. He seems blithely unaware of this. And he still can’t properly weigh political risk.”
The prime minister’s lack of depth was on display in a recent interview with Q+A journalist Jack Tame. Luxon had declined to be interviewed all year and finally fronted in early December. It was not an impressive performance, and many commentators noted the number of times Luxon said, “What I would say to you Jack”. Clips of him repeating the term 26 times went viral on social media.
Communications experts tell their clients to use phrases like this as a “bridge”, in which they transition from the question they’ve been asked to the question they’d prefer to answer. Tame asked the prime minister a number of questions about his government’s performance and its plans to improve the nation’s economic prospects, and Luxon repeatedly bridged to attacking the previous government.
It was all a vivid demonstration of Hooton’s critique. It’s not clear that Luxon has the depth to do his job well.
When the government was formed, Luxon’s preferred prime minister rating averaged across three polls was 31.3 per cent. A year later it had dropped to 24.4 per cent. He suffered a loss of public confidence in March, when it was disclosed that he was having Premier House refurbished, staying in his Wellington apartment in the meantime, and charging the taxpayer $52,000 per annum to pay his own rent. He repaid the money.
In the second half of the year, he sold a number of investment properties, and struggled to explain why his hundreds of thousands of dollars in capital gains shouldn’t be taxed, when workers pay such high rates on their income. He even seemed confused as to why journalists were asking him about it.
National will be looking around their caucus table and wondering who they could replace their current leader with. Nicola Willis, Chris Bishop and Erica Stanford are the most likely candidates.
But Luxon is not under immediate threat. Spills can be enormously destabilising. When they replaced Simon Bridges in 2020, it triggered months of chaos, leading to a devastating election defeat. A leadership coup while in power could call the legitimacy of the government and the integrity of the coalition into question. But eventually, National’s MPs will choose the uncertainty of a spill over the high probability of a loss under a poorly performing leader.
Off the tracks
National is also struggling with an ongoing recession caused by the Reserve Bank’s monetary policy, responding to the high inflation of the Covid era. During last year’s election campaign, Luxon talked about the country “losing its mojo” and promised to “get New Zealand back on track”. But so far, the economic and financial measures adopted under Luxon’s government amount to little more than tinkering.
Robert MacCulloch, a professor of economics at Auckland university summarised the very bleak prospects for the economy as revealed in Treasury’s recent Half-Yearly Economic and Fiscal Update:
On both Real GDP and GDP per capita bases, our actual performance is now 7% lower than where NZ was expected to be, before the pandemic. Treasury predict we will keep underperforming at that level for the foreseeable future. To put numbers on these amounts, we’re talking $28 billion per year in lost output. Should it go on indefinitely, it will add up to a $560 billion total loss (= 28/0.05, with a 5% discount rate used). In terms of personal incomes, we’re losing $4,000 per year, compared to where we should be tracking. The bottom has fallen out of NZ’s economy.
This was confirmed by a recent report by the Economist magazine contrasting the economic performance of 37 wealthy countries in 2024, using standard metrics like inflation, growth, deficits and unemployment. New Zealand came 33rd, and the only nations lower on the list were proximate to wars, political instability and/or an energy crisis: Turkey, Estonia, Finland and Latvia.
The number of corporate insolvencies has soared. This number is now higher than the depths of the global financial crisis. The prime minister and Finance Minister Nicola Willis have made much of recent reductions in interest rates, which they hope will drive economic growth, but both Treasury and the Reserve Bank are warning that the recovery will be muted.
Luxon and Willis protest that they’ve inherited a mess from the previous government. They’re not wrong – but their promise during the campaign was that they’d fix the mess. They’d get the country back on track.
There’s no evidence that this is happening or that there’s any plan equal to the challenge the government now faces. Treasury are indicating that balancing the nation’s books will require both tax increases and significant spending cuts.
National’s challenge here is both political and economic. The party is ideologically opposed to more tax cuts, and if it reduces spending it risks slowing the economy even further. And even if it were inclined towards either of these options, ACT will oppose additional taxes, and New Zealand First will not support an austerity budget. National is trapped between two very capable coalition partners.
To make matters much worse, there’s an increasingly popular narrative that the government has been captured by vested interests, driven more by corporate lobbyists than by the public interest. It’s doing the bidding of wealthy individuals and entities, while poorer New Zealanders and the natural environment are the victims. If it is to turn around its 2024 decline, in 2025 National will need to convince New Zealand that the party is actually the opponent of ‘tribal politics’ and stands for the ‘national interest’ instead.
The sick health system
In their recent survey of ministerial performance, the Post’s political team ranked Health Minister Shane Reti at three out of 10. It reflects a terrible year across this portfolio.
The government broke its promise to fund cancer drugs in the budget and scrambled to compensate, costing it an extra $600 million dollars it could not afford to spend.
Much of Reti’s job appears to have been outsourced to the newly appointed Health Commissioner Lester Levy. There’s considerable uncertainty about the veracity of the government’s claims about the financial state of the health service and whether the cost-cutting is impacting core services. As with the economy, the government does not appear to have a coherent plan to address problems in this sector.
Health was the domain of two broken election promises. The first was the failure to fund a number of cancer drugs that were promised during the election campaign in the budget. The decision was reversed after intense criticism and the government then announced $600 million over four years in additional funding to Pharmac. This is a significant cost, given how tight the Government’s operating allowance will be during this period.
The second broken promise has not been reversed. In 2017, Jacinda Ardern promised to commence the rebuilding of Dunedin Hospital before 2020 and complete it before 2027. Labour failed to begin by 2020 and made a number of cuts to the project, as well as pushing the timeline out to 2029. Shane Reti promised to deliver a full rebuild during the 2023 campaign, but in late September Reti and Infrastructure Minister Chris Bishop announced that they were scaling back the project to reduce costs. Now Chris Hipkins has promised that if Labour are re-elected, they’ll complete the build.
All of this happened against a backdrop of reports about patients dying after being sent home from emergency departments, provincial hospitals closing overnight due to lack of staff, recurring cutbacks at HealthNZ and an expanding deficit. In October, RNZ reported that Health NZ was projected to overspend by about $147 million a month, adding up to $1.6 billion a year.
That same month the polling company Ipsos reported that health had become the second most important issue for voters and that voters were significantly more likely to trust Labour to manage the sector. The most important issue remained inflation/cost of living: National remains slightly ahead of Labour but continues to decline.
The light-less tunnel
The government will face a number of challenges next year. The ongoing debacle around replacing the Interislander ferries will drag on. Winston Peters is the new minister of rail and he has until March to find a superior solution to the option of delivering lower cost ferries without the rail enablement that blew out the spend in Labour’s scheme.
There’s also the problem of the electricity market. The midyear power crisis wiped out a number of manufacturers. One analyst estimated it inflicted $300 million of damage in foregone export revenue alone. Business leaders have complained that high energy costs were one of the biggest handbrakes on the New Zealand economy this year. The government has announced a review, but it will not begin until the new year. It’s unlikely to deliver before the next winter, which is when power crises usually occur.
Economic forecasters are predicting a flat year. Hopefully slightly better than 2024, but not by much, and a number of events could make it significantly worse. Failures in the Cook Strait, or the energy sector. Trade tariffs from the Trump administration, or a trade war. More blowouts in the health sector provoking more cuts. Civil unrest around David Seymour’s treaty legislation.
New Zealanders lack confidence in Christopher Luxon to lead us through these challenges. His own caucus sounds increasingly sceptical. New Zealand politics could look very different by the end of next year.
This article was originally published on the author’s Substack.
