The Government can head off to the holidays, entitled to assure itself that it has done more or less what it said it would do.
The campaign last year promised to “get New Zealand back on track.”
When you look at the basic promises—to trim back Government expenditure, toughen up on law and order, reform the Resource Management Act, restore confidence in farming, get our schools back to basics, and improve access to health—all except the health promise have been honoured.
Yet, for all that, there is a discordant note in the current political situation.
Last September, the electorate was a political lynch mob determined to swing Labour from the highest tree it could find.
But once Chris Hipkins had been defeated and, presumably, in the minds of his opponents, forced to eat humble pie, that seemed to also be the end of the euphoric enthusiasm for Christopher Luxon and National.
They had done their job, and as far as the electorate was concerned, that was that.
It was as if the country had entered into a political vacuum.
National preoccupied with repealing, abolishing and reprioritising offered little new in response.
Sometimes, the Government has looked like the last gasp of the baby Boomer generation.
The big stuff, like the Fast Track legislation, the revised Resource Management Act, the new school curriculum, the de-Maorification moves, and even foreign policy, has been all about restoration rather than creation.
We are told that will come this year.
It will, apparently, be all about growth.
But the real challenge next year for the Government will be reality.
Two immediate problems are looming up on the political horizon.
The first will be the Treaty Principles Bill, and the second the Budget.
The Government can now do nothing about the Bill other than hope it doesn’t provoke an entrenched division within New Zealand society.
The time to have stopped it was during the coalition negotiations but either through naivety or a desire to have his cake and eat too, the Prime Minister allowed it to go through to the coalition agreement.
ACT may not have been as firm as it appeared if it had been challenged.
There is every reason to believe that ACT discovered during the campaign that the proposal was not as big a vote booster as it might have hoped.
Some sources say that after David Seymour announced it would be a bottom line and that ACT would sooner sit on the cross benches than negotiate it away, their polling dropped by as much as three per cent.
New Zealand voters do not like political tails trying to wag the Government dog, and that was what ACT was doing.
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Ironically it is Labour who have most clearly defined what a realistic Government’s position on the Treaty might be.
Willie Jackson explained it at Labour’s conference.
“Māori did not cede sovereignty,” he said.
“Does this mean that parliament is not sovereign? Of course not.
“Does that mean the King is not our head of state? Of course he is!”
Jackson was reflecting on an argument emerging from a growing body of scholarship that the original intent of the Treaty was for Maori to have Tino Rangatiratanga (or sovereignty) over their own affairs.
“What Māori gave in the treaty was the opportunity for the crown to govern as long as the Crown acknowledged Māori sovereignty or tino rangatiratanga,” Jackson said.
But if the Treaty is about intangible commitments, the long term fiscal outlook for New Zealand is about cold hard numbers.
The GDP figures yesterday and the Half Yearly Economic and Fiscal Update show that we are coming to the end of a worse recession in terms of negative growth than the Global Financial Crisis of 2008.
It’s useful to compare the situation Bill English faced then at the end of the Key Government’s first year in office with that faced by Nicola Willis this week.
English faced projections of negative growth for each of the next four years; for Willis the worst is already over and she faces only positive growth for the next four years.
Treasury has even forecast an “Upside Scenario,” which would see the growth of over three per cent for the next five years.
The Government’s main problem is the long-term deficit, which is forecast to improve only slowly over the next five years. Even so, the traditional OBEGAL measure will still not quite be in surplus at the end of 2029.
There is no easy answer to that.
More tax revenue would help, meaning Luxon will need his big growth push to work.
There are great expectations that the Fast Track legislation will unleash an infrastructure boom, partly financed by the private sector, which will kick growth up a gear.
Willis now sounds open to new taxes, such as a foreign buyers’ tax or possibly even a windfall tax on banks.
However, National is still rejecting the IMF and OECD proposals for a tax on wealth, capital, or land.
But sooner or later the two big entitlement programmes, health and New Zealand Superannuation, will need looking at.
Whether Lester Levy and Health NZ can bring their near $1 billion deficits under control is a moot point.
Willis will have to tread carefully, though.
Politicians lost their licence to restructure the welfare state after the reforms of the 1990s.
However, the immediate outlook is sunnier.
What National has learned politically in the post-Ruth Richardson era is that the so-called “misery index” plays a big part in determining elections, not more abstract economic indicators.
The index, the sum of the unemployment rate, the lending rate, and the inflation rate minus the GDP growth rate is heading down, which is good news for a government that wants to be re-elected.
Unemployment will be lower by the next election, and the Official Cash Rate and inflation are forecast to continue declining.
As measured by Westpac, consumer confidence is on the rebound, and growth is expected to bounce back in 2026.
If Labour had hoped Willis would deliver austerity and misery in 2026, they may be out of luck.
So next year is going to be more challenging for the Prime Minister.
He will have to manage the fallout from the Treaty Principles Bill and hope the economy recovers quickly and substantially.
However, his announcement yesterday that he would not go to Waitangi next year may well validate Labour’s argument that he is running away from problems of his own creation.
His test will come once the Treaty Principles Bill has been disposed of. If a bitter legacy is left behind on either or both sides of the debate, only the Prime Minister will be able to pull the country together.
It is a big ask and he is no speech-maker.
This year, his response to economic questions has been to either endlessly regurgitate his campaign slogans or criticise Labour for its fiscal record.
He won’t be able to get away with that next year. He will need to preside over real growth.
Ultimately, the test will be whether his Government can get the economy to beat the 3.3 percent growth figure 2025 – 26 forecast by Treasury on Wednesday.
He has an ambitious travel agenda for the first six months of next year: India, Indonesia, Vietnam, and then, in April or May, China.
That will be another test.
Can he move beyond slogans to make a genuine impact on the world stage?
That is what he needs, something to indicate that he is an “homme sérieux” (as the French would say) rather than somebody who has read far too many management manuals.
Those books are central to who he is. He says he is a turnaround expert and argues that he is not a politician. But he has to be. He is not just Prime Minister and MP for Botany he is also the leader of the country’s largest political party.
National Party members expect a lot from their leader.
But at party conferences, he doesn’t really seem all that comfortable and often gives the impression that he can’t wait to get away.
In short, party members and quite a few MPs seem to feel that he is not really one of them.
Sometimes, they ventilate those views, which gives rise to some excited gossip and speculation that he may not last next year, that he will be rolled.
Wiser heads within the party and caucus know that would be fatal.
In some ways, Luxon is like Jim Bolger at the end of his first year in 1991, who faced a putative coup led by Philip Burdon.
That didn’t succeed even though Bolger faced a caucus in open rebellion and unemployment of 11.2 per cent.
The thing is, Luxon has done what he was asked.
But at the end of his first year he can as Prime Minister he can reflect that he has done what his party and supporters wanted.
He has brought discipline and order to the Caucus, he defeated Labour and he has restored much of what New Zealand was like during the Key Government.
He has done all that while having to work with two difficult coalition partners.
But in a way that has been the easy bit.
Luxon’s real challenges will come if he wins another term in 2026.
Then, if the deficit is not going down, he will have to address that, and if ACT winds up the race debate in the 2026 campaign, he will need all the skill in the world to calm that down.
It will be a changed world, with the baby boomers and those who lived through the 1980s economic reforms a diminishing force. Winston Peters will be 84 by the time of the 2029 election. Young Maori will be even more prominent than they are now. After three years of Trump, the world will be a more uncertain place.
All of that spells a need for generational reform.
What we are seeing with the Luxon Government is very probably the last gasp of political tendencies that had their genesis 40 years ago.
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