NZ First may find itself squeezed into third place in the new Government by the Greens who, though they will not be in Cabinet, may well end up having more leverage over Labour.
NZ First are going into a full coalition with Labour which means they will be bound by Cabinet collective responsibility and depending on the wording of the coalition agreement may well be bound to vote with Labour on all votes in Parliament.
In return for this, they will get four Cabinet Ministers, and one Under Secretary’s position and Winston Peters has been offered the Deputy Prime Ministership.
There is a provision in the Cabinet Manual for them to “agree to disagree” with Labour but the Greens will have much more freedom.
That’s because they have been offered only a supply and confidence agreement which means they are bound to vote for the coalition only on the Budget and confidence votes.
In return for this, they will get three Ministerial posts outside Cabinet and one Under Secretaryship.
At this stage, the details of what policy concessions NZ First has secured are not clear.
But the main outlines of the new Government are more obvious.
We can expect:
- An end to the April 1, 2018, tax cuts
- A big scale Government house building programme
- A cutback in immigration — particularly some education immigration.
- An end to the foreign purchase of existing houses.
- Tougher controls on foreign purchase of farmland.
- A bid to renegotiate the TPP but whether failure would entail walking away was unclear last night.
- Increased expenditure on health and education, particularly mental health.
- A working party to look at water pollution with possibly both Labour’s water tax and the Greens nitrate levy off the table for the meantime.
- No referendum on the continuation of the Maori seats.
However, perhaps the biggest change in the new Government will be a shift of emphasis and mood.
Obviously, with Jacinda Ardern (37) and James Shaw (44), there is generational change even though Peters is 72.
Yet it was Peters who maybe defined the goal of the new Government more precisely than anyone.
“Far too many New Zealanders have come to view today’s capitalism, not as their friend, but as their foe,” he said.
“And they are not all wrong.
“That is why we believe that capitalism must regain its responsible – its human face.
“That perception has influenced our negotiations.”
Asked about this last night, Jacinda Ardern said she “absolutely” agreed that capitalism was not delivering for the people of New Zealand.
“We need to make sure that we are an active government working alongside people to ensure that they are having all of their needs met.
“We need to make sure they can access Government services when they need them; that they are supported to find work and that we are active in ensuring that we have greater job creation in this country.; that we don’t simply rely on New Zealand’s economy to be reliant on a housing market and simple population growth.
“We are ambitious that our economy can do better.”
Peters was even more emphatic.
“We’ve heard, and we’ve read many comments about poverty and the concentrating of wealth in fewer and fewer hands.
“We wish to address that issue.
“It’s not an old-fashioned sentiment, we did it hugely in past decades in our great history, and we want to be part of doing it again.”
It seems this was the deal breaker for Peters.
“We’ve had to make a choice, whether it was with either National or Labour, for a modified status quo, or for change.
“In our negotiations, both National and Labour were presented with that opportunity; working together, cooperating together, for New Zealand.
“We choose a coalition government of New Zealand First with Labour.”
Did National misread the electorate?
Both Peters and Ardern’s statements raise the question as to whether National misread the electorate and its growing concern over the past year over failing Government services, rising house prices and wages that for significant sections of the population did not seem to keep up, particularly with rising housing costs.
But outgoing Prime Minister Bill English said he wasn’t going to get into a political debate last night.
“There will be plenty of opportunities to debate those issues later,” he said.
However asked if he had any advice for her he said New Zealanders had seen their country going in a positive direction and she had an opportunity to build on that.
The new Cabinet
The immediate agenda for Prime Minister Artdern will be to preside over Labour’s election of its Cabinet tomorrow.
(Unlike National, Labour elects its Cabinet).
She will allocate portfolios next week and hopes to be sworn in on Thursday.
Given that Cabinets are usually of 20 Ministers and that NZ First will have four positions that means Labour will elect 16.
Likely Ministers (apart from Ardern and deputy Leader kelvin Davis) would include Andrew Little, Grant Robertson, Phil Twyford, Megan Woods, Chris Hipkins, Carmel Sepuloni, David Clark, David Parker and Nanaia Mahuta. Other could include Stuart Nash, Kris Faafoi, William Sio, Damien O’Connor, Jenny Salesa, Ruth Dyson and Michael Wood.
Trevor Mallard is likely to be Speaker.
Peters suggested last night he would like a portfolio mix which included regional development.
NZ First’s Ministers would be Peters, Ron Mark, Tracey Martin and Shane Jones with Fletcher Tabuteau likely to become an Under Secretary.
The Greens three Ministers would be James Shaw and possibly Julie-Anne Genter with Eugenie Sage possibly an Under Secretary.
The new Government will face some immediate challenges.
The most immediate will be its plan to legislate as a priority to ban foreigners from buying existing houses.
Ardern will be going to APEC in Vet Nam on November 11 (three weeks) and last night said she planned to renegotiate New Zealand’s TPP membership there to accommodate the housing ban and also Labour’s differences with the Investor-State Disputes Settlement clauses in the agreement.
Asked if she was prepared to walk away from the agreement if she couldn’t get agreement to Labour’s requests, she said that had not been demonstrated as necessary “at this time”.
“We are in a period of renegotiation for that agreement, and we will be using that period of renegotiation to deliver an outcome that will ensure that New Zealanders are looked after in that agreement.
“At the moment the Government made no effort to negotiate an agreement that allowed New Zealanders an agreement to ensure they can protect the asset they have been unable to attain which is housing.”
But Australian Trade Minister Steven Ciobo was warning last night that attempts to change the TPP could cause it to unravel altogether.
“If we start unstitching elements of it, if each country starts bringing to the table issues they’d like to change then logically then the conclusion is the deal will become unstitched,” he told “The Australian” newspaper.
The Reserve Bank
Perhaps the potentially most radical change the Ardern-Peters Government is contemplating is its proposed changes to the Reserve Bank Act.
Peters had to concede last night that he had not got Labour agreement to change the Act completely and adopt the so-called “Singapore Model’ which targets the exchange rate rather than inflation as the main focus of monetary policy.
But he said the NZ First private members’ bill which failed to pass by one vote would form the basis of a new Bill.
NZ First’s 2013 Bill added the rate of growth, export growth, the value of the dollar, and employment as well as price stability as factors to be considered in setting the official Cash Rate.
Labour’s monetary policy would simply add “full employment” to price stability to the bank’s considerations when setting the OCR.
But it would also have the OCR set by a committee rather than the Governor and the committee would include three external appointments.
The external members would be chosen in consultation with the finance minister, but the final say on the committee’s make-up would be left to the Governor to preserve the bank’s independence.
Speaking last night, Labour’s likely Finance Minister, Grant Robertson said the timing of any legislation would be something Labour would the coming weeks.
“We campaigned for the specific monetary policy changes,” he said.
“We’ve obviously had discussions about those during the negotiations (with NZ First).
“We’ll get underway as soon as we possibly can.”
There was less clarity on what Labour would do about its proposed water tax on farmers and other commercial users of water which was opposed by NZ First during their campaign and countered by the Greens with their own proposal for a nitrate levy.
Peters said that when the coalition documents were made publicly available – probably next week – then “you will know that we have done the best we possibly could for the people out in the rural sector and their concerns.”
Ardern said that Labour and NZ First and the Greens had had a “robust conversation” about policy direction.
“We all agreed – every single party agreed — that in New Zealand our rivers are dying.
“We all agreed that we needed to take action.
“The methodology we wanted to use differed in some areas, but you will see from the agreements that we release and the policies within them that we have found a path forward collectively.”
The Greens Leader James Shaw, would not go into detail about water policy but said it was covered in the various agreements that would be released next week.
Peters announcement last night marked the end of a day when the emotions in both Labour and National had ebbed and flowed as each tried to guess whether they would be NZ First’s selection to go into Government.
The announcement – promised for Wednesday, then yesterday afternoon, finally came just before seven o’clock last night.
There was a suggestion that one of the reasons it had been delayed was that NZst’s caucus was badly split over which party to go with.
Peters seemed to confirm this last night when he was asked whether the vote in Caucus and the board had been unanimous.
“Not quite,” he said.
He said they had a consensus rather than a vote.
National Party Ministers and MPs were long faced when they stood around Bill English as he held a brief press conference to respond to the decision.
He had briefed both the Caucus and the party’s board earlier in the day on what had been offered to NZ First.
Board members were relieved that the party had not made any big offers to NZ First which would have contradicted the past nine years of policy.
But that may have been National’s undoing.
Peters wanted change.
The Greens contacted their 175 delegates by phone last night – they needed 155 to agree.
Just after 11.00 p.m., they issued a statement saying they had that agreement.
But earlier, anticipating that would be the result, an ecstatic Shaw told journalists that this was a historic moment for the Green Parrty.
“For the first time, we are going to be in a position to have Ministerial control in the areas that are important to us and the areas that we campaigned on in this last election campaign.”
He listed those areas climate change, water pollution and child poverty.
For most people involved in the negotiations – and even for the media – the main emotion last night was relief that what had been an exhausting process was now over.
There will undoubtedly be some other reactions as the cold light of reality hits home among the three Government parties, and the full impact of the loss sinks into National.
But ultimately it was a deal which was inevitable.
For nine years Peters has campaigned against the neo-liberalism of the National Government and called for a return to a more egalitarian New Zealand.
Labour under Andrew Little had been doing the same thing, but Little could not seem to make an emotional connection with the electorate.
Ardern could – and did. And in doing that she saw the seeds that Little had planted, particularly in provincial New Zealand, suddenly bloom.
National never acknowledged that its economic policies were creating victims and resentment.
It now has three years to reflect on that.