Are Luxon & Co now doomed to liquidation?
How might Kiwi voters react to the global energy crisis?
The current global energy crisis was precipitated by Trump and Netanyahu’s assault on Iran, and by Iran’s effective restriction of traffic through the Strait of Hormuz, inflicting economic pain on the world. At the time of writing, Iran hasn’t buckled to President Trump’s obscene and lawless threat, made on Truth Social: “A whole civilization will die tonight, never to be brought back again. I don’t want that to happen, but it probably will”.
The Iranian government is proving to be a tough negotiator, and yet progress isn’t helped by the Israelis killing many of their officials. Nonetheless, the BBC reports that Pakistan, India, China and the Philippines have negotiated with Tehran to allow ships through the Strait.
Update at 11.50 am: See Trump’s acceptance of a ceasefire below.
This crisis is one of the worst things that could’ve happened for the Luxon government – and for New Zealand as a whole, regardless of who forms the next government in November. Two out of four published polls conducted during March, as the energy crisis was only beginning to unfold, put National below 30%, one of which was getting close to their disastrous 2020 election result. On 31 March, Roy Morgan revealed 26.5% support for National: its lowest result since late 2023.
The rising cost of living and the struggle to deliver quality public services, especially healthcare, were leading issues before the 2023 election, and they will increase in salience as November’s election approaches. Economic projections are being revised for the worse in the face of disruption and uncertainty over oil and fertiliser supplies and prices.
Westpac now expects the economy to grow 1.9% in the year to December, down from the forecast of 2.8% made in February. They’re forecasting inflation to peak at 4.1% around the middle of this year.
There could be a toxic brew of stalled growth, rising inflation and rising unemployment, while the projection for the government’s books to return to surplus recedes further into the future. The cautious optimism that began 2026 has dissolved.
Comparisons have been made with the oil shock of 1973, but these come with a caveat: it’s a different world now with a changed energy economy. Nonetheless, there are some lessons we can learn from the past, and these give a hint about how New Zealand might react politically.
1973 was a turning-point for New Zealand with long-term consequences. In addition to the oil shock, the Bretton Woods arrangement had unraveled and the UK joined the EEC (now EU). Things haven’t gone well for New Zealand since then.
In July 2025, I wrote:
The NZ economy has been lagging behind for half a century. Following the global oil shock and recession of the early 70s, NZ fell out of step and never caught up again. It suffered from nine years of Muldoon (1975–84) and then twelve years of disruptive deregulation, privatisation and downsizing (aka neoliberal reforms). New Zealand could be permanently falling behind now, as Uruguay and Argentina did from the early twentieth century. It would be unrealistic to expect NZ to sprint ahead from behind in the way that Singapore has done, but at present there is no politically serious aspiration or plan to get NZ back into the race. And hence it probably won’t. National’s 2023 election slogan (“Back on track”) was hardly aiming high. Whether it’s National or Labour in charge, they’ve been running a New Zombie economy, limping along mindlessly with a chronic productivity problem, comparable arguably with Mexico, Greece or Portugal.
All of the five largest parties in parliament agree that something needs to be done about New Zealand’s lagging economic productivity. They disagree over what to do, but, no matter who wins this political argument, the present global economic shock is beyond anything that they can fix. The best Wellington can do (such as the temporary boost to family tax-credits, and ensuring fuel storage) is reactive damage-control.
Voters may change the government, or not, but it won’t make much difference to the big reset that’s now happening, and no party has a convincing solution for NZ’s long-term productivity lag.
Politically, how did New Zealanders react to the 1973 crisis? At that time, Labour was in office. In 1972, Labour had won a clear majority of 55 seats to National’s 32. But the prospects were dramatically changed by the untimely death of prime minister Norman Kirk on 31 August 1974. Bill Rowling took over from Kirk and fought the 1975 election against National’s Robert Muldoon. The result was a 180-degree turn: National won a clear majority of 55 seats to Labour’s 32. That ushered in nine years of Muldoon’s centralised economic controls and Think Big projects, none which fundamentally improved NZ economic performance.
(Many argue that Muldoonism made it worse. A generous interpretation would say that Muldoon was trying to protect New Zealanders from the consequences of global changes. Once he was gone, though, the built-up pressure for reform meant a sudden swing towards globalisation and deregulation under the fourth Labour government.)
The third Labour government (1972–75) was a one-termer. The loss of Kirk was a big factor in that, so there’s no easy comparison with the present.
To re-imagine the 1975 leadership contest today, however, an analogy would be Winston Peters defeating Chris Hipkins. Readers may react to that thought in various ways, but it’s not far from what may be coming.
NZ First’s populist style could generate political capital out of the global crisis and from people’s fears.
Conclusion
The current energy crisis can be expected to have repercussions for November’s election and beyond. There’s more likely to be a change of government under these conditions, but don’t expect such a change, if it happens, to improve your standard of living.
The Labour Party has not suggested better ways (nor indeed any way at all) to deal with this unfolding situation. The Greens at least made some proposals. To fund their election promises, both Labour and the Greens may end up making demands on an economy that can’t sustain them.
When I asked if Luxon & Co are heading for liquidation back in September, I was keeping an open mind, figuring that the economy would pick up in 2026.
Their chances of survival have now been downgraded, due to events beyond their control. But NZ First could still come to the rescue.
The month of March has been a turning-point in the election race.
“It’s time to de-escalate”, Luxon said. Sound advice, if anyone’s listening.
Later on, President Trump took escalatory rhetoric to a level never seen before:
Does he even know the meaning of the word “civilization”?
Thank you Grant. There are voices which present a little more hope, if only we Kiwis would take a little more responsibility for ourselves and our predicament, and stop saying 'government has to fix this'.
The old No 8 wire thinking that still held when my family immigrated in 1950, took on the challenges and tailored solutions.
Of course there were not the rules and regulations we have today, although it was nigh impossible to buy a car unless you had overseas funds.
David Harvey wrote a confronting yet hopeful piece, 'The Distant Yet Pervasive State', on 3rd April. In brief it requires us to rebuild the sense of community we once had, forming clubs, associations, sports bodies, the friendships which saw us doing things together, and enjoying it. As he writes - "fostering a culture in which the rights and responsibilities of self-governance are not merely acknowledged but exercised — daily, locally, without waiting for Wellington’s permission."
Depressing !
Imagine the feckless Hipkins in control with Chloe as deputy and Waititi as Foreign Minister.
Our leadership would make Trump a world class statesman by comparison.