Housing costs grew in 2023: so, what next for Labour?
Are they looking ahead or fighting lost battles?
The NZ Labour Party may be in for a long spell in opposition – unless it can turn present changes into opportunities.
Labour’s been attacked by left- and right-wing commentators lately, as reported in Bryce Edwards’s recent column. He fairly criticises Labour for having “shown no real sign of learning any lessons from its defeat, nor … any capacity to revive itself” – so far.
Labour has made itself into the party of petty redistribution: maybe tax the rich a bit more and pay out more on benefits and public services – or maybe let’s not be so ambitious and just remove GST from fresh fruit and vegetables. On that basis, Labour’s most significant lasting achievement in recent memory was Working for Families, back in 2004. And that was only a band-aid on a deeper wound: the growing inequality in market incomes and in home ownership.
Stats NZ tells us that, in the year ended June 2023, 18.2 percent of households were spending more than 40 percent of their income on housing costs – up by 2.9 percentage points on the previous year. The rate was 27.5 percent for households that didn’t own their dwelling (up 3.4 percentage points). Going over that 40-percent criterion is especially perilous for those on lower incomes, as there’s little disposable income for other basics.
Housing was again getting less affordable, especially for many renters, in 2023 – under Labour’s watch.
National’s response is to require councils to allocate more land to housing development, and thus boost supply. But they acknowledge it’ll take a long time to reduce the ratio of incomes to prices – if it works at all.
For now, even the educated middle-class may struggle to own a home and raise a family. According to careers.govt.nz, the median income of a person with a bachelors degree in IT five years after graduation is $80,000. With a bachelors in management and commerce, it’s about the same at $79,000. Imagine two such graduates in their late twenties earning about $160,000 per annum between them – less than an MP gets. Raising a family in a materially secure environment may be a struggle for this couple, with the median house price approaching $800k nationally and around $1 million in Auckland.
Even if they’ve paid off the student loans and saved a solid deposit (no mean feat!), a 30-year mortgage of $700,000 will cost them almost all of one of those after-tax incomes. At least they can live on the other one. With a household income that’s well above average, this hypothetical couple are relatively fortunate, although things will change if they have a child or lose a job.
One income used to suffice to raise a family, however. And yet the NZ economy has grown in real terms since the mythical seventies.
Back in the 2000s, Labour was pushing “the knowledge economy”: get more graduates into innovative industries, and incomes will grow. But, if a suitably qualified couple can study hard and work hard and still struggle to enjoy a “normal” family life – like the one their parents gave them – then something’s not working well. Tinkering with taxes and benefits won’t relieve that smart young couple’s financial stress. Labour desperately needs their two party votes, but one or both of them probably voted for National last year.
Their parents meanwhile may feel concerned that, no matter how hard they tried to give the kids the best start in life, the next generation may not be as financially secure in their turn as parents of the grandkids.
A market economy has reduced the share of income and wealth that goes to employees, and quietly redistributed it upwards to owners of capital and landlords. A “trickle-up” effect seems to have outweighed redistributive policies.
Acknowledging these things doesn’t require resenting or hating the rich. Inequality creates social and economic problems that ultimately affect everyone, and a smart Labour leader will look for some common ideological ground. If they want to avoid the kind of crisis and polarisation that we’re witnessing in the US, then Labour will be honest with disgruntled workers and with employers about a common problem and then set a shared goal of prosperity.
Labour has an opportunity at the moment with its internal changes, notably Grant Robertson jumping ship. It can refresh its parliamentary team and rethink its policy direction, or not. It can choose a forward-looking policy agenda, or it can skirmish over old election debates.
But even before they take it to the present right-wing government, Labour’s internal contest over ranking occurs among relatively well-off professionals with university degrees: nice well-meaning folk, but they don’t resemble the low-paid and precarious workforces whom they supposedly represent. Parliamentary debates and the struggle over who occupies the Treasury benches are fought between factions of society’s elite. The Labour Party’s mission is to work on behalf of people who don’t aspire to live like MPs and can’t afford big donations.
Mission Impossible?
