Luxon & Co: leading the country in the right direction?

Or a government of little ambition?

The National-led government isn’t thinking seriously about productivity and prosperity.

Now that the first 100 days are fading into distant memory, it’s timely to ask what the new government will do next and whether it’s leading the country in the right direction. But what’s the right direction? Here are some aims that should be relevant to a centre-right administration:

1. Raise economic productivity by raising skill-levels so that workers earn more per hour and the country earns more from the rest of the world.

2. Close the infrastructure deficit.

3. Reduce carbon emissions.

4. Plan for an AI-driven future (which connects with point 1).

5. Consider tax fairness and efficiency, not just tax cuts.

6. Improve health and welfare services (which also connects with point 1).

7. And don’t forget to aim for budget surpluses and to pay down public debt while you’re at it.

That’s asking a lot – and, considered all together, it may be asking the impossible of a country that’s possibly just too small to keep up with global competition and technological change. How well, then, will Luxon & Co tackle their mission impossible? – which they’ve decided already to accept.

In line with point 1 above, my first port of call was the Economic Development portfolio on the Beehive website, on which there was one announcement from the minister, Melissa Lee: “The inaugural Women’s British and Irish Lions Tour will receive government funding [$3.9 million] to support matches played across New Zealand in September 2027”. There were no announcements at all on Arts, Culture and Heritage, in contrast, thus saying something about priorities. One notes, though, the fuss on X about an $800,000 contribution from the independent Film Commission towards a documentary about Jacinda Ardern. But this line of inquiry was getting me nowhere!

The real action was happening around the plan to fast-track resource approvals and cut through “red tape” for specified developments in, for example, aquaculture and mining. But the bill’s schedule that will nominate favoured projects is currently blank. There’s been critical analysis of this bill’s pros and cons, and comparisons made with the Muldoon government, while the Greens condemned it for “brazenly anti-democratic disregard for environmental protection”. Will lobbyists and wealthy donors get their pet projects approved much faster now? Or is it more important to unshackle some new industry?

Alongside this are efforts to grow housing, requiring councils to rezone enough land for 30 years of housing growth and making it easier for overseas interests to invest in build-to-rent developments. Again, there are environmental concerns, but there’s no doubt that New Zealand has a housing shortage, which the minister, Chris Bishop, acknowledges is a social and moral issue as well as an economic one.

Bishop made some comments about New Zealand’s poor productivity (“the average Kiwi earns in one hour what an Australian earns in 45 minutes”), but the present government has nothing intelligent to say about skills development in post-compulsory education. After the ill-starred mega-polytech Te Pūkenga gets dismantled, there’s apparently no strategy. Skill gaps will presumably be filled mainly through immigration, rather than by investing in training and retraining New Zealanders. Why invest in training workers ourselves when we can recruit ready-made employable people from countries that have even lower incomes?

Infrastructure, especially road transport, is front-of-mind for the Luxon government. A 40-page draft policy statement on land transport was released last week. The emphasis is on roads, and it links back to the fast-tracking of consents mentioned above. Reduction of carbon emissions is not one of its strategic priorities, but only a side issue. Alternatives such as public transport, cycling and walking are de-emphasised. So don’t expect any new rail links (not even in a second Auckland Harbour crossing), but do expect tolls on new roads and increases in vehicle registration fees. You’ll be able to drive faster from A to B – one day, if the new roads aren’t already congested. Idling in traffic wastes time, diminishes quality of life and is a drain on economic productivity.

A goal in the 100-day plan to “begin efforts to double renewable energy production, including drawing up a national policy statement on renewable electricity generation” was worded in a deliberately vague manner. Some work may have begun, but statements from the ministers for energy and climate change show little urgency, compared with those building roads and fixing pot-holes.

As for water services infrastructure, the new government has repealed Labour’s 3 Waters scheme and aims now to restore local government ownership and control. Two new bills will be introduced during 2024, so it’s too early to judge. But the minister for local government, Simeon Brown, has mentioned new “financing tools” and “financially independent council-controlled organisations”. In the meantime, some councils, especially smaller provincial ones, will struggle to make essential system upgrades.

The National Party style themselves as superior economic managers, but their pre-election tax policy – especially the proposed duty on foreign buyers of real estate – was quickly shot down by tax and property experts. After the election, they dumped foreign buyers and, controversially, went for smokers as a revenue source instead, repealing Labour’s sinking-lid tobacco elimination policy. Now it’s being reported that the reinstatement of tax-deductibility of landlords’ interest payments will cost much more than originally estimated, knocking yet another hole in the fiscal plan. National’s election policy was to return to surplus in 2026/27 and then to reduce debt so that, by 2027/28, debt will be $3.4 billion lower than forecast in the Treasury’s pre-election fiscal and economic update. All eyes will be on Nicola Willis’s first budget on 30 May.

The pressures are coming from all sides:

• The Luxon government was elected on a law and order platform, but police officers are threatening industrial action following an “insulting” pay offer.

• It’s hard to believe Luxon’s trickle-down theory that the reinstatement of tax deductions for landlords will lead to lower rents – as opposed to a renewed buy-up by investors, higher house prices, higher rents and more cost-of-living pressures on renters.

• The cost blowout in National’s tax-deduction policy could rise to about the same amount as the cost of the canned Cook Strait ferry replacements and terminal upgrades, according to Labour’s finance spokesperson, Barbara Edmonds (as reported by Thomas Coughlan in Tuesday’s NZ Herald).

• The inevitable decline of inter-regional rail services will mean more big trucks on the roads, and hence more potholes to fix – and more carbon emissions.

National’s approach to health is driven by setting five targets. In themselves, they’re desirable goals, but this kind of approach has a well-known downside: what gets measured gets managed – while other important matters don’t get managed. A section of society these days will reject the target of “95 per cent of children to be fully immunised at 24 months of age” – and that may be more than 5 per cent of us. Will ministers Upston and Reti now reconsider a vaccine mandate for beneficiaries with children, or the “no jab, no pay” policy that they proposed in 2019?

In welfare, the approach is to apply more stringently the existing set of sanctions. The return of “social investment” means that policy on working-age social security will be based, like insurance, on an actuarial model – not a wellbeing model. It’s one area where the government will seek significant savings. Many people who are eligible for benefits may be deterred from even applying. On the other other hand, long periods on benefits aren’t beneficial for those able to work.

There are pros and cons in the all of the above, and the opposition parties aren’t an opposing force to be reckoned with at this stage. Weighing up the present government’s plans with the seven points above, however, there’s a lot left to be desired. This government isn’t preparing the country for the future. It’s been silent on the effects of AI – even though we’ve been watching a whole industry unravel in real time on TV screens due to the effects of platform capitalism, with more to come. There’s no credible plan to raise skills and productivity for the impending AI-driven economy. Climate-related policy is minimal, appeasing those who want to milk more cows and drive faster on roads.

Within cabinet, it’s a few doing the heavy lifting: Nicola Willis, Chris Bishop and Simeon Brown – while Shane Reti took the hospital pass (health), Louise Upston deals with the difficult welfare portfolios, and Erica Stanford goes back to basics in education.

For about the last 30 years, it’s a been a cliché that Kiwis need to learn to work smarter, not harder: produce more per hour rather than work more hours. That means utilising new technologies. The country as a whole needs to produce more of the stuff that the rest of the world wants – and also to restore the idea of a decent standard of living on a fair wage. New Zealand has a half-century track-record of under-achievement in labour productivity, making other desirable goals harder to achieve. Landlording, trading second-hand goods (including houses) and peddling drugs just won’t cut it. Luxon & Co are in the business of pleasing landlords and real-estate agents, while cracking down on drug-dealing gangs. They want to cut through regulatory barriers for some selected enterprises, but they have no proposals about shared prosperity in a rapidly changing world.