Luxon's Mid-Term Blues

Will the National Party wake up in time for the next election?

Christopher Luxon’s National-led coalition government is now past the mid-term point, heading towards its reckoning with voters in (probably) September or October next year.

Will the National Party pull itself up by its bootstraps for the 2026 election?

In polls, roughly half of New Zealanders are saying that the country is heading in the wrong direction, compared with about 35 percent saying right direction. Luxon has been getting net-negative approval ratings, and Labour edged slightly ahead of National in three successive polls over late May to mid-June.

The Budget delivered in May hasn’t boosted confidence in the coalition government. But this is a government that wasn’t popular from the start, and made itself more unpopular around the beginning of this year by leading the country into a divisive debate about the founding document, the 1840 Treaty of Waitangi.

Controversial policies keep appearing, such as regulatory standards legislation and rolling back pay equity. And the government may have difficulty in meeting public-service targets that it set for itself, especially in the healthcare sector. Can Luxon and his team live up to their repeated promise to “deliver for New Zealanders”?

At least inflation has come down to within the target range, and economic growth has been modestly positive for the last two quarters. But the unemployment rate (around 5 percent) and the numbers on job-seeker benefit remain too high.

With ongoing wars and global uncertainty about trade and oil prices, New Zealanders shouldn’t expect an economic miracle. Trump and his Republicans, facing mid-term elections in 2026, may see it as in their interests to stop causing economic uncertainty, which may be helpful for New Zealand – but that can’t be relied upon. With Israel and Iran exchanging bombs at the moment, it’s unlikely that global disorder will end in the foreseeable future.

The NZ government has limited options and, by the next election, they’ll still be running a budget deficit. In 2026 they’ll need a consistent run of positive economic results – and the confidence that would follow from that – in order to clear a path for a second term.

The alternative is that more discontented voters could swing towards Labour. How many do so will partly depend on whether (or when) Labour offers an attractive alternative, including their long-awaited “fair tax” policy, and not solely on dissatisfaction with National. It will also depend on the extent to which voters are comfortable with the prospect of a Labour–Green–TPM coalition, given its potential for infighting, as compared with the tensions within the incumbent coalition.

With ACT’s David Seymour and NZ First’s Winston Peters being so adept at capturing public attention, Luxon will have to convince voters that he can actually lead. As the election approaches, however, Seymour and Peters will make themselves heard (even more than usual) to distinguish their respective parties’ platforms from National’s and to consolidate voter support. They’ll aim to improve on their 2023 election results (8.6 percent for ACT and 6.1 for NZ First), which would largely come at the expense of National.

Recent polls indicate (for the time being) a close contest between right and left coalitions.

Polling in the low 30s, and well below its 2023 election result of 38 percent, the National Party is in trouble. And its two coalition partners aren’t picking up the slack. ACT is polling around 8 percent, which is close to its last election result, while NZ First is at or slightly above the 6 percent it won in 2023. So National’s poor polling isn’t accounted for by a noticeable shift towards its partners.

Public opinion has shifted left, in favour of Labour who are polling at about 34 percent, above their 2023 result of 27 percent. Meanwhile, Labour’s likely coalition partner, the Green Party, is holding steady. To form a government, Labour would probably also need the support of Te Pāti Māori who – following a boost during the Treaty debate – is polling again below the five percent threshold, but likely to be returned to the next parliament by winning Māori seats.

All of this comes with my usual caveat that opinion polls are only snapshots from the recent past. They don’t predict future results, let alone seating arrangements in the next parliament. Headlines about a “shock” poll or a “whopping” drop for one party need to be read with caution.

We can reliably say, though, that neither National nor Labour is polling anywhere near where either would like to be (meaning over 40 percent). Both leaders are languishing in preferred prime minister polls. Judging by other countries with proportional representation, New Zealand may face a long-term trend where both traditional (centre-right and -left) parties go into decline, and neither gets anywhere near a majority, leaving them with difficult post-election negotiations to form coalitions, regardless of which gets the most votes.

Conclusion

National needs an economic miracle to be sure of a second term, but miracles don’t happen. A consistent return to growth, however modest, could boost confidence sufficiently to get them the numbers they’ll need to pull together another coalition, but many of the factors affecting the economy are beyond their control.

While Luxon will take credit for any positive upturn next year, he’ll be lumbered with the blame if the economy performs poorly. Having claimed the mantle of “manager of the economy”, he may find it doesn’t suit him after all. At the moment, his options are limited and his prospects for a second term aren’t secure. But one never knows what the future will bring.

Two posts from 2024 recall how long National’s been in these doldrums: