Economic sticking points and sacred cows
NZ First’s impact on the direction of a National-led coalition could be huge, writes
While the National Party has given little away about what it would be prepared to give ground on in coalition talks with NZ First, leader and Prime Minister Bill English has said he does not believe voters will want economic progress compromised.
There are plenty of areas where NZ First’s policies would mark major changes to the direction of the recent National government.
Here are a few where there could be sticking points, and some where there is less of a problem than in the past.
Electricity
Shortly before the election NZ First MP Richard Prosser caused consternation at a business conference when he warned the audience to ‘‘get rid of’’ their Contact Energy shares ‘‘now’’ as the party would buy them back at the price the Government sold them, in order to create a single electricity generator. Contact was privatised in the 1990s.
Although NZ First has long used rhetoric suggesting a tough response to the partial sales of state-owned generators Meridian Energy, Mercury and Genesis Energy, Prosser’s comments suggested the party’s response had become more disruptive to the industry and market while Labour and the Greens had become far more moderate.
NZ First leader Winston Peters immediately ticked off Prosser, claiming there was never an intent to strip investors of their rights.
Instead the party would simply wait, probably in hope, for the price of the shares to drop. For investors, if enacted, that could actually make electricity companies one of the safest investments available.
While it was possible to read NZ First’s policy at that time and agree with Peters, since Prosser’s gaffe the party has overhauled its electricity policy. It now proposes a number of reviews, but the only concrete plans are to transfer the regulatory functions of the Electricity Authority to the Commerce Commission and require Transpower to fund upgrades from its profits.
Migration
While National announced plans to tighten migration settings in April, by July it was backing down under pressure from farmers and other employers.
The net gains from migration have dropped from all-time highs, but it remains above 71,000 a year, which has helped boost the economy. Strong migration has also been blamed for muted growth in wages.
While economists are divided on the long-term benefits of strong migration to the economy, back in 2015 English was clear that the strain created by strong migration was the kind of problem it was good to have. ‘‘In the longer term, we build our economy around people and more of them in New Zealand is a good thing.’’
NZ First has long promised to cut immigration numbers, and its current promise is to cut it to ‘‘around 10,000’’ a year, increase skills and language requirements and requiring migrants to live and work in New Zealand for longer before being eligible for NZ Super.
This is an area which is likely to lead to changes, whether National or Labour manage to form a coalition government. This has come with warnings that a cut in overseas workers could make it harder for business that have already complained about skills shortages. ‘‘If that [source of workers] is taken away from them, a lot of businesses are really going to struggle,’’ economist Shamubeel Eaqub said on Sunday.
Foreign ownership
The current National-led Government has so far refused to bow to political pressure over foreign investment, with former prime minister John Key telling an audience in Beijing in 2016 that New Zealand’s fast-growing economy needed money to expand.
‘‘We fundamentally don’t have enough private-sector capital of our own to fund that growth,’’ Key told major Chinese investors.
As well as buying farms, Chinese investors have invested heavily in dairy processing during National’s time in office.
While the policies of NZ First are light on precise detail, it is clear Peters wants to tighten the rules on foreign investment in New Zealand from homes and farms to primary processing.
NZ First’s policies promise to ‘‘stop the loss of New Zealand’s land and assets to foreign ownership’’ and would ensure that ‘‘only New Zealand citizens and permanent residents can buy freehold land’’.
It would also ‘‘end foreign vertical integration in the primary industries‘‘, which appears to be directed at foreign-owned dairy processors.
Trade deals
National announced its ‘‘boldestever’’ trade deal push in April, pledging to seek to initiate negotiations with the European Union, Britain, Sri Lanka and a group of Latin American nations, complete TPP-11 and two other sets of negotiations, and ‘‘upgrade’’ deals with China, Singapore and the Association of Southeast Asian Nations (Asean).
NZ First’s policy on trade deals appears focused on fixing issues from the past. The party wants to renegotiate the TPP, as well as other ‘‘existing poor-quality deals’’ (without saying which ones).
The party’s focus for new trade deals is to conclude a deal with the Russia-Belarus Kazakhstan Customs Union, (which was put on ice since Russia annexed Crimea) and initiate what it calls Closer Commonwealth Economic Relations (CCER), a panCommonwealth trade deal.
NZ First said its ‘‘priority’’ would be a bilateral deal with Britain; however, Britain cannot begin trade negotiations with anyone until Brexit negotiations are completed.
Other NZ First policies would threaten to breach existing free trade deals. One of the key points in its economic plan is to ‘‘give preference for majority-owned New Zealand firms in government procurement (centrally and locally)’’, which would appear to breach the Closer Economic Relations treaty with Australia.
Trade Minister Todd McClay dismissed a recent move by Queensland to give priority to its businesses in government contracts as ‘‘a little bit crazy’’.
In September McClay accused Labour of jeopardising trade deals by wanting to ban foreign buyers of residential property, but has been silent on NZ First’s policy, which is practically identical.
Reserve Bank
National’s Reserve Bank policy has been status quo, save for commissioning a report on whether to formalise the existing moves by the central bank to make decisions by committee.
NZ First’s policy is for radical change, pledging to adopt a model Peters says is used in Singapore, so that it can ‘‘better manage our currency’’. The policy appears to make the main role of the Reserve Bank to be currency intervention, something National has repeatedly warned may not work.
Peters has publicly stated that the dollar would be ‘‘much lower than it is now’’. Such a move would make our exports more competitive overseas, but would make imports and overseas travel more expensive. Economists are cool on the plan, with Bank of New Zealand head of research Stephen Toplis claiming on Monday that it would not happen.
Minimum wage
National has consistently raised the minimum wage since taking office in 2008 (when it was $12), increasing it by 50 cents to $15.75 an hour in April. Workplace Relations Minister Michael Woodhouse said this was ‘‘striking the right balance between protecting our lowest paid workers and ensuring jobs are not lost’’.
NZ First’s policy, meanwhile, would see a sharp acceleration in the rises, pledging an increase to $20 an hour over three years from 2018, almost three times the speed National has increased it in recent years. Employers would get ‘‘tax assistance’’ as part of this.