Election result a call to action

Dr Oliver Hartwich
Insights Newsletter
23 October, 2020

The sense of relief was palpable as the long election campaign finally ended. It is even better that the result delivered a clear mandate without the need of compromises, deal-making and brinkmanship.

Labour secured a first-past-the-post result despite our MMP system. This never happened before, and it may never happen again.

The absolute parliamentary majority is an impressive achievement for prime minister Jacinda Ardern. It is a nod from the public for (largely) keeping Covid-19 out of the country.

It is also a call to action. When a party holds 53% of seats in Parliament, there is no excuse for not delivering results.

The campaign was dreadful for policy. Every proposal was costly, barely workable and unsuited to lifting New Zealand’s economic performance and restoring livelihoods. An extra public holiday (Labour), more electric vehicles (National) or a new wealth tax (Greens) would not boost jobs or productivity.

But boosting productivity is just what New Zealand needs. The economic challenges resulting from Covid-19 are dramatic, here are some:

  • Government debt increase from 19% to 56% of GDP in 2026:
  • Through its quantitative easing policy (about $20,000 per Kiwi), the Reserve Bank could eventually hold half of public debt and inflate the housing market;
  • The IMF forecasts real per capita incomes to be lower in 2025 than they were in 2019;
  • New Zealand’s net international liability position – the amount we owe the world – stands at $180.1 billion, or $90,000 per household;
  • GDP per hour worked remains about a fifth lower than the OECD average (Turkey and the Slovak Republic are already doing better than New Zealand);
  • Trade as a percentage of GDP stands at a low 56% – too low for a small economy and way lower than Canada (65%), Denmark (105%), Ireland (240%), let alone Singapore (319%);
  • New Zealand’s inward stock of foreign direct investment stands at a meagre 39% of GDP compared to an OECD average of 45%.

The economic situation is difficult, and there is no shortage of other issues.

New Zealand’s performance in international education assessments has fallen sharply over the past couple of decades. The water infrastructure in the major cities requires enormous investment. And then, there is dealing with the industries temporarily decimated by Covid.

The situation is serious but at least the political power to deal with it is now as clear-cut as it could be. The Government can now start the job of getting New Zealand out of its current state. Kiwis have made it clear they do not want politics to be a handbrake on escaping the status quo.

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