A report card on Labour’s first month
Bernard Hickey assesses the new Labour-led Government's first month in power as mostly successful, but with the proviso that the rubber will really have to hit the road in the next couple of weeks.
New Zealand First Leader Winston Peters surprised the nation and the Labour Party a month ago by choosing to form a coalition Government with Labour and agreeing to the Green Party supporting them with a supply and confidence agreement. So how's it gone so far?
Good marks for...
- Prime Minister Jacinda Ardern has surprised a few people with her broadly assured and decisive performance in that first month in charge, while Peters has appeared a happy, disciplined and compliant partner. Critics worried about Ardern's lack of experience and Peters' cantankerousness. Those worries have evaporated over the last month.
- The coalition and support agreements gave few major concessions to the two smaller parties that were broadly unpopular, and at the same time softened the least popular ones in the Labour manifesto (no water tax or capital gains tax in a first term). The tail did not wag the dog in the Government-building process.
- The major policy changes agreed (a foreign buyers' ban, a Carbon Act for carbon neutrality by 2050, cutting migration by 20,000 to 30,000, building 100,000 houses in 10 years, a big minimum wage increase and pivoting to urban and regional rail from motorways) were essentially a triangulation of all three parties' manifestos, which collectively were supported by more than half of voters.
- The only exception was including agriculture in the emissions scheme (albeit with an initial 95 percent exemption for farmers), which New Zealand First opposed. However, New Zealand First did manage to get Labour to give up its water tax idea and increase the initial exemption from 90 to 95 percent in exchange for agreeing to that.
- The least popular policies of New Zealand First (much bigger migration cuts and its fiscally dangerous changes to GST and company taxes) did not make it through the coalition building process. New Zealand First's major achievement, its $1 billion a year regional development fund, was an extension of a Labour policy that neatly tied up with and appealed to a common desire with the Greens to plant a billion trees and invest in urban and regional rail. New Zealand First's other major concession was an extra 800 police officers.
- The Government has begun achieving its 100 day plan with a flurry of parliamentary and executive activity that has so far shown they meant what they said and have started delivering. Few show-stopping unintended consequences or political land mines have been set off so far in the plan for those 100 days ending in early February.
- Its biggest achievements so far have been its foreign buyers ban proposal, which neatly killed two birds with one stone, and its hurdling of local and global opposition to the Trans Pacific Partnership. The use of the 'sensitive land' provision in the Overseas Investment Act sidestepped the risk of having to rewrite multiple trade agreements (with the exception of one with Singapore) and allowed the TPP to progress.
- Jacinda Ardern and David Parker have managed to re-create a type of cross-party consensus on free trade, albeit with plenty of grumpiness about (but ultimate acceptance of) the unpopular Investor State Dispute Settlement (ISDS) provisions. For a couple of years, Labour and National had parted company on their previous broad support for free trade agreements, largely under Andrew Little. Ardern and Parker have pulled Labour back to the nearer the centre in the last four weeks.
- The Greens still oppose the TPP, and New Zealand First may yet also vote against it, but the support of National in Parliament means it is likely to be approved here -- assuming Canada in particular can also agree. Ardern's rhetoric and assurances about some slight tweaks to the ISDS clauses and the inclusion of the foreign buyers ban may soothe some of the political pain on the left of agreeing to the TPP, which was angrily opposed by tens of thousands of Labour and Green voters last year.
- Labour has begun implementing its 100 day plan by a mix of executive orders and legislative change. The first substantial moves in Parliament are the rebirth of Sue Moroney's twice blocked Paid Parental Leave Extension Bill and the revival of Andrew Little's Healthy Homes Bill - both of which were private members' bills in the last Parliament.
- Ardern performed strongly on her first major foray into international summitry, deftly handling the dramas around the TPP, pushing harder against a weak Malcolm Turnbull over the Manus Island issue and delivering a sneaky sick burn to Donald Trump when he teased her in a line-up before a dinner. The images of a confident, smiling and occasionally steely Prime Minister footing it on the global stage with the likes of Justin Trudeau, Shinzo Abe and Trump have extended her electoral honeymoon.
- In purely political terms, Ardern's ability to shine at key moments on the tele-visual stage is a massive positive for the Government. Her decision to walk up the steps of Parliament after being sworn in with her partner Clarke Gayford and their two young nieces was a masterstroke of political symbolism. Last night's images of Ardern handing over an award to a star-struck Lorde at the Vodafone Music Awards was a similar moment of tele-visual political gold.
- We have no fresh public polling since the handover of power, but it wouldn't surprise me to see Labour's support rise into the mid to low 40 percent range from its final election result of 36.9 percent. That would bring it into line with National and allow for some slippage by New Zealand First in particular.
- The Government is now frantically working with the Parliamentary Counsel Office over the next week's Parliamentary recess to draft legislation to be introduced or passed via urgency in the final four weeks of Parliament of the year, which ends on December 21.
- Meanwhile, new Ministers have been just as frantically employing their advisors, reading their Briefings to Incoming Ministers, and asking for formal advice on the policies agreed in the coalition and support agreements.
Poor marks for...
- Labour and its support partners began poorly in Parliament. It was forced on its first day to back down on a plan to significantly reduce the size of select committees after appearing to miscalculate whether it had the numbers to get its choice of speaker (Trevor Mallard) elected. This picture above told the story.
- The new Government was also put on the back foot when National pushed for a more flexible form of Paid Parental Leave that would have allowed both parents to stay at home at the same time in exchange for shorter leave for the mother. Labour blocked it and was accused of a 'nanny state' type approach. Both episodes showed an early wobble in the new Government's management of the Parliamentary agenda and some creaky political skills around legislation.
- Kelvin Davis was distinctly uncomfortable as Acting Prime Minister answering questions in the house while Ardern was away. Meanwhile, Police and Revenue Minister Stuart Nash was corrected by his respective colleagues Nanaia Mahuta and Grant Robertson after calling for more police recruits from overseas and saying GST would be applied "absolutely" to lower value goods bought from overseas websites.
- Some ministers look overloaded with collections of big spending portfolios with massive reform plans. They include Stuart Nash with Police and Revenue and Chris Hipkins with Education, Tertiary Education and being the Leader of the House. The pressure will be particularly intense on Hipkins, who has early and politically dangerous changes to make around national standards, education's creaky property portfolio, a year's free fees for tertiary students from January 1 and an intense Parliamentary workload. He has already come down with a heavy cold.
- Businesses remain wary and nervous about the new Government, particularly in the wake of the extended uncertainty around the negotiations to find a new Government. As it turned out, the chances of a National-New Zealand First Government appeared negligible anyway and much of the back-and-forth and brinksmanship could have been avoided. Winston Peters actually signed legal documents the day before the election to investigate his belief that Bill English and Steven Joyce personally breached his privacy over the release of details about his pension over-payments. In retrospect, it is clear Peters was never going to choose National and the relatively small concessions he achieved in the negotiations proved that.
- Business confidence about the wider economy has dropped sharply in the last three months, although confidence by businesses in their own outlooks has fallen to a much lesser extent. Consumer confidence also remains elevated, although the sharp slowdown in house price inflation has dampened spending appetites and could prove a headwind over the next year. ANZ reported yesterday that its Roy Morgan survey of consumer confidence found its index eased from 126.3 to 123.7 in November from October. See more on business confidence lower.
- There is a risk of businesses having another 'winter of discontent' through mid-2018 if the Government alienates them and business confidence continues to fall. However, the personnel and the political context on both sides are different to the winter of Labour's first year in power in 1999/2000. There are few signs yet of a massive backlash from business leaders or farmers, although a tough rewrite of labour rules, harsh new migration restrictions and any disruption in the handover to a new Reserve Bank Governor could upset the applecart.
The jury is still out on...
- The biggest tests of the Government's first 100 days have yet to be sat. It is in the midst of a massive rewrite of the Budget outlook to be presented in the second or third weeks of December. It will include the latest economic forecasts and update the Government's spending and revenue projections to include its 100 day plan changes to family incomes, paid parental leave, extra police and adjust for whatever spending landmines were left over in health and education from the previous Government.
- The Government will also have to update its capital spending plans and has already warned it has found a couple of dead rats in big infrastructure projects started by the previous Government, along with heavy new spending forecasts in the likes of Corrections and infrastructure.
- Finance Minister Grant Robertson has said the Government can still meet its fiscal targets of running surpluses and getting net debt down to 20 percent of GDP by 2022, even with the forecasts of slightly slower growth and big new infrastructure spending.
- The mid-December 'Mini-Budget' of fresh fiscal forecasts, updated infrastructure plans and a Parliamentary plan to implement the 100 day programme will be the Government's biggest 'show me the money' moment yet.