Politics

A second term PM for crises and the status quo

Jacinda Ardern is taking a low target policy platform to the election, despite having an historic chance under MMP to campaign for transformation, Bernard Hickey writes

Where once she campaigned as a transformer, Jacinda Ardern will ask for a second term as simply a manager of the post-1989 tax and welfare status quo, and of the Covid-19 recovery. That's despite having the potential political power to govern without the moderating 'hand brake' of New Zealand First leader Winston Peters.

In political circles, it is known as the 'low target' strategy: offer little obvious change from the status quo to give your opponent few clear pain points to target you on the grounds you want to 'hurt' one part of the electorate or another. It is essentially a conservative strategy, often employed by conservative parties in government. 

This week Jacinda Ardern revealed herself as a small 'c' conservative, focused on maintaining the current shape and (historically and comparatively small) size of government, but with a friendlier face. She confirmed Labour had no plans for major new spending or tax or welfare reform in the last full post-Cabinet news conference of her first term. Instead, voters should look at the Government's current achievements, its plans for Covid-19 recovery and Budget 2020's debt track as an indicator of 'steady-as-she-goes'. There is no more. That is it. 

After months of wondering if she was about to flex her new and larger political muscles to pull a big policy rabbit out of the hat, she tapped the hat, turned it upside down, asked us to peer inside at the emptiness, and put it back down on the table: a popular magician without a trick who doesn't harm rabbits.

It wasn't always like this

Ardern used a higher profile approach in 2017, campaigning for transformation of the tax system, including a capital gains tax, and for much faster action on housing and climate change.

In part, this was because she and Labour didn't really expect to win and her role was to limit the damage of defeat by shoring up Labour's base and winning wavering Green votes. 

Ardern's popularity is not in question: she wowed the crowd at a community event in Wainuiomata last week. Photo: Lynn Grieveson

Then Jacindamania hit, and there was a very real prospect she could win government, and implement those 'high target' policies. That's when then-National Prime Minister Bill English and then-Finance Minister Stephen Joyce, who are also 'small c' conservatives, leapt on the Capital Gains Tax as the pain point to push and prod and then carve into. Ardern's new tax would destroy the wealth of hard-working kiwi families and small businesses, and rob future generations of the wealth gains of their parents, they argues.

It worked. The pain levels escalated to the point where Ardern was forced in the last week of the campaign to effectively abandon the CGT. She has been back-pedalling from it ever since, along with the prospect of income tax, migration and welfare reform, knowing these policies are the points of pain for middle New Zealand that can be easily prodded and poked in the cut and thrust of an election campaign. 

A 'small c' conservative on debt

Ardern confirmed this low target approach in an interview on RNZ's  Morning Report on Monday, and then through repeated questioning in her final set-piece post-Cabinet news conference of her first term. Rightly, she was asked what her 'real' policy aims were, now there is a higher probability of Labour either governing alone or in tandem with the Greens.

Asked by Corin Dann what Labour's tax and economic policy was, given postal voting would start in just over four weeks, she pointed to the Government's track record and its current five point plan for Covid-19 recovery, focused on retraining.

"That five point plan really is giving a very strong indication of the momentum we want to maintain should we be re-elected. What we'll be doing over this election period is yes adding some additional aspects, but I would flag to voters not to expect to see large scale manifestos that are a significant departure from what we're doing," Ardern said.

"Because ultimately what needs to be done, we are already rolling out," she said.

Asked about Labour's plan for reducing debt in response to National's plan to cut net debt to 30 percent of GDP within 10 years, she pointed to the existing debt track laid out in Budget 2020, which is based on the current tax and welfare settings.

She framed the debate as a contest between National's unspecified plans for austerity, versus Labour's status quo. Essentially, she was poking at National's own 'high target' policy.

"They are yet to tell us how they will achieve their 30 per cent target, which could mean up to 80 billion dollars worth of cuts," she said.

"What we've set out is our view is that by maintaining solid economic growth, by investing in training, investing in education, investing in job creation, targeting high skilled, high wage jobs, of course, that's how we grow our taxpayer base. And that is how we grow our way out."

Challenged again on Labour's plans to reduce debt, she said: "At the Budget, you can see our trajectories. By 2024 we hit the high point and then it starts to come away from that point. Our view is that through the economic plan that we've set out, we don't have to experience the harsh cuts that the Opposition are promoting."

'The fiscal position is tight'

Later at the post-Cabinet news conference Ardern said there would be policy differences between the major parties.

"We will still have policy that as a Labour Party we will roll out. But it is clear that the fiscal position New Zealand finds itself in, is tight. We have had to include additional borrowing for the likes of the wage subsidy, which is the right thing to do. But we also have to maintain careful fiscal management and that will be part of our thinking in future policy," said said.

Challenged on whether there would be a new top tax bracket, Ardern pivoted straight back to the fiscally conservative point of view.

"You'll have heard me talk this morning about our plan around debt. And of course, our debt trajectory has been set out in the budget, and a very clear difference between that's emerging between the opposition and the current government is our plan to grow the economy by investing in our people, by investing in job creation versus the alternative, which is austerity measures and up to 80 billion dollars worth of cuts, which could include health and education. So there are very clear differences in the way that we plan to deal with those issues over the coming decade."

Challenged again to rule out a higher tax rate, she said: "I've been very careful to point out that we haven't put out some final parts of the Labour Party's policy, happy to debate those at the time we do."

Asked why the Government needed to be so fiscally conservative and worry about debt when it had the lowest debt in the OECD and it could borrow for less than 1.0 percent, she said: "It's a good question because we have always been careful around our fiscal management."

Ardern stands by the focus on fiscal conservatism, saying it has paid off now the "rainy day" has actually arrived, and needs to be maintained. Photo: Lynn Grieveson

'We were right to target 20 percent'

She argued the focus on fiscal conservatism before Covid-19 was now paying off.

"I stand by that decision because it has now when that rainy day of Covid arrived, we are now in a position where even at its peak, we will have debt levels lower than some of those countries in the OECD that we compare ourselves against, before they even went into Covid," she said.

"And so that is something that I maintain as being important. We have to maintain that fiscal management and discipline. We are a country that tends to experience shocks. The pandemic in this case that everyone is experiencing, but our earthquakes are something that are unique to us. And so I do think that careful management is still required."

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