Labour's nightmare reality - an election year recession

12:20 pm on 26 November 2022

By Peter Wilson*

Jacinda Ardern, Adrian Orr and Christopher Luxon.

Labour Party leader and Prime Minister Jacinda Ardern is facing a tough election battle after the Reserve Bank Governor Adrian Orr engineered a predicted recession and higher unemployment as a tool to hammer down inflation and already struggling households. Photo: RNZ

Analysis - Supporters of the Make it 16 campaign were overjoyed when they won a ruling from the Supreme Court that not allowing 16 and 17-year-olds to vote was inconsistent with the Bill of rights, but it quickly became clear electoral law isn't going to change.

The ruling doesn't require the law to be changed, that's up to Parliament.

Electoral law is entrenched and a 75 per cent majority vote is needed to change it.

The math is simple: There are 120 MPs and 75 per cent of 120 is 90. There are five parties in Parliament, and National and ACT oppose a change.

If all the MPs from the other three parties - Labour, the Greens and Te Pati Maori - voted to lower the voting age there would be 77 in favour, way short of 75 per cent.

National and ACT aren't messing about on this, they're not giving themselves any wriggle room to change their minds.

National's justice spokesman Paul Goldsmith said on Morning Report the party as a whole did not support any lowering of the age and would keep it at 18.

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National's justice spokesman Paul Goldsmith Photo: RNZ / Dom Thomas

ACT leader David Seymour said his party would fight any attempt to change it.

"We don't want 120,000 more voters who pay no taxes voting for lots more spending," he said.

There's a process that has to be followed after a ruling such as this and the government could have kicked it down the road.

It didn't - cabinet decided to draft a bill that would lower the age and put it to a vote. The draft legislation will be ready around the middle of next year.

Prime Minister Jacinda Ardern said allowing the whole of Parliament to decide the voting age was the right way to go, and she personally favoured lowering the age.

She must have known it wasn't going to happen.

The Herald detected some smart politics at work.

"The government has neatly positioned itself on what it sees as the right side of history, as well as preserving the status quo preferred by a majority of present voters," it said in an editorial.

The Herald's report noted that a Talbot Mills poll in August found 28 per cent of people backed lowering the age while 66 per cent were opposed.

What could be changed, and what ministers are considering, is the voting age for local government elections. That's set at 18 at present but the law isn't entrenched and can be changed with a simple majority.

Labour could do that without needing any other party. It could be part of the same bill and voted on separately, or in a stand-alone bill that runs alongside it.

Robertson said it could be a road test, and Seymour thought "training wheels" might not be a bad way to go.

"I guess you can't do quite as much damage electing a bad council as you can electing a bad government," he said.

When Parliament eventually holds the vote it will be the first time since the election that National and ACT have actually been able to influence a legislative outcome, or anything else. With Labour holding its own majority, opposition parties have been powerless.

After that the voting age issue will go away, probably for a long time.

What isn't going to go away is the Reserve Bank's grim warning this week that an economic recession is on the way, one it is deliberately creating.

On Wednesday it raised the Official Cash Rate - the rate at which it loans money to banks - by 75 basis points to 4.25 per cent, the highest level since December 2008. It expects that will increase to 5.5 per cent next year.

Among the economic forecasts were four quarters of contraction - a year-long recession - starting in the middle of next year.

Governor of the Reserve Bank Adrian Orr.

Governor Adrian Orr says everyone should tighten their belts. Photo: RNZ / Dom Thomas

Governor Adrian Orr told RNZ's business editor Gyles Beckford on Thursday everyone in the country should tighten their belts and prepare for a recession.

He said mortgages heading to 8 per cent and a recession were the price the country had to pay to get spending and inflation under control.

Appearing before Parliament's finance and expenditure committee the same day, he agreed under questioning that the Reserve Bank was creating a recession to control inflation.

Its actions have huge political implications.

The government will go into next year's election with mortgage rates hitting home owners really hard and house prices probably continuing to decline.

Orr has made it clear he wants the government to cut spending, as well as everyone else, which means election sweeteners will be very difficult to justify.

Media homed in on the bad news.

"Deck the halls in pain and misery," said Newshub.

Jacinda Ardern

Labour Party leader and Prime Minister Jacinda Ardern is facing a nightmare election, according to some pundits. Photo: RNZ / Samuel Rillstone

"Bank lines up Labour's nightmare scenario," said Stuff while the Herald's take on it was "Labour's 2023 hopes hit by perfect storm".

Against this ghastly background Finance Minister Grant Robertson did his best to accentuate any positives he could find.

He said there was good news among the predictions in the Reserve Bank's data.

"We continue, actually, for the rest of this year to be forecast to have strong economic growth and the shallow period of recession - while it is over a number of quarters- still doesn't match the economic growth of the last two quarters of this year," he said.

"The overall economic forecasts here are ones that are reflective of how tough 2023 is going to be. I've been saying for some time this is going to be a difficult year for many New Zealand households."

All the details of the Reserve Bank's projections are in RNZ's OCR hike: What we know so far and what is being said.

The recession forecast also had a profound effect on National.

Leader Christopher Luxon said everything in the party's tax policy except the indexing of tax thresholds to inflation was now under review.

That includes abolishing what it says are the seven new taxes introduced by Labour and, in particular, getting rid of the 39 per cent top tax rate on income over $180,000.

"We would like to offer people tax relief but when I look ahead, if I think about the 39 per cent tax rate in particular, that's something I really want to think about," he said.

"In this environment the situation has changed big time."

Luxon might not be too unhappy about revisiting the top tax rate policy. The government has been hammering away at it for months - every time he talks about struggling Kiwis he gets slapped with "tax cuts for the rich".

A policy review is a fair response to the situation, which is a lot worse than expected, and Luxon blamed the government for that.

"This is happening because the government has its foot flat on the accelerator with unprecedented levels of government spending," he said.

Finance spokesperson Nicola Willis said the Reserve Bank was sending a message to Robertson: "Every single year you've blown your spending limit. Please, for the good of New Zealanders, don't do that again next year - the country can't afford it."

Luxon highlighted the RNZ-TVNZ merger as an example of spending that could be cut.

Christopher Luxon

Nats leader Christopher Luxon says Government spending most be restricted. Photo: RNZ / Samuel Rillstone

"You could literally go in this week and knock on the head the RNZ-TVNZ merger and save New Zealand $6 billion over the next 30 years - good thing to do," he said.

Winston Peters has never said before an election which of the main parties he would work with after it.

He's played National and Labour off against each other and drawn votes from the centre-left and the centre-right.

Until now, that is. In an interview with the Herald's Audrey Young Peters said he wasn't going to work with Labour if New Zealand First gets back into Parliament next year.

Young wanted to make sure there wasn't any way he could get around that and asked him if he was ruling out working with a Jacinda Ardern-led government.

"Most definitely," he replied.

Winston Peters.

NZ First leader has ruled out a coalition with Labour. Photo: RNZ / Samuel Rillstone

"You can take that as there is no way this present Labour crowd will ever be in a coalition with New Zealand First because they lied to us last time. We trusted them."

His big gripe is that when he was deputy prime minister in New Zealand First's coalition with Labour after the 2017 election he was kept in the dark over the commissioning of the He Puapua report, and what the Three Waters reforms looked like.

He spoke of a "secret agenda" and said "no one gets to lie to me twice".

The government has previously dismissed claims it deliberately withheld the He Puapua report on potential ways for New Zealand to meet its commitments under the UN Declaration on the Rights of Indigenous Peoples and the Treaty of Waitangi.

When it first came up Māori Development Minister Willie Jackson denied there had been a secret agenda. He said He Puapua wasn't government policy and hadn't been a priority.

However, as Young pointed out in her report, Jackson also said that in retrospect he was pleased Peters and his NZ First colleagues hadn't seen it before the 2020 election.

"If they had got it they would have utilised it and said 'here we go, that's why you have to vote for New Zealand first'," he said in June last year.

While Peters was unequivocal about not working with Labour, he wasn't clear about anything else.

"It doesn't mean we are rushing off to the other side," he said.

"We want a better government in 2023 and a much better government than we've had for a long time."

For any of this to even be tested, Peters has to get NZ First back into Parliament and hold the balance of power, as it did in 2017.

The party was voted out in 2020 with only 2.6 per cent of the vote when it needed 5 per cent.

Polls are showing it on the rise, reaching between 3 per cent and 4 per cent.

It is, as Young said in her report, "within spitting distance" of the threshold.

Peters said this time he was going after Labour's core voters.

"This present crowd has absolutely abandoned its core voter, the ordinary hard-working man and woman that used to be a core Labour vote," he said.

"I'm going to go and talk to that core vote because I, in my long career, never have."

*Peter Wilson is a life member of Parliament's press gallery, 22 years as NZPA's political editor and seven as Parliamentary bureau chief for NZ Newswire

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