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What you see is what you get. Mostly.

For all the coalition haggling, culture wars and “let me be clear” obfuscation we’ve seen in the first six months of this government, National has delivered a very National budget. It’s not so much the axe being swung in this budget as the pendulum – the centre-right is back in charge and is getting on with its core business – shrinking the size of government.

National has – as promised – knelt before its one true god – tax cuts. By changing tax thresholds, National has reduced personal income tax of the first time since 2010. A whopping $14.7 billion is going into tax cuts over four years, almost exactly the $14.6b Nicola Willis said it would cost during the Election 2023 campaign. The main change of tack we’ve known about since the coalition agreements were signed; a foreign buyers’ tax isn’t being introduced to help pay for the cuts. It was always a mythology anyway. Instead, cuts have been made – “savings” and “reprioritisations” if you prefer the government’s language – to deliver on National’s promise. And will borrow more.

Willis promised an operating allowance of $3.2b, lower than Labour’s promised $3.5b. She delivered it, relishing the fact it’s the lowest in real terms since 2017. She noted that in 2023 Labour’s operating allowance had reached $4.8b. For this government, size matters. The smaller the better.

What little new money there is, goes to health (more security, maintaining hospitals), education (more buildings) and law and order (more police, more pay), although most of that will do little more than maintain the status quo.

There are no surprises and little sleight of hand here. (We’ll get to that bits there are later). The good news for democracy is that New Zealanders will wake up the morning after Budget day to knowledge they will get almost exactly what they expected when they woke up the morning after Election day; which is the agenda the majority of New Zealanders voted for.

The political question is, now that National’s laser-like focus on tax has been delivered, will voters like what they’ve got? And what they’ve given up to get it. And what’s not on the list. Sometimes, the promise that’s delivered is not the promise that delights.

The harsh reality for the government is that voters have already psychologically banked their tax cut, well before they bank the actual cash. There will be little excitement – or poll movement – for a National government delivering tax cuts. It’s like summer sun or winter rain – just to be expected.

What’s likely to be more front of mind for many is that the government’s way of easing the cost of living pressure comes at the expense of other ways of easing the cost of living pressure. The subsidised bus fares, increases to benefits by indexing payments to wages rather than inflation, plans to increase the smoking age and ban smoking for future generations, free prescriptions, first year fees-free for students (moving to final year free), the clean car discount and so on.

Today, you can toss in cuts to the Human Rights Commission, NZ Symphony Orchestra, and the Warmer Kiwi Homes scheme. They’re all trimmed to pay for your holy tax cut.

What’s missing? How about plans to help GPs whose funding formulas mean many are barely hanging on? More state houses? Given that last year’s PREFU said any economic growth will largely be based on immigration growth and we already have an infrastructure deficit estimated at more than $200b, how about a serious commitment to infrastructure spending? The two big items in this year’s infrastructure budget are more roads and a new prison. Is that enough to prepare us for a rapidly changing climate, ageing population and record numbers of new New Zealanders?

But the bitterest of political pills is National’s failure to meet its promise of $70m in Pharmac funding for 13 new cancer drugs. This is what New Zealanders will remember in a week’s time, when the numbers and spin have faded. The stories of Kiwis who will die because of a broken promise will be brutal.

Place that alongside the changes to smoking and benefit policies and the government has made it very easy for Opposition parties to argue it is the most vulnerable who are paying for these tax cuts. When the government has also chosen to stick with its near $3b boost to landlords with the return of interest deductibility on rental properties, National has delivered a fiscal plan that is exactly what it promised, but also exactly what Opposition parties will have hoped for. Labour and co gets to shake its head sadly over the next year and say, ‘we warned you. The poor subsidising the rich, how predictably National’.

What’s more, National has – in what will be the most discomfiting move for its MPs and party members and is the other dirty – committed to a $12b increase in borrowing over the next four years. Willis insists she’s not borrowing to pay for tax cuts, because that’s at odds with her promise to return the government to fiscal discipline. But the truth is that the government couldn’t afford the tax cuts delivered today without BOTH cuts and borrowing.  

So the bottom-line for Budget 2024 is that National (to ACT’s delight) has shrunk the government’s bottom-line. But here’s the real news from Budget 2024, and it’s all about Budget 2025 and 2026. After this year, the moderating influences of an election campaign fade into the rearview mirror. Prime Minister Christopher Luxon has called today’s budget a “careful budget”. But after this year, he’s not promising to be so careful. The shrinking government will continue to shrink over the rest of the term; down to what RNZ’s Business Editor Gyles Beckford called its “barest of bare bones”.

The government’s spending allowance for the next two years is a mere $2.4b a year. Half what Labour spent in 2023. And roughly half of that is already committed to health. The room for new spending, new programmes and ideas, or dealing with emergencies, is almost non-existent. This government is promising the status quo, but no more. What you see is what you’re going to keep getting. Or less.

And if you’re tempted to shrug and say Willis will spend more when the pressure comes on, remember how determinedly she has kept her promises this year. And hear her when she said of those $2.4b allowances, “we intend to stick to them”. Government cuts, she says, will be “business as usual”.

Willis is betting on a growing private sector to pick up the slack as the government withdraws. That just like the 2010s, house prices and immigration will be enough to satisfy voters as the government does less. The pendulum has swung, the era of the shrinking government is back and has only just begun.

The 2018 Social Security Act suggests that Labour may have retreated to the minimalist (neo-liberal) welfare state which has developed out of the Richardson-Shipley ‘redesign’.

One wonders what Michael Joseph Savage, Peter Fraser and Walter Nash would have thought of the Social Security Act passed by the Ardern Labour Government in 2018. Its principles were set out as

Every person performing or exercising a duty, function, or power under this Act must have regard to the following general principles:

(a) work in paid employment offers the best opportunity for people to achieve social and economic well-being:

(b) the priority for people of working age should be to find and retain work:

(c) people for whom work may not currently be an appropriate outcome should be assisted to prepare for work in the future and develop employment-focused skills:

(d) people for whom work is not appropriate should be supported in accordance with this Act.

This has a quite different focus from the act Labour passed in 1938 which began:

An act to provide for the payment of superannuation benefits and of other benefits designed to safeguard the people of New Zealand from disabilities arising from age, sickness, widowhood, orphanhood, unemployment, or other exceptional conditions; (I have omitted the provisions for healthcare).

There is a redirection in the purpose of the system described by the 2018 Act from safeguarding those with disability to prioritising paid work as the social norm.

Eighty years ago, statutes did not include general principles. The 1972 (McCarthy) Royal Commission on Social Security codified the principles of the existing social security system, the first of which was:

The community is responsible for giving dependent people a standard of living consistent with human dignity and approaching that enjoyed by the majority, irrespective of the cause of dependency. We believe, further, that the community responsibility should be discharged in a way which does not stifle personal initiative, nor unduly hinder anyone trying to preserve or even enhance living standards on retirement or during times of temporary disability.

I can find no such sentiment in the 2018 Act, which is in many ways a manual for those administering a very different system. (It is over five times as long as the 1938 Act which also covered retirement and health benefits.)

Admittedly things have changed since the 1972 Royal Commission, including higher evident unemployment and women are more likely to be in the paid workforce. (The changes are detailed in my Not in Narrow Seas, Chapter 39.) However, that is not a justification for abandoning the principles which Savage, Fraser and Nash would have applauded. Rather, the challenge was to apply those principles to the new circumstances.

Governments since the 1972 Royal Commission have largely abandoned the challenge. Indeed the Richardson-Shipley ‘redesign of the welfare state’ replaced the 1938 approach with a minimalist neoliberal one of an American-style welfare state instead of the more European social democratic approach which the Royal Commission accepted and where once New Zealand led the world as Lord Beveridge (of the British Beveridge Report – the foundation of their welfare state) once acknowledged. 

And so the prioritisation of work as the foundation of social security followed. It was the Clark-Cullen Labour Government which introduced the work focus into the Social Security Act in 2007. It was applied by Minister Paula Bennett under the Key-English National Government.  

The 2018 Act itself was enacted by a Labour Government (minister Carmel Sepoloni) in effect endorsing the 1990 redesign of the welfare state and abandoning the system which Labour was once so proud. Yes, the Ardern-Hipkins Government administered the system more generously and fiddled around at its edges but it adopted the underlying framework, just as in 1949 the first Holland-Holyoake National Government adopted the preceding Labour Government’s 1938 framework. (When the statute was being passed in 1938, Sid Holland had described it as ‘applied lunacy’ responding to Savage’s ‘applied Christianity’ – I suppose Christianity is out of fashion today.)

So the Arden-Hipkins Government and its advisers  accepted the neo-liberal framework. Was that by default because they had no alternative? One acknowledges that their proposed Social Unemployment Insurance scheme was a more European-style approach to welfare. Its critics included advisers to Labour’s social welfare minister and it was abandoned by the Hipkins ‘policy bonfire’ of February 2023. (My objection was that it was poorly articulated with the existing social security system; a proper articulation would have shifted the system away from the minimalist welfare state approach. I was told those implementing the scheme thought the challenge of the integration was too great.)

This is but one example of the reluctance of the Ardern-Hipkins Labour Government to challenge the neoliberal framework it inherited (although it did in some areas). Given that the 1938 Social Security Act is usually seen as one of the greatest achievements by any New Zealand Labour Government, the reluctance illustrates how far Labour has shifted in the eighty-odd years. Savage, Fraser, Nash and a host of their colleagues must be wondering what has gone on.

The Fast-Track Approvals Bill enables cabinet ministers to circumvent key environmental planning and protection processes for infrastructure projects. Its difficulties have been well canvassed. This column suggests a different way of thinking about the proposal.

I am going to explore the Bill from the perspective of its proponents with their focus on short-term material output (usually GDP or one of its variants). That means I am not going to canvass issues already covered in much on my writings of such things as the relationship between material consumption and wellbeing, the boundary between the market and outside the market including resource depletion, the distributional issues, the time horizon and so on. They are important, but if we try to deal with everything at the same time we get into the typical confusion which marks so much public discussion in New Zealand. Instead, I want to focus upon the narrow vision of the advocates of the Fast Track legislation of maximising material output.

One form of the theorem set out by Nobel Laureate Ronald Coase states that market decisions maximize material output if transaction costs are zero and property rights are fully allocated.* Some people use the theorem to argue that the market can rip away if there is private property, but it actually illustrates just how complicated market design is.

I once asked an economist who worked on the development of the Resource Management Act (RMA) how important the Coase theorem was in their thinking. You will recall this was a time when the penchant to let the market rip dominated much government policy. They looked at me in astonishment and said it had not occurred to them.

Had it done so, they would have been confronted with the fact that they were designing a system with very high transaction costs – as your lawyer will remind you when you are off to an environmental hearing. Moreover, underpinning every environmental hearing is the allocation of property rights. They are rarely unconstrained or simple. (You will find rules prohibit you from doing everything you may want to your house despite the slogan that a home is one’s castle.)

A reason that transactions costs are high and that the market cannot be left to itself is that the property rights involved with the RMA have not been fully allocated. I first began thinking about the relevance of the Coase Theorem to the RMA when I realised that its notion of sustainability, as the effect of giving property rights to the unborn. It says that they are entitled to an environment similar to today’s. (Whether that is practical is another matter.) But does it not also give some sort of rights to plants and animals which are near extinction?

But there are also rights to the living. What if a development proposal cuts out the sun from your property, or the view, or aesthetically offends you, or changes the nature of your neighbourhood, or …? There is a very long list of such potential infringements of what you value.

A doomsday book survey of all such property rights would have been impossible. Instead each case involves the courts determining the detail of the entitlements. The transaction costs become substantial, in which case the Coase Theorem says it is unlikely there will be an optimal outcome.

This may be making heavy weather of the RMA but it sheds light on the Fast-Track Approvals Bill. Nominally, the Bill aims to reduce the transaction costs of the RMA process; that is usually a good thing, especially if you think increasing material output is a good thing. (If there are side payments – such as political donations – an optimal outcome is not so obvious. Market theory does not conclude that political corruption leads to good outcomes. That is also practical experience – corrupt regimes have a poor economic record.)

However, the focus on the transaction costs means that the property rights issues can get lost. Many of those opposed to the bill expect that the implicit property rights of the environment will be overridden. Certainly at least some of the supporters of the bill have publicly discounted the property rights some of the opponents think they have – or should have.

In effect, the proposed legislation charges cabinet ministers (Infrastructure, Transport and Regional Development) from the coalition government with deciding on which property rights triumph. No doubt, the three think they will do so wisely, but I would expect them to blanche at the thought of three cabinet ministers from, say, Labour, the Greens and Te Parti Maori making decisions in their place. It would lead to a quite different assignment of those property rights and often there would be different outcomes. (One genius suggested that the proposed act be repealed after three years, ignoring that once the principle had been established it could be reintroduced by a government hostile to this one.)

Implicit in the Coase Theorem is that if property rights are not fully articulated and secure – as they are not when they are subject to political interference – the market will not work properly and the economy will suffer.

There is an even deeper issue. Should politicians determine the allocation of property rights? This is what happens in today’s Russia where Putin arbitrarily seizes property, including forced sales and imprisonment of property owners. (Hence Russian oligarchs living and investing outside Russia.)

But it was a feature of English life, six and more centuries ago. Monarchs arbitrarily seized their subjects’ estates and often had considerable powers in determining what happened to inheritances. (Like Putin, they even incarcerated or executed foes in the process.) Part of the reason for the subsequent success of the English economy is that property owners steadily reduced their monarch’s powers to interfere with property rights.

Are we returning to that situation? Well, the Fast-track Approvals Bill is a step on the way – some would say it is but a small step. I’ve not seen the usual guardians of property rights – the classical liberals and neoliberals – making much of a fuss over this. Is it because the property rights that are being seized are from future generations, from the environment and from small property owners? I leave them to respond. I doubt that Ronald Coase was wrong.

* For the cognoscenti, the theorem is a lemma from general equilibrium theory. That theory, and therefore the Coase Theorem, breaks down if there are multiple equilibria.

‘It has been said that figures rule the world. Maybe. I am quite sure that it is figures which show us whether it is being ruled well or badly.’ Goethe

I was struck at a recent conference on equity for the elderly, how many presenters implicitly relied upon Statistics New Zealand. We take SNZ for granted. Had it been drawn to their attention, many users would have been astonished. This is not just true for economists, but as the conference showed, it is true for social issues as well across a wider group of professions and thinkers.

Underpinning the SNZ’s work is a comprehensive data base of every New Zealander. Our data base comes from a five-yearly census of population and dwelling. The last was held in 2023; the results are to be released in August.

I am aware more than most of the value of the censuses. Economic data in the nineteenth century is scarce, so when I was working on an economic history of New Zealand I had to pay close attention to the population data. In the twentieth century, censuses were not held in 1931 and 1941 because of depression and war. We have no official estimate of how much unemployment there was in the Great Depression and we have only the vaguest idea of women’s contribution to the domestic war effort.

More recently, the 2018 census head count was poor. The statisticians in SNZ made a valiant effort to improve the unsatisfactory results that the incompetence of those administrating the count, but about once every month or so I meet an issue where I cannot trust the 2018 estimates, and those from the more reliable 2013 census are out of date – in fact I am usually trying to trace a post-2013 social change. Ah, you say, now we have sample surveys, but their reliability depends upon a comprehensive data base and they do not have the same detail and coverage.

SNZ is exploring whether they can make greater use of administrative data even to the extent of abandoning the regular census next due in 2028. A properly done census is very expensive. The 2023 census cost more than $300m. (The administrators tried to do the 2018 census on the cheap and we still suffer from the shoddy job.) Arguably, we could save a mint by using administrative data.

Does that mean we have an official population register? No, but almost everyone turns up in various official data bases and it is possible to meld them together to get a picture of each of us. SNZ, who does the melding, has strong statutory privacy restraints (as well as a professional ethos) that protects the public from turning this into an official population register. (Social statisticians such as those at SNZ are actually not very interested in the individual records providing they are comprehensive and accurate, because typically we are looking for patterns in the data.)

I would be very uneasy if the government knew as much about me as I disclose in my census return. The Census is double protected. As well as the general provisions in the Statistics Act there are additional protections for the Census. There have been famous occasions when the Government has wanted to use the Census as, in effect, an Official Population Register and Government Statisticians, bless them, have told politicians to go to hell, although more politely. (If SNZ could create an Official Population Register, then another government agency with fewer scruples could do the same. It would be far more interested in individuals.)

Additionally, there are issues which we need to know about for social purposes where the official data coverage is poor: disabilty, ethnicity, fertility, household composition, internal migration, religion and voluntary work, for instance.

We have no idea how reliable administrative data are for the purpose of a foundation data base.   We shall have a better idea following a comparison with the 2023 Census results but the study will take time and we need to make a decision about the next Census before it is done. In the interim, we should be reluctant to rely solely on administrative data bases.

What if the administrative data base proves inadequate? It would be a repeat of the 2018 Census in which a new system was tried, found wanting and there was no back up. Those of us who depend on quality statistics would be even more stranded – that is everybody.

Apparently the 2023 enumerators – those who knock on our doors – were subject to unusual levels of abuse. We do not know whether that happened as much in 2018 because the enumeration was outsourced and gave less feedback, but the abuse – some of it very unpleasant – was markedly higher than during the 2013 enumeration.

The reasons might include increasing social fragmentation, perhaps compounded by extraneous events like the turmoil from Covid. That is for a later conversation, which needs to be held. (If it is at all analytic it will be using data based upon SNZ statistics.)

I hardly saw any publicity; apparently it was targeted on others. (To make a confession, in the 45 years of writing this column, I have always written one about census time, explaining some facet of it as a small contribution to public understanding. The 2023 census was an exception, because it crept up on me without any of the usual alerts.) Perhaps there were people who resented the knocking at the door, because they did not understand it was about making a contribution to running the country. That is what a census means. If you are not counted, then you are likely to be ignored when policy decisions are being made.

That leads to a wider issue. The public profile of Statistics New Zealand is diminishing. Once a teacher would refer students to the New Zealand Official Yearbook in the school library. There has not been a yearbook since 2010.  I doubt nowadays that most school libraries have any printed material published by SNZ so the students don’t get that appreciation of it’s role. Yes, there is an SNZ website, which is invaluable for someone like me who uses it almost daily for a wide variety of issues. So complicated and rich is SNZ’s work, that the newbie faces a maze. I do too, but I’ve learned how to find my way through it (usually – sometimes I have to ask).

On every business page there are references to official statistics or analyses based on them. Other news stories do not feature population-based statistics so often, but they are there. However, the vital role of SNZ in the development of these stories rarely gets noticed.

Perhaps SNZ should be raising its public profile. I am not saying it should be as explicit as in Goethe’s: ‘it has been said that figures rule the world. Maybe. I am quite sure that it is figures which show us whether it is being ruled well or badly.’ But SNZ needs to convey to the public the task it is doing. It could do this with hard copy publications, a separate public friendly website (like Te Ara), and the Government Statistician taking a more prominent public role, promoting and defending the integrity of the statistical system. A former Government Statistician was unwise to dismantle the SNZ advisory system which generated a cadre of informed expert defenders of SNZ.

SNZ especially needs to guard against being seen as just managing the statistics for the government. It is managing them for the public too. You may have observed that the government spending cuts have been more directed at cutting services to the public and less to cutting services to the state. Focusing on administrative data and abandoning the census could be seen as symbolic of this narrowing remit; hopefully that is not Statistics New Zealand’s intention.

Is the economy in another long stagnation? If so, why?

This is about the time that the Treasury will be locking up its economic forecasts to be published in the 2024 Budget Economic and Fiscal Update (BEFU) on budget day, 30 May. I am not privy to what they will be (I will report on them in due course) but the Treasury are competent economists persuaded by the evidence, so other economists should be able to make reasonable guesses at what is bothering them

Probably the economy is in a state of stagnation. I come to this conclusion on a slightly different basis from the news headlines – gone the day after – which we are all fed. First, I use per capita GDP as a measure rather than aggregate GDP. I got into that habit when I was writing an economic history of New Zealand because population growth in some periods dominated market economic activity (I use GDP well aware of its limitations both in content and sustainability; that is what the news headlines use.) Second, I do not use mechanical definitions of stagnation and recession because I am too aware of the measurement noise in the estimates (which are a proportionally bigger problem in a small economy like New Zealand than in a huge economy like the US which the news headlines tend to imitate). Those who lack economic and statistical judgement should stick with mechanical definitions.

The statistical record is that GDP per capita grew at about 1.6 percent p.a. between end-2010 and end-2019. Then the economy went into turbulence during the Covid nationwide lockdown of the first half of 2020. Since then, it has hardly grown at all. Sure, there have been ups and downs but eyeballing the chart, per capita GDP looks flat. End-quarter-2023 GDP per capita, which is that latest figure we have, is only fractionally above end-2019. The growth rate since then has been about a tenth of the pre-Covid growth rate at 0.16 percent.

Treasury’s 2023 Half Yearly Economic and Fiscal Update (HYEFU), locked up in November 2023, forecast that per capita GDP would fall in the three years to June 2025. The forecast seemed to imply that the economy will not to return to the end-2019 level until early 2026. As I say, I have not seen the Treasury’s  current forecasts but most of the economic news since November has been pessimistic, so it may be the Treasury will now be expecting the end-2026 level to be much the same as seven years earlier.

In the past I have treated such a seven-year stagnation as significant. It amounts to double the length of the traditional standard business cycle of the New Zealand economy, although it is shorter than the past major stagnations:

            – the Long Depression (1878 to about 1896 –18 years);

            – the Interwar Recession including the Great Depression (1908 to 1935 – 27 years);

            – the Post-War Stagnation (1944 to 1953 – 9 years);

            – the Wool Price Crash (1966 to 1978 – 12 years);

            – the Rogernomics Recession (1985 and 1995 –10 years).

(You can read more about them in the appendix of my Not in Narrow Seas: The Economic History of Aotearoa New Zealand.)

What is causing this stagnation? I discount political explanations as superficial. It looks as though this stagnation is going to straddle both the stewardship of Labour’s Grant Robertson and of National’s Nicola Willis. The negligible growth rate made it politically and fiscally difficult for Labour and is making it similarly difficult for National. Were the economy on its pre-2019 trend, the government’s revenue would be up an additional 6 percent. Even if the Coalition Government’s policies – such as the infrastructure spend – boost the long-term growth rate, their significant impact will be beyond the time horizon with which this column is concerned.

A possible explanation is Reserve Bank actions. In November 2022 a select committee asked the RBNZ Governor whether the central bank was deliberately engineering a recession to combat inflation. He answered ‘I think that is correct. We are deliberately trying to slow aggregate spending in the economy. The quicker inflation expectations come down, the less work we need to do and the less likely it is that we have a prolonged period of low or negative growth.’

The difficulty with that explanation is that the economy seems to have already been in stagnation before the RBNZ took its action, Nor is one sure that Governor Orr expected his induced recession to last as long as even three years. Still, it is reasonable to suggest that the RBNZ measures to stifle inflation have contributed to prolonging the stagnation. (Or, as it might argue, that it has been the reluctance of players in the economy to get their expectations down.)

Undoubtedly, the beginning of the stagnation is to do with the onset of the Covid pandemic. Unfortunately, the measurement system which underpins our National Accounts was not designed to deal with this sort of shock. But even if we start the analysis at end-2020, when the initial shock was over, we still seem to be facing around six years of stagnation.

The international post-Covid economy has not been doing well. (And probably worse than the 2023 HYEFU assumed, which is one of the reasons the forecasts in the 2024 BEFU may be wound back.) It has also been a major source of the inflationary pressures that the RBNZ has been trying to resist. Add to this heady brew the economic impacts of the invasions of Ukraine and Gaza (although wars usually add to economic activity as well as to inflationary pressures).

We also need to be mindful of the possibility of ‘secular stagnation’ among affluent countries – a long-term slowing down of the growth rate of their material production. Perhaps New Zealand is joining them. It will take a number of decades to be certain whether this is, or is not, happening.

The fact is that the New Zealand economy has now been stagnating longer than one standard business cycle. The expectation is that it will continue to do so. Before proposing policies to boost the sustainable growth rate, there is a need to explain systematically why the New Zealand economy appears to be stagnating. Treasury’s 2024 BEFU should give us further insights.

It is all very well cutting the backrooms of public agencies but it may compromise the frontlines.

One of the frustrations of the Productivity Commission’s 2017 review of universities is that while it observed that their non-academic staff were increasing faster than their academic staff, it did not bother to analyse the trend.

In today’s jargon it found that staffing in backrooms was increasing faster than in the frontline. This need not be a bad thing. For instance, the police force’s backroom includes ‘unsworn’ officers who carry out clerical tasks, relieving the sworn officers to spend more time on the frontline. On the other hand, academics have complained that their administrations have asked them to fill in forms compiled by people who had little idea what academics actually do; some ignored the forms – their institutions still seem to be running much as ever. For another example – one hears more grumbles than good reports, but that is the way of anecdotes – doctors were outraged to learn of an ethics unit in a DHB which seemed unaware that medical professions have been struggling with ethical dilemmas since before Hippocrates and did not consult them.

Sadly, the Productivity Commission flubbed the opportunity to carry out a detailed case study of the relationship between the frontline and the backroom despite it apparently being central to university productivity. Nor have I been able to find any other useful study. We rely on the treacheries of anecdotes.

The issue has become most pertinent recently with the government instructing its agencies to cut spending by 6.5 percent and more without compromising their frontlines.

Some of the cuts were easy. The Department of Internal Affairs is cutting most of the 400 plus staff who were working on the Three Waters program which the Government has abandoned. Cutting a service is a simple way of cutting staff (although this may be cost shifting and the jobs will reappear in local authorities funded by ratepayers). However that does not explain the rationale for most of the cuts.

Apparently, the Government thinks that a lot of backrooms jobs are not productive and can be dispensed with at little cost to the provision of public services. Where it got the notion from is unclear. It might be that they think they are mainly bullshit jobs although that problem is more bullshit work – only part of the total activity. (It occurs in the private sector.) That other activity may be critical is the effectiveness of those on the frontline.

The government agencies seem to have concurred with the Government view by cutting more than 3000 jobs. If those jobs can be dispensed with, does it mean that the agencies’ Chief Executives were running some highly inefficient operations? Were they all that inept? How come we appoint such amateurish senior managers?

Of course. not all were, but the effective Chief Executives who were already running lean backrooms were given similar targets to the others. That sounds neither efficient nor fair. (One has an uneasy feeling that those Chief Executives who have made the biggest cuts will be promoted, rather than demoted for running over-staffed administrations.)

The quantity target for the 6.5 percent cuts (plus a further 2 percent directed by the previous Labour Government, while some agencies had a further 1 percent added) seems to have come from the need to fund the Government’s promised income tax reductions. Presumably, this reflects its judgment that the private sector is carrying too much of the burden of the struggling economy; it is the view on which they got elected (although whether electors really understand their policies is moot). The Government may be right, although one would prefer that they were getting the savings from cutting programs and services rather nebulous backroom reductions.

But now the Government is saying it is doing the cuts in order to increase the number of workers on the front line. How that connects to income tax cuts is a bit puzzling – we await the 30 May budget to find out.

The claim one can easily shift resources from the backroom needs to be treated with caution. It is treating workers as fungible – easily interchangeable – like financial instruments. They are usually not. Obviously, some of the teachers working in the Ministry of Education can go back onto the front line. But what about those who have been working in the DIA’s Three Waters program? Give each layoff a shovel and tell them to fix a sewer?

I do not have answers to such questions. I wonder if they even occurred to the Opposition backroomer who invented the policy. That boffin is probably now an adviser in a minister’s office still as dependent upon anecdotes but beginning to face the realities which the Opposition are privileged to avoid. Ministers may be getting poor servicing, while the public may soon be suffering from poorer quality public services and cost-shifting onto them. (It might help if public servants drew more attention to the deteriorating services the public are getting and less to their own suffering – real enough though it is.)

Underlying this column is the concern that our public service is not well managed and its performance will further suffer as a consequence of these cuts. I am not making a party-specific criticism here. It is long since we had a minister of public services who seemed competent and genuinely interested in their quality. (And we have had some dud chief executives too.)

In fact, the quality of our public service is remarkable given the way it has been treated. But there is a general feeling that the quality is deteriorating, slowed only by the inertia inherent in the system. (Which may surprise, since we usually grumble about public sector inertia.)

What is needed is a thorough review. I do not mean a Royal Commission, but some solid research which focusses on nuts and bolts issues – like how public sector backrooms actually work. Without such a better understanding, cutting staff is compromising the effectiveness of the public service to the cost of the public and the politicians they serve.

One Could Reduce Child Poverty At No Fiscal Cost

Following the Richardson/Shipley 1990 ‘redesign of the welfare state’ – which eliminated the universal Family Benefit and doubled the rate of child poverty – various income supplements for families have been added, the best known being ‘Working for Families’, introduced in 2005. The result of the various ad hoc incremental adjustments with confused objectives is a difficult-to-understand and poorly targeted system of family assistance.

As you might expect from such a Heath-Robinson arrangement, the outcome is inefficient in that it is both an expensive means of reducing family poverty and not very effective at reducing the worst child poverty. The clumsiness is well recognised but every attempt to get a better system of supporting children has failed because the approach has been incremental rather than a fundamental redesign – more strings to the rackety structure.

A simpler delivery of the same income support would markedly reduce child poverty without costing the state anything more – so inefficient are the current arrangements. Let’s call it a ‘Universal Family Benefit’ ((UFB). If differs from the one introduced in 1946, by its contribution reducing as the family earns other income. The bleed-out rate on this extra income is 39 percent (the top income tax rate).

To evaluate the proposal, I’ve used the Treasury’s microsimulation model of the New Zealand personal tax and transfer system TAWA (Tax and Welfare Analysis), which they use for assessing tax and benefit changes. (The Treasury is not responsible for these results, but thankyou for their help.)

The system would work by families choosing to go onto a different tax code – let’s call it the Family Tax Code (FTC) – which involved their paying 39 percent on all their market income. Additionally, the family would receive for each child an untaxed benefit of $255p.w. (the precise calculations apply for the 2021/2 year). They would not get all the other family tax credits and benefits would be stripped out (except for the adult part of the benefit which goes to solo parents). (Some high-income families would be worse off if they went onto the FTC; they would choose to remain on the existing tax code instead.)

The level of the child benefit was chosen so that the package had net zero fiscal cost (overall cost to the government). Yet despite the fiscal balance, the proposed package would result in 64,000 fewer children being below the poverty line (using the ‘moving-line BHC50’ measure; the broad conclusion of a marked reduction in child poverty will apply for any sensible poverty line). TAWA thinks there are about 115,000 children below that poverty line, so the UFB package would reduce the numbers in poverty by over a half – the ambition of the Child Poverty Reduction Act – without any extra government spending. One might argue that the current system of income support for children is less than 50% efficient.

There are modifications which would reduce child poverty (and increase the efficiency) even further. For instance, there is a case for having the family benefit higher for the first child. Best Start, which provides additional support for recently born children, should be kept. The simulation also left the existing housing and early child education support in place; both can be rationalised, with further gains.

Since the UFB is fiscally balanced, if some children (and their parents) are better off, it follows that some others (and their parents) are worse off. In fact, the scheme pushes 6,000 children below the poverty line as well as lifting 70,000 above it (hence the net 64,000 children).

The UFB also reduces the incomes of many families, although they would still be above the poverty line. That poor targeting is where the inefficiency of the current scheme comes from. (Typically, these are smaller families; the current regime underfunds the poor in large families.) This is an example of Rabin’s Law – named after an American economist, Matthew Rabin – that all policy change makes somebody worse off.

The big challenge of introducing a new redistributive scheme is how to get from the current inefficient scheme to a more efficient one without causing too much pain to those who are made worse off. That is the trick of the different tax code. A family does not have to join the scheme. On the other hand the rule would be that no family could join the existing Heath-Robinson scheme. Moreover, the old scheme rates would not be increased, so that it would become less costly and eventually phase out over time over time as families dropped off. (So there would be transition costs, which would temporarily unbalance the budget. Most incremental redesigns assume that their new scheme would be more costly.)

What is the catch (once we have got through the transition phase)? First, it involves combining both parents’ income, but that happens already. But it does not involve any household paying more tax, since parents could leave the tax code and miss out on the accompanying family benefit.

The big issue is the 39 percent uniform income tax rate. Many people will judge that too high. A high rate is necessary in order to finance the scheme. The tax rate could be reduced, but that would mean a lower UFB and more children left in poverty (while well-off families would do better).

The UFB is an extension of minimum income support. Those over 65 already have it in New Zealand Superannuation. However, universal minimum income schemes require high tax rates.

It is possible that some families faced with the high rate will choose to reduce the hours they work. In effect, income inadequacy is forcing them to work longer hours than they judge prudent. Many will be able to spend more time with their children, which is no bad thing. The most likely reduction will be parents choosing to finish work early so they can be home in the afternoon or during school holidays.

In any case, there are families already facing marginal income taxes far in excess of 39 percent. It is just that the muddle of current rules makes it hard to identify when that happens; the UFB is more transparent and less confusing (it may even require fewer bureaucrats to run it).

The reason that the scheme does not eliminate all child poverty is because it does not provide a minimum income for parents – that would require much higher income tax rates. But it will markedly reduce income stress in most poor families below the poverty line.

So it is possible to reduce child poverty substantially with simpler, more transparent and better targeted income support at no extra cost to the taxpayer in the long run.

As a final point, observe that this is an example of how difficult it is to replace a badly designed policy by a better one – a consequence of Rabin’s law. A poor-quality policy makes some people inappropriately better off. A better policy will make them worse off and they will resist the change. There are many other examples of badly designed policies; sometimes I think New Zealand specialises in them.

There is a constant theme from the economic commentariat that New Zealand needs to lift its economic growth rate, coupled with policies which they are certain will attain that objective. Their prescriptions are usually characterised by two features. First, they tend to be in their advocate’s self-interest. Second, they are unbacked by any systematic empirical evidence using, instead selective anecdote. Well, yes; there is always an example to confirm one’s prejudice. But rarely will it stand up in a court of science. (The conversation is not helped by those who cannot discriminate between productivity growth is slowing down and productivity is falling.)

My research on economic growth has been driven by curiosity rather than seeking policy conclusions. It goes back to almost the beginning of modern growth economics in 1960 when we began having the data and the theories it generated.

I may have done more research on the topic than any other New Zealand economist. For instance, I can explain why in some periods the economy has grown more slowly than other affluent economies. The explanations are prosaic and do not depend on an ideology. The salutary conclusion is that there was not much we could have done to change the underlying growth rate. (That is not true for other measures; for instance, sometimes we could have avoided high rates of inflation – but with different costs from those that inflation imposed.)

That does not mean that we can do nothing about the economic growth rate. It needs actions to maintain it; some of those actions are in our powers. I remember a 1965 seminar – it was discussing then fashionable planning – at which someone said the concern was unblocking bottlenecks. A lifetime of research has demonstrated the wisdom of this observation. The best explanation I can give for economic growth (aside from moving resources from the non-market to the market) is the introduction of new technologies – blueprints on how to do things. They often require changes to policy.

For instance, Telecom could not work out how to create a broadband network. The government had to intervene to enable the rollout, breaking the bottleneck with a new telecommunications configuration based on Chorus. The strange thing is that while a comprehensive broadband network is a good thing for the economy and society (and has had dramatic impacts on our lives), I have seen no evidence that it has increased the economic growth rate. Perhaps if the rollout had not happened, the growth rate would have stalled, although I am not sure how to verify the proposition scientifically.

One of the strangest results from the research is that within measurement error the underlying long-run economic growth rate has been broadly constant since the 1860s – as far back as we can go. I am stuck with an explanation that the impact of those technological blueprints over the last two centuries has been broadly uniform. (I am not entirely comfortable with the explanation; any empirically based alternative explanations would be welcome.)

Bottleneck-busting best explains the New Zealand Productivity Commission (NZPC). The rhetoric was that its purpose was to increase the economic growth rate. There is not a skerrick of evidence that it has.

But the NZPC may not have been a failure. Rather, it has been reviewing growth bottlenecks. There are diverging views about how successful it has been. Some are ideological. Under the National Government the NZPC had a bias towards a neoliberal account of how the economy worked. Their friends commended their work, although in some cases the bias meant the NZPC did not chase up what I thought would have been fruitful lines of enquiry. When the Labour Government eventually appointed Commissioners who were more attuned to it’s view, the neoliberals began to vigorously criticise the NZPC. That’s politics.

Much of the work of both phases had little impact on the public debate. (However, policy analysts in the public sector have told me they found particular reports invaluable.) I particularly draw attention to Business by Numbers, published in February 2024, which usefully brings together a lot of information from various Business Operation Surveys. The report concludes it has only scratched the surface of what is available; there is a lot more work to be done before we can fully exploit the potential that the surveys offer.

Alas, the work won’t be done by the NZPC (or, probably, anyone else). The incoming Government has closed it down. When the NZPC was established, the National Minister of Finance, Bill English, said the intention was that it would be non-political and survive change of governments. It was in that spirit that the following Labour Minister of Finance, Grant Robertson, left the NZPC largely untouched until new appointments were necessary; so that for his first term the NZPC continued to operate as it had, with its neoliberal bias.

Despite the NZPC being a 2010 ACT initiative, it was the ACT party which abruptly abolished it in February 2024 in an exercise of taking no prisoners. (One is reminded of neoliberals in the 1987-1993 period; if it continues, the current Government may be reminded in the 2026 election of the collapse of support experienced by its predecessors.)

The funds saved from the abolition of the NZPC are being diverted to the newly established Ministry of Regulation. (It will be three times as large as the NZPC – here is one area the government is not cutting back.) Because it is a ministry – its minister is ACT party leader David Seymour – it will have less independence than the NZPC.

There is a view that what is stalling economic growth is over-regulation; abolish it and the economy will boom. It is hard to find empirical evidence to support the view. The last big attack on regulation was in the 1986-1993 period. It is difficult to show it enhanced the growth rate. Once the economy got through the stagnation from macroeconomic mismanagement, it returned to chugging along at the historical growth rate.

Because I wanted to believe that market liberalisation would benefit the economy, I put a lot of research into assessing the hypothesis. I concluded that the liberalisation seems to have led to a better quality of output, more variety and more resilience, none of which are measured well in conventional economic growth statistics. It was also more beneficial to the rich than the poor. But, blow me down, I could not find any acceleration of the underlying growth rate.

There is a counter-example. New Zealand’s fastest economic growth in the last century was in the late 1930s and the early 1940s under the First Labour Government, even when we have allowed for the recovery from the Great Depression. It was also a period of a substantially increasing state regulation of the market. I do not think the additional interventions explain the growth boom, but the episode suggests they did not retard it either.

There is a case for more pragmatic attention to regulate better. Two examples I have looked at illustrate the need. The Leaky Buildings Disaster was a case of under-regulation which cost the country millions of dollars to replace badly built homes and other buildings, while stressing many homeowners. The 2016 Building (Earthquake-prone Buildings) Amendment Bill is a case of over-regulation which is costing the country millions of dollars to unnecessarily modify homes and other buildings, while also stressing many homeowners.

Business by Numbers devotes a chapter to business views on regulation. It found grumbling rather than griping. (The largest concern is workplace safety rules.)

There is certainly a case for better regulation of markets. It would be great if the Ministry of Regulation meets the challenge, although it won’t unless it approaches each case pragmatically. I doubt that it will have much impact on the economic growth rate but, done well, it will improve the quality of life of New Zealanders.

PS. I am puzzled why the Minister of Regulation is not one of the ministers to make the final determination on Fast Track Approval. The current proposal involves the Ministers for Infrastructure, for Regional Development and for Transport (sometimes the Minister for Conservation will be involved). It almost suggests that the government is running two separate economic development policies.

Do we treat the government finances with the common sense that household’s manage theirs?

It is a commonly held view that we should treat the government as if it is a prudent household. We don’t when it comes to its debt. Currently the government says it wants to constrain its net debt to between 20 and 40 percent of annual GDP; that is, between about 67 and 133 percent of its annual revenue. But households borrow up to 450 percent of their annual before-tax income.

Households borrow at that rate to purchase houses. They look at the whole of their balance sheet including their assets as well as their liabilities. When did you see mention of government assets in a discussion on our debt policy? For the record, they sum to about 400 percent of government annual revenue although not all generate income or save spending. Net worth (which deducts all the liabilities) is about 133 percent of annual revenue.

Focussing solely on debt without looking at the balance sheet as a whole distorts public investment. Some examples:

Suppose a significant private business collapsed (as did Air New Zealand and Kiwi Rail) and the best rescue involved the government taking over the enterprise. Even if there was no equity to be purchased, the government may have to take over the failed business’s debt. ‘Sorry, minister, you can’t rescue the business because that would exceed the debt ceiling.’

Suppose we wanted to tackle the problems of our fresh-, storm- and waste-water which will require borrowing up to $20b in the next 30-odd years. The most cost-effective structure would be to leave the responsibilities for water with (large enough) regional authorities which borrowed their funds from a central government agency which borrowed the $20b (or whatever) offshore. ‘Sorry, Minister, you can’t do that because the central agency would appear on the government balance sheet which would then exceed its debt ceiling. So we will have to design a more inefficient and costly solution.’

‘Sorry, Minister, you can’t get around the debt ceiling constraint by using a public-private-partnership in which the private sector does the borrowing but the government services the debt.’ Other countries use this ghost public debt so they can, in effect, borrow more than their debt ceiling allows. But it is still a government liability and, because we use more rigorous accounting standards, it appears as such as in the Government’s Financial Statements and is included in overall debt. (Currently it amounts to $3.7b. It is backed by two state highways, three corrections facilities, and some education assets.)

On the other hand ‘Sorry, Minister, your focus on a debt target ignores any assets which may match it means that we are failing to provide sufficient infrastructure and maintenance to offset the depreciation of assets. Not just central government. Local government too. That is one reason our fresh-, storm- and waste-water systems are increasingly failing us.’

It’s Gilling’s law isn’t it? By prioritising the debt target we shape the game to ignore assets.

There are complications. A household’s borrowing is not simply constrained by its belief in its ability to service the debt. It is also constrained by the willingness of lenders to advance the funds. They are particularly concerned that they can recover their advances if things go belly up. (That is why they won’t advance you unlimited amounts to speculate on crypto-currencies, even if you think it is a sure thing.)

International lenders have got tangled up in countries which cannot meet their debt obligations. So they are cautious. Even so, New Zealand’s relative public debt level is well below the debt levels of many countries which are considered prudent borrowers.

There is a case we should be a little below that level. All prudent households (which are not facing too much hardship) hold a reserve they can use for an unexpected shock. It may be cash or an investment which can be readily liquidated; it may be an additional capacity to borrow. New Zealand has some of the former (the Reserve Bank has foreign exchange reserves) but low public debt makes it easier to borrow offshore in an emergency. New Zealand is probably more vulnerable than average to some shocks – earthquakes, volcanoes and tsunamis and the volatility of its terms of trade (but not militarily shocks so much) – so we need to maintain a lower debt level than what is normally accepted. (Another factor is the private banking debt, which may be pushed back onto the Reserve Bank in a financial crisis, but we have greatly reduced that exposure since 2008.) A margin for additional prudence does not explain all the difference in our lower debt target.

Observe too, that the above analysis has been in terms of debt levels offset by assets. It did not argue we can borrow for consumption. (It accepts a government may borrow or raid the reserves for short-term emergencies; any net asset reduction should be reversed reasonably quickly.)

Let me passionately state a moral perspective. Public borrowing is a cost to future generations. I do not think one generation should borrow unless it can justify its debt servicing to those yet-to-be-born, even if deciding what they will value when they are adults may be difficult. The decision is easy for investments which make a return; it is much harder where the borrowing funds activities which do not.

There are items which do not give a financial return but can be justified; conservation and heritage projects for instance. Future generations are likely to bless us if Aotearoa New Zealand is predator-free in 2050 (although the amount of borrowing the program generates is trivial).

Conversely, education is an investment but (largely) an investment in the individual who may migrate taking their education with them. I am committed to providing every New Zealander with a decent education (and healthcare) but it should be funded from current revenue.

The logic of this analysis is critical of the current government fiscal strategy, which amounts to borrowing for current consumption via income tax reductions. We are not in an emergency (and the government is not proposing to reverse the tax cuts when it gets through the current phase). We should support borrowing for projects which future generations would value, such as in conservation and infrastructure.

Once we ran the government as if it were a prudent household. Initially Keynesian management ran a surplus on current public spending which was invested in businesses and infrastructure; further funding was supplemented by borrowing. Today we are not as prudent. Borrowing to fund consumption is likely to be unfair, inefficient and detrimental to future generations.

If we are to have a target, perhaps something like the following: over a medium term, public current spending including transfers should not exceed public revenue. In the medium term, public borrowing should only be for public investment.

Budget tensions are becoming evident within the Coalition Government.

Winston Peters made numerous political points in his speech to the NZF annual conference. But the attack on his own government’s fiscal policies raised issues of substance.

     ‘Today in the Sunday Star Times, journalist and former advisor to the Labour Government, Vernon Small, refers to the ‘present government facing a fiscal hole’ of $5.6 billion. He’s right of course, but he’s wrong when he said that last year politicians were warned of that. Only one political party in the 2023 [election] campaigned to alert New Zealanders as to how bad things were. New Zealand First pointed out where optimistic predictions of others were false – such as the ‘House Buyers Tax’, and taxing on overseas online gambling.’

Small’s column has an interest even had Peters not referred to it. It was sufficiently confident to suggest he was relying upon a reasonably informed source. That does not mean Small’s estimate of the fiscal hole was correct. There has been a lower estimate of $3.6b, in contrast to a promised saving from expenditure reductions of $1.5b. I don’t think includes the promised tax cuts. The numbers are all over the place and probably do not add up. Small and Peters gloom was broadly confirmed by Minister of Finance Nicola Willis in her recent Budget Policy Statement.

Whatever, Peters seemed to be attacking the fiscal stance of his National and Act colleagues or perhaps even disclosing an internal Cabinet debate. What was the political purpose? Peters must have realised it would both embarrass his coalition partners and add to the instability of the coalition.

I do not know how advanced the internal Cabinet debate about the 31 May Budget is. However, it is usual at this stage in the process that the external task is to manage public perceptions – as Willis has been doing. I cannot recall an earlier New Zealand budget where the usual tensions have appeared so explicitly in public so soon.

There are two views of Peters which might help provide an answer.

One might be called ‘Winston First’, which was the title of a 1995 book, by Martin Hames commissioned by those with a neoliberal disposition. It portrayed Peters as an unprincipled self-seeking politician who cynically sought popular support for his personal ends. This was to explain why Peters left the National Cabinet in 1992, when it was in its full neoliberal glory. (Peters is not the only politician to be so explained by ideologists who cannot understand why anyone would disagree with them.) That he is a politician without principles seeking only personal gain is a widely held view by those on his left as well as on his right. Peters has sometimes reinforced the perception with populist stances he has taken.

Why would Winston First have publicised the fiscal critique? Its logic might be that it would precipitate events which would result in him becoming full prime minister.

That seems unlikely. Suppose the Coalition Government collapsed. There would be an election. Perhaps NZF’s share of the votes might rise, but a stronger possibility is that it would get blamed for any collapse. That is hardly a path to WP4PM, especially as Peters appears to be currently cutting off the possibility of an NZF coalition with the parties on the political left.

(We can rule out the relevance of a scenario in which the left wins an early election, fails again, and NZF is triumphant in 2028. Peters would be 83, older than Biden is today.)

The alternative to Winston First portrait might be called WPPPP: Winston Peters – principled, populist, politician. Perhaps ‘politician’ is redundant. It is there to remind us that he is continually seeking a coalition of the voting public to support him and that sometimes that coalition involves some strange bedfellows.

‘Populist’ is there because Peters in style and belief naturally connects with a broader population with its scepticism of the political elites. In turn, the elites do not connect with him. He does not fit their models of a Māori boy from a poor rural background who should be a deferential conservative or angry lefty. Peters is an angry conservative.

That is where ‘principle’ comes in. Peters has some deep principles which are poorly recognised – those of a rural working-class New Zealand Tory. This is not a well discussed political group (nor its urban equivalent) even though it is more common than is recognised; a chunk of the working class regularly votes on the right.

It has a view that New Zealand is a land of opportunity. While it may be sympathetic to those in difficulty, it is coupled with a suspicion of state welfare because it may sap initiative. The view is critical of the Brahmins on the left, who are considered out of touch with the common people (and often excessively woke), and of Big Commerce on the right. It is strongly New Zealand nationalist.

This philosophy was expressed by Peters in his 1979 maiden speech with its belief in ‘free enterprise’ and encouraging hard work, and his description of coming from a poor family which thrived by working together.

Peters loathes neo-liberals. It is not just a question of ACT taking up potential support of the non-left who dislike National from NZF. In 1993 Peters left the National party – he had been a member for twenty years – because of its neoliberal policies. Peters said in his 2017 speech anointing Labour as the main party of the next government:

     ‘The truth is that after 32 years of the neoliberal experiment the character and the quality of our country has changed dramatically, and much of it for the worse. … Far too many New Zealanders have come to view today’s capitalism, not as their friend, but as their foe. And they are not all wrong. That is why we believe that capitalism must regain its responsible – its human – face.’

So he sees NZF restraining ACT and the neoliberals in National the the Coalition Government. (Despite ACT having more of the voter numbers than NZF, it has less power because a party on a political extreme has fewer options. Additionally, Peters is politically more experienced and probably politically smarter than the leaders of National or ACT. Counterbalancing is not a vain objective.)

It is not an exaggeration to see the fiscal debate that is going on within today’s Cabinet involves tensions between the extreme-right and centre-right. WPPPP’s conference speech was bringing them into the open in order to weaken the neoliberals.

A final point: Peters is indicating that he had an unhappy time in the Labour between 2017 and 2020 and he appears to be in difficulties with the current Coalition Government. The one other time he has been inside a coalition Cabinet was between 1996 and 1998. (He was outside Cabinet in the 2005-2008 Clark-Cullen Government.) In 1998 Peters fell out with Jenny Shipley, who is a neoliberal. Earlier he had got on well with Jim Bolger, who is also a rural working-class Tory (his family farm was not affluent) and who has also expressed doubts about neoliberalism.