Kiwi News and Views

The more informed an economist is, the more they keep their head down during elections.

Elections are not a time to talk about economics in a serious way. Sure, politicians talk about the economy and what they will do to it, with promises soon forgotten when they take power. Elections are timely reminders of how shallow and poor quality our public discussion on the economy is. (You won’t be able to infer how I voted from this column. Economic issues were not a major determinant.)

The front page advertisement of my paper on the morning before election day proclaimed:

‘Vote Labour for help with the cost of living:

     – Free dental care for under 30-year-olds;

     – No GST on fruit and veges;

     – Free prescriptions;

     – $25 extra a week for 180,000 families;

     – 20 hours free ECE for 2-year-olds.’

My instant reaction was ‘Is that what the Labour Government is about? Where is the narrative?’

Providing such narratives is not an area of my expertise. Typically they are less pointy-headed than what I write and are developed by trying them out on audiences and modifying them in response to reactions. (Trump is a very transparent example of this behaviour.)

Had I been foolish enough to have been a Labour politician elected to office in 2017, I’d have started off with a narrative that the Key-English Government had suffered from inertia and failed to address a multitude of issues and ‘we are going to deal with the backlog’. One example would be the mess that housing had got into – it would take years to sort it out. (National is hinting that it will use the narrative but apply the backlog thesis to Labour. Oh well!)

Of course other events – the Mosque Massacres and the War on Covid – took over. In any case, a new narrative was needed following reelection in 2020. One which fitted in with actual events was something like ‘We’ve won the War on Covid; we are dealing with the recovery.’ (OK, it’s too pointy-headed.)

After the guns stop firing, there is an enormous readjustment necessary to get back to a peace-time economy. What happened after the Great War is not well documented and data deficient but it was turbulent. (Recall the sentiment in Man Alone: ‘I couldn’t tell you about the war,’ Johnson said. ‘It wasn’t a lot different from anything else. I could tell you worse things about the peace.’) In the case of the Second World War, Jack Baker points out that while it lasted five years, the recovery took another ten.

The War on Covid is in an uneasy armistice with guerilla warfare as the virus mutates and we respond with improved vaccines. Even so, we should celebrate our successes. Vigorous public health measures, including lockdowns until vaccines became available, restrained deaths to below 3000. There would have been another 20,000-odd deaths if our response had been as ineffective as the US’s. (One wonders how those who didn’t die, and their friends and relations, voted.)

To win that war we used a lot of economic resources, as is the way of warfare. That is the major reason for net public debt rising from around $5b in June 2019 to around $71b today. And as occurred during the Second World War, not only did government debt rise dramatically, but other economic activity got diverted. We had power cuts in the 1950s because we did not build enough power stations during WWII.

Today the pall of the War on Covid hangs over the world and New Zealand economies, in addition to the Russian invasion of Ukraine which is impacting on the world and hence on the local economy too. That pall hung over the 2023 election.

Is there a narrative to be constructed from this? As I said, this is outside my competence. But I do know that when faced with the 2008 Global Financial Crisis the government threw everything at it, public debt rose sharply, and National’s Key-English Government was re-elected in 2011 and 2014. People believed their narrative (although Labour did little to offer an alternative one).

The critical point is that the state of the New Zealand economy is shaped by what happened in its past and what is happening overseas. But, well illustrated in the election campaign, the public rhetoric assumes that the economy is isolated in time and space – a bit like a 101 economics textbook, I suppose. I infer that the commentariat find it very hard to follow what is happening overseas, while their knowledge of New Zealand economic history is thin, at best.

I am not saying that the more sophisticated in the local economics profession think this way and sometimes Minister of Finance Robertson showed he was aware of the international and historical impacts. But the public commentary was, shall we say, out of this world.

To go back to that front page advert. It could have been rejigged into this narrative. Something like ‘the economy is struggling under pressures over which the government has little control; but it is doing its best to shield the most vulnerable’. That is not to say that the promises were the most efficient way to protect them (some were more about targeting particular voters).

National’s story was similar. They were promising tax relief, funding it by cutting public services. Perhaps the tax relief was poorly targeted and indulgent. One fears the new government will repeat the Key-English mistake of cuts which cripple the public sector.

Even so, the choice for electors was not too bad (assuming you expected the promises to be delivered) although not very transparent.

Observe that neither party was targeting the group which was hardest hit – those facing substantial interest rate hikes. (I have a column to write about current international thinking on interest rates; prospects look grim for mortgage holders.) I take it that neither party could think of how to provide relief. It is a reminder that on many matters the government is impotent despite the political rhetoric. It makes promises to improve the situation but if it is realistic it knows it cant; if it is stupid it believes itself and is dismally disappointed. At best, politics hides behind promising policies which are largely ineffective. 

It’s often said that truth is the first casualty of war.

If that’s true, then humanity is second in line.

As the Israeli Defence Forces prepare a ground attack on Gaza, shifting concepts of humanity and its dark oppositional force, inhumanity, are being weighed and measured, promoted and deflected.

As distant observers we are asked to make an assessment from grainy images of bombed babies and kidnapped grandmothers about the degrees of humanity on either side.

Israeli politicians say they have suffered the biggest single loss of life since the establishment of the state 75 years ago, raising deep memories of European pogroms.

More than 1300 Israelis, mainly civilians, have been killed by Hamas militants who arrived from Gaza on motorbikes, trucks, speedboats and motorised paragliders, blowing holes in the security wall and widening gaps with bulldozers.

They mowed down concertgoers at a music festival and threw grenades at people hiding on kibbutzim – taking as many as 150 hostages, live bargaining chips, back to the Gaza enclave where Hamas is based.

These actions are made possible by a suspension of humanity. The inability to see your victims as people like yourselves.

Dehumanisation is an active tool of modern warfare, fought in the age of the 15-second video.

Hamas social media clips show young music fans cowering in holes in the ground, at the points of guns, being referred to by their captors as “pigs”.

The inability or unwillingness to see the opposing side as human beings, to instead regard them as sub-human or animals is a necessary pre-requisite for absolute war – conflict without restrictions – enabling the very worst behaviour imaginable.

It allows the suspension of protective humanising processes which would ordinarily prevent soldiers from targeting civilians.

And now the bombs fall on Gaza. In the first six days of the war Israel says it’s dropped 6000. The number of dead children, Palestinian health officials say, was greater than 500. A week further on the death toll in Gaza has reached an estimated 3700, including deaths at a bombed hospital, although who launched the rocket remains debated.

There are 2.3 million Palestinians living on a 41km long strip of land between the Mediterranean Sea and the State of Israel.

Gaza, originally a conglomeration of refugee camps, has grown into one of the most densely populated places on earth.

One by one, its neighbourhoods are being flattened by rolling airstrikes. Israel’s government has turned a 16-year economic blockade into a state of siege.

Supplies of fuel, food and fresh water have been cut off.

Announcing the siege, defence minister Yoav Gallant said: “we are fighting beasts (or human animals depending on which translation you use) and will act accordingly”.

On both sides, the accusation of inhumanity is being used as a justification for waging war on civilians.

Highly emotive interviews with survivors of the Hamas attacks and families of the hostages describe “barbaric” experiences.

On the sixth day of the conflict the office of Benjamin Netanyahu posted photos of a baby in a pool of blood and the charred bodies of two other children on social media.

The Israeli prime minister shared them with US Secretary of State Anthony Blinken, who had just flown into Tel Aviv.

Blinken speaks of the value that Americans place on “human life and human dignity” – that’s “who we are,” he says.

The ability of a newly formed Israeli unity government and Hamas to uphold some form of that ideal will have a major impact on the direction of this conflict, and the collateral human damage.

Throughout history the suspension of humanity has long enabled atrocities.

Look at the Holocaust, look at the terrors of Stalin, the Killing Fields.

Exterminate the cockroaches, was the cry of the Rwandan genocide.

As observers from far away, we are asked to judge accusations of inhumanity as we witness the opening salvos of what might become the mass extermination of civilians.

We are expected to weigh the pictures of dead babies, with a tiny infant lying in the middle of a huge orange stretcher or a lifeless child in the arms of a father, its back to the camera in a pink stretch and grow, one arm dangling.

Balance up the abduction of an 85-year-old woman in a golf cart with a inert two-year-old lifted from the rubble of a bombed building, and they all take us to a place of terrible outrage.

To try and balance atrocity is a fool’s errand. Each deserves its own investigation and condemnation.

The Israeli-Palestinian conflict has claimed tens of thousands of lives and displaced many millions of people and has its roots in a colonial act carried out nearly a century ago.

Israeli human rights organization B’Tselem has been tracking conflict-related deaths since September 2000.

The overwhelming majority of the deaths are Palestinian and have been for almost 14 years.

For every 15 people killed in the conflict, 13 are Palestinian and two are Israeli.

Within a week, the number of dead in Gaza at more than 1500 surpassed the number of Israelis killed in the Hamas attack. The bombing didn’t stop.

The concept of proportionality does seem to apply.

In President Joe Biden’s first major statement after the Hamas attack he said that the US stood by Israel but that said it was important that their ally operated “by the rules of law”.

The Geneva Conventions unequivocally forbid the taking of hostages. However, the rules around a siege like the one in Gaza are less clear.

Under laws of armed conflict a siege is acceptable so long as the target is military and the aim isn’t to starve the civilian population.

How do you assess the decision to cut off fuel to power generators which keep the hospitals running? Hospitals that are full of thousands of Palestinians injured in sustained Israeli bombing.

An article on the International Committee of the Red Cross website says legally justifying sieges in a time of war is a “slippery method of thinking”.

The Israeli Defence Force claims that Hamas uses civilians of Gaza as human shields. That their infrastructure is scattered among places where people live.

Protecting civilians under these conditions is incredibly challenging. Though it does not serve as a humane argument for killing innocents or perceived collaborators.

Labels are crucial to humanity.

When talking about Hamas, Israeli spokespeople invariably refer to the militants as terrorists.

The Chief Rabbi of Britain has criticised the BBC for not using the expression terrorists to describe Hamas militants. He said it showed they weren’t impartial.

Veteran war reporter John Simpson staged a spirited response insisting that the use of the t-word immediately designated one side as baddies and the other as goodies.

This simplistic dichotomy hides a more complicated truth – there are goodies and baddies on both sides.

To maintain humanity in times of conflict we perhaps need to nurture simultaneous and contradictory thoughts.

We need to entertain the thought that either side is capable of anything – bad deeds and good.

The complete suspension of humanity and the promotion of good vs evil takes us to an intractable place where the concept of peace and a cessation of hostilities is unthinkable.

The practice of looking for humanity in the actions and words of others, especially our enemies, may not solve the Middle East crisis, but it may help prevent an agnostic conflict turning into the slaughter of absolute war.

She may have progressed our understanding of women in the economy but that has not resolved all the issues.

A woman who was once chief executive of New Zealand’s biggest company said ‘It is true that a large percentage of the [women’s pay] gap is unexplained and that’s where the issue comes about; could it be bias even if that’s unconscious bias? Regardless of how we’ve got a gap … the much more important thing is, what are we going to do about it?’

That is so characteristic of the way we tackle policy in New Zealand. We don’t worry about understanding a problem; we focus on solving it. We don’t even bother about trying to find out what is known about it. Just get on with the policy.

There is, in fact, an enormous amount of research on the different income patterns of men’s and women’s earnings – very little of it in New Zealand. (Some of the overseas research has been used in the better policy work in New Zealand.)

If this general neglect as been unacceptable, hopefully it cannot be justified any longer given the award of the Bank of Sweden’s economics prize in honour of Alfred Nobel to Claudia Goldin.

She was not awarded just for her work in women’s economics – which is, after all, also in men’s economics because they are interdependent. Goldin is a bloody good economist (as were the other two female Nobel laureates).

(It was repeatedly mentioned that she is the first women to have been awarded the economics prize on her own rather than jointly. The reason is that in about 1975 the award should have gone to Joan Robinson who made some major innovations in economic thinking. But one member of the selection panel had a snitch on her and vetoed the choice. Never underestimate the extent to which the eccentricities of a panel determine awards.)

Goldin’s many contributions have been mainly in (American) economic history, including on inequality. She was a student of Robert Fogel, the last economic historian laureate, who, like her, imaginatively investigated important questions – in his case, most notably the economics of American slavery – often finding data which no one else thought existed. But she also addresses contemporary issues.

She traced the pattern of American women’s employment over time. For the generation of women born between 1878 and 1897, a successful career typically required forgoing children and sometimes marriage. The choice women faced was ‘family or career’. For their granddaughters born between 1924 and 1943, it was ‘family then job’ for a college-educated woman: work after graduation, marry (soon), have children and drop out of the workforce, returning once her children were in school. But her prolonged absence from work meant she did not have the skills and experience necessary to thrive in the workplace. For Goldin’s last group, born after 1958, many women aspired to achieve ‘career and family’. The shift was aided by access to better contraception, which helped women delay marriage and childbearing and by more liberal social norms.

The research she did on the impact of contraception was with her personal and research partner Lawrence Katz, who is also a very good economist. Using an ingenious research strategy they found that the contraceptive pill gave women more control over decisions about children, enabling them to plan their career and develop their work skills, so the age of first birth increased.

Demographer Natalie Jackson identified an interesting New Zealand twist. Māori mothers have their children about five years earlier than Pakeha ones. What do the latter do in those five years? They add to their qualifications and their paid-work experience. They are much better placed when they return to paid work as the children grow up.

Despite these changes there remains a clear gender gap for these women, most notably with respect to pay. In a recent 2021 book, Career and Family: Women’s Century-Long Journey Toward Equity, Goldin argues that most women no longer suffer unequal pay nor is the gender pay gap driven primarily by women’s choice of occupation. She argues markets generously reward anyone, male or female, who is willing to hold down what she calls ‘greedy jobs’, those which demand long and unpredictable hours. Parents needing to be on-call at home in case a child falls ill and needs picking up from school, or needs cheering on at a concert or football match, cannot hold greedy jobs which require being available for last-minute demands from a client or boss. Typically, it is the mother who spends more time raising children; the gender pay gap tends to open up after a first child. Goldin says ‘Men forgo time with their family and women often forgo their career.’

Does it always have to be like this? I’ve had friends in which the parenting roles have reversed. But there is still the inequality, even if it does not appear as gender inequality. Goldin is optimistic that the ability to work at home will reduce the gap – it won’t eliminate it though.

She is not telling the full story. Some of my own research illustrates another dimension. Fifty years ago, I was interested in how non-market work affected the market economy. (This was well before the popular literature on the deficiencies of GDP as a measure of human activity. The long history of economists concerned about the problem before my work is rarely mentioned by the populists.)

I got blocked because there was no data. That led me to advocate an official time-use survey which Statistics New Zealand first implemented twenty-odd years ago. It is an extremely valuable resource although sadly few people have tried to exploit it. (Where are the Claudia Goldins when we need them?) My findings are reported in Not in Narrow Seas: The Economic History of Aotearoa New Zealand but here is a summary of some of them.

Time-use surveys ask individuals to keep diaries of what they did each hour. It turns out that on average men and women spend roughly the same amount of time on most things such as personal care (including sleeping) at 76 hours a week (out of 168 hours) and leisure (40 hours a week).

The big difference is in their working time balance. Both spend about 48 hours a week on such activities, but men’s paid labour force activity (including travelling to work) is 30 hours a week while women’s is 16 hours. (The male figure appears low because it includes the retired and students.) The remaining time is mainly work around the house; men do about half the amount women do.

So men and women work as long but men get paid for almost twice as many hours. Hence women have lower incomes from working, even if you adjust for age and qualifications.

Additionally they get paid less per hour. The reasons they get paid less are various. Goldin gives some, such as women having less work experience and being less into greedy jobs. What she does not pay much attention to is discrimination. I think that comes from her ‘Chicago School’ tendencies. (She is at Harvard University).

Neo-liberals argue that discrimination is insignificant, it’s the way the markets work. Others suggest that labour markets are fragmented and do not work as competitively as the neo-liberals assume. A particular issue arises if a single employer dominates a particular market. (The technical term is ‘monopsonist’.) They can screw down wages. (One of the pioneers exploring such non-competitive markets was Joan Robinson.)

We have had much legislation since 1973 to weaken the discrimination. The gap has diminished but it is still there. New Zealand’s most widespread monopsonist is the government. To give the Ardern-Hipkins Government some credit, it was reducing its monopsonistic discrimination. The consequence has been higher taxes with no real increase in services – just greater fairness.

Claudia Goldin would seem to give little weight to the last couple of paragraphs. Many economists would disagree. Even so they will celebrate her Noble laureateship. Her research has contributed markedly to the progression of the scientific part of economics even if some of her policy conclusions may be limited.

Even more, the award recognises an area where economists ought to be doing more work, rather than leaving non-economists to argue from ignorance.

Coalition government reflects a nation’s diversity. Electoral arrangements show it.

          Things fall apart; the centre cannot hold;

          Mere anarchy is loosed upon the world,

          The blood-dimmed tide is loosed, and everywhere

          The ceremony of innocence is drowned;

          The best lack all conviction, while the worst

          Are full of passionate intensity.

                              W. B. Yeats The Second Coming

The New Zealand Government is always a coalition of disparate interests. For its first 38 years – the first parliamentary election was in 1853 – there were no parties and the government was an unstable alliance of individuals. The 1872 Stafford Ministry lasted 31 days; the 1873 Fox Ministry lasted 36 days; the 1876 Atkinson Ministry lasted 12 days; the 1884 Stout-Vogel Ministry lasted another 12 days; followed by 6 days of the 1884 Atkinson Ministry. (Britain’s 2022 Liz Truss Ministry was 49 days from appointment to resignation – including 10 days of the national mourning period for Queen Elizabeth II.)

With the election of the Liberal Government 1891, New Zealand began party government. Even so, a number of Liberal MPs crossed the parliamentary floor to elect the Reform Government in 1912. In 1915-1919 there was a National Ministry of a coalition of Reform and Liberals. In 1930-1931 the Forbes Ministry was a minority government. His 1931-1935 ministry was a coalition between Reform and United (previously Liberals).

However, from 1935 to the arrival of MMP in 1996 there was single-party government. Since then there has been 18 years of coalition governments with the exception of the Ardern-Hipkins Government 2020-2023. All the coalitions since 1891 have been reasonably stable. Only the Shipley-Peters coalition of 1997-1998 had an untimely end.

Observe that there are broadly two kinds of coalitions. One involves more than one party having seats in Cabinet as occurred with National and New Zealand First in 1996-1998. More common has been minority single-party governments with other parties providing confidence and supply and Ministers outside Cabinet. (Between 2017 and 2020 there was a minority two-party government of Labour and NZF with the Greens providing confidence and supply and Ministers outside Cabinet.)

Coalition governments are common elsewhere. At the time of writing, Slovakia is negotiating a coalition government, with the lead party having won just 23 percent of the vote. There is talk that they may need another election soon.

Even our parties are coalitions. National is a merger of the country-based Reform Party and the urban-based Liberal Party. A way of thinking about the 1984-1990 Labour Government is that it was a coalition between the traditional Labour Party and the yet-to-be-formed ACT party in which the minority party dominated. As we ponder on what is going on in the US, we may think of the Republican Party as a coalition of traditional conservative Republicans and the extreme right. There are similar obvious, but not as public, tensions among the Democrats – they currently handle them in a more civilised way.

The reasons the tensions are not as visible in the US as they are in New Zealand (or Slovakia) is the different electoral systems. MMP does not create these tensions. It exposes them.

I puzzle over whether these tensions are greater today than they once were or whether they are just more visible. Once Māori were hidden in the countryside, women in the kitchen, homosexuals in closets. They would be much more visible today even if we did not have MMP.

Māori are an interesting example of how electoral arrangements change visibility. They were confined to four seats in 1868. National’s first Māori MP won general seats in 1975 (although James Carroll won one for the Liberals back in 1893 – he was twice acting Prime Minister, a Māori first). Even if parties are unable to win the Māori seats, under MMP they want to win as many list votes as possible and they put Māori on their lists. Today there are more than twice as many MPs of Māori descent as there are specific Māori seats.

Not all social diversity is evident in public discussion. We pretend there is no class in New Zealand. But class plays a role in both American and British politics – especially that the traditional working class sense they are being left out. It could happen in New Zealand.

(We confuse Māori with the working class, even though there are more non-Māori who belong to it. We talk of Māori as a unity. They are not. In class terms there is a Māori elite, a growing Māori bourgeoisie, and a Māori working class. There are other tensions within Māoridom which non-Māori only see dimly.)

Historically for logistic reasons, we have had electorates based on regions except Māori are separated out. If we had electorate based on all ethnicities, class, gender, income or religion, we would have a very different politics. MMP reduced the importance of regions.

One of the consequences of MMP is that political tribalism is fading. The number who vote ‘my party – right or wrong’, often with clenched teeth, seems to be diminishing. As a result the dominance of the two main parties is lessening. In the 1987 and 1990 elections Labour and National won 83 percent of the vote between them; this year they have been struggling to get 65 percent. (There is a sense that the 2023 voting outcome is the same as that of the 2017 election, except for smaller support for the main parties – and Labour’s and NZF’s unwillingness to cooperate.)

What has been unusual about the 2023 election was not that it will lead to a coalition government, but that the coalition negotiations have been going on in public before election day. (There were private ones between Labour and the Alliance in 1999.) It has been a bit weird really. Like everyone playing poker not knowing what cards they hold. After the election those with decent hands will play in earnest.

What struck me about the pre-election game was that every party – even minor ones – talks as if FPP still applies, as if they are going to win the election and will be able to implement their manifesto promises unconstrained by any other party. Yeah, right. Not one said much about respecting the wishes of voters. Not one set out their bottom lines which they will not negotiate nor what they were willing to negotiate. One hopes they prove better organised in the post-election negotiations.

Whatever party ‘wins’ the election, they will have been rejected by a majority of voters. That is one of the reasons we don’t like coalitions. As a rule, we prefer ones involving a minority government to a majority one consisting of representatives of two parties. 

Underneath there are questions of how to manage the diversity in the nation which MMP, among other indicators, exposes. Is there anything we all have in common other than living in the same land? (There are even around 250,000 potential voters offshore.) The centralist solution is to impose some sort of national unity – in laws and rhetoric: ‘you will bloody well follow the All Blacks’. Bugger any minorities.

We are long past that possibility although there are authoritarian regimes overseas which pursue it, often crushing (ethnic, religious and sexual) minorities. What the growing affluence has meant is choice – of lifestyle as well as what you buy on the supermarket shelf.

It seems to me that we can only hold the nation together by tolerating this diversity – the only intolerance should be towards the intolerance. We need to make tolerance of diversity a proud national characteristic. (Up you, authoritarian regimes.) That means greater decentralisation.

Yes, governments will have to take decisions with which minorities are uncomfortable, but the decisions should be in a context of respect for them. I broadly accepted our anti-Covid strategy but was uneasy about its attitude to, and treatment of, those who disagreed. (Yes, many were nutters, but they had a right to be nutters, providing they impacted minimally on others.)

It is a feature of the last seventy-odd years that the one occasion we came together politically was in the war against Covid and the rejection of the views which caused the Mosque Massacres. It won the Ardern Government a majority in parliament in 2020 – despite National winning more votes than Labour in 2017.

But the mood of tolerance over diversity was not continued. The 2023 election campaign has certainly been divisive. Top of the post-2023 Prime Minister’s list has to be promote tolerance and think more about decentralisation.

          The darkness drops again; but now I know

          That twenty centuries of stony sleep

          Were vexed to nightmare by a rocking cradle,

          And what rough beast, its hour come round at last,

          Slouches towards Bethlehem to be born?

PS. An earlier column discussed the unthinkable of a grand coalition.

We should begin by properly acknowledging loss. The death of Act’s Port Waikato candidate, Neil Christensen, is a tragedy for his family and friends. Me tangi, kāpā ko te mate i te marama.

However, Christensen died while a candidate for election, so this personal loss also has very public consequences. In particular, the Electoral Act 1993, s 153A is quite clear about what happens when an electorate candidate dies during the campaign. The election of an MP for that electorate is cancelled (although voters still may cast party votes and these get counted). Then, under the Electoral Act 1993, s 153E, instructions for a by-election in that electorate must then be issued “without delay”.

Which means that Port Waikato voters still need to go to the polls by the end of Saturday to cast their party vote, then sometime after the general election process is completed but before the end of the year go back to the polls again to elect a local electorate MP. In the meantime, of course, all the country’s other MPs will have been declared elected. So, how does the required by-election in Port Waikato link with that process?

The law governing the allocation of seats in parliament after the general election is set out in the Electoral Act 1993, ss 191-193. In essence, it requires the Electoral Commission to allocate 120 seats amongst the various parties that cross the representation threshold of either 5% of the party vote, or winning an electorate. The Commission can only allocate less than 120 seats if some independent candidate wins an electorate (something that has not happened in NZ under MMP).

Therefore, in early November after all the votes are officially counted, there will be at least – more on this in a minute – 120 MPs with the right to sit in Parliament. One of these MPs will be National’s candidate for Port Waikato, Andrew Bayly, who is at 15 on the National Party list. Given current polling, this guarantees him a list seat in Parliament even with the Port Waikato electorate vote being cancelled.

Then, at some point before the end of the year, Port Waikato voters will elect their local electorate MP. This MP will be “extra” to the 120 seats already allocated by the Electoral Commission after the general election. And one of the candidates at the by-election will be Andrew Bayly, standing for the National Party. Smarter people than I, such as the NZ Herald’s Claire Trevett, say that he will be a lock to win that by-election. At which point he will resign his list seat for National, re-enter Parliament as Port Waikato’s electorate MP, while the National Party gets allocated another list seat to make up for the one that it “lost” when he resigned.

In short, the legally required by-election process means that National basically is guaranteed getting another seat in Parliament quite shortly after the final results of the general election are announced. Meaning that the magic number of seats it and Act now need to get between them from the general election in order to avoid having to deal with New Zealand First is 60, rather than 61. Which, given how tight everyone says the polls are, could literally change who will be our next government.

All of which raises the question, how much sense does this make? Well, parliaments with more than 120 MPs in them and parties getting more seats than they are “entitled” to can happen in other ways. If at a general election a party wins more electorate seats than its share of the party vote would give it, they get to keep these “overhang” seats and parliament just gets that much bigger. We’ve already seen this happen after three elections under MMP. Depending on what happens in the Māori seats – how many of these Te Pati Māori win relative to their share of the party vote – it might happen this year, too.

However, the underlying rule that when any candidate in an electorate dies the election of an electorate MP must be re-run really is a throwback to pre-MMP days. Under the old First Past the Post system, winning an electorate was the only route into parliament. And it was the total electorates won by each party that then determined the overall government. So, having a candidate – especially one of the National or Labour candidates – die during the campaign could literally change the nationwide outcome.

Under MMP that just isn’t the case. Let’s imagine – and apologies if this sounds ghoulish – that it were Andrew Bayly who passed on and not Neil Christensen, but the election of an electorate MP for Port Waikato carried on anyway. That would mean one less electorate seat for National, and one more electorate seat for some other party. However, when the list seats are allocated by the Electoral Commission, National would receive one more, while the other party would receive one less. The voters of Port Waikato may not get their preferred local MP – assuming they want that to be a National one – but the overall distribution of seats in parliament would remain the same.

As such, it might be time to rethink the rule at play here. Not for this election – it must play out as the law requires. But whether this ought to happen again in future elections really is questionable,

Singapore and New Zealand have much the same population – a bit over five million people. They are both affluent economies. Singapore is more affluent than New Zealand although there are reasons to believe the data exaggerates the differences. Because of their resource base and location they have rather different economic structures. Yet the two small economies work together in the international political economy.

New Zealand’s land area is 368 times that of Singapore, so there is a lower population density and lower economies of agglomeration. (New Zealand’s EEZ is roughly 4000 times greater.)

The difference results in quite different economic structures. Compared to the typical affluent economy, New Zealand has a large natural resource sector based on the land and sea; Singapore’s natural resource sector is negligible. As a consequence, if Singapore was located as far away as, say, the Falkland Islands, it would be as poor and as unpopulated as they are.

But it is not. Singapore is near the centre of the world economy. Almost half of the world’s population lives in countries within 4000kms, producing over a third of the world’s GDP. Both figures are increasing. Australia is the only a country of any significant size within the New Zealand 4000km-circle. Australasia has 0.4 percent of the world’s population and 1.1 percent of its GDP.

(One OECD report estimated that reduced access to markets relative to the OECD average could reduce GDP per capita by as much as 11% in Australia and New Zealand. Conversely, a favourable impact of around 6-7% of GDP is found in the case of two centrally located countries: Belgium and the Netherlands. Singapore was not included in the study, but applying the latter figure to it, New Zealand’s GDP would be depressed relative to Singapore by 17 percent, probably more.)

The structural consequence for the manufacturing and tradeable services sectors is that Singapore is involved with the web of Asian supply chains, whereas New Zealand manufacturing mainly consists of primary-product processing or small, localised market supply where importing would be too complicated or costly. Its businesses are rarely in the middle of supply chains, which have been one of the most dynamic international developments in recent times.

(A nice illustration of the difference between the two countries is that New Zealand is a supplier of milk powder to Singapore, which converts it into infant formula which it distributes throughout its region.)

Not only is Singapore central but it sits on the Straits of Malacca, a critical link in the international transport network. It is the international hub for the countries which encircle it.

So the two countries have quite different economic structures. Historically, New Zealand’s main resource-based activity has been pastoral farming, with wool, meat and dairy products once making up over 90 percent of total foreign exchange earnings. A shrewd summary was that New Zealand was an ‘exporter of processed grass’ – processing through livestock and factory. Its comparative advantage was not so much its land – which is not particularly fertile – but a generous supply of sunlight and water. For a variety of reasons, there has since been a substantial diversification of the farm sector in the last decades into forestry, horticulture and wine over the last fifty years. Additionally, the fishing industry has boomed both offshore and with fish farming.

Perhaps the international tourist industry should be included among the ‘resource-based’ industries, given that scenery, as well as novelty, is a major appeal for one of New Zealand’s biggest foreign-exchange earning industries. If the isolation adds to the attractions, it also puts New Zealand a long way from where the tourists live. In contrast, Singapore tourism arises from it being at the centre of that large Asian population – its local tourist attractions are primarily urban.

Both economies have the large service sector characteristic of a modern affluent economy. But Singapore’s financial and business sector is a major Asian and world centre; New Zealand’s financial and business sector mainly services its domestic market. Singapore’s dominance arises from its location and a sound and robust domestic rule of law which has recently been strengthened by the weakening of Hong Kong with Beijing’s increasing involvement in its affairs.

Their external structures for goods are quite different. Singapore’s exports of goods and services (including re-exports) amount to around 176 percent of its GDP, while its imports are 148 percent (in 2019); New Zealand’s comparable figures are both 27 percent. The ginormous Singapore figure reflects its involvement in supply chains because of its near neighbours and location on the Malacca Straits. Its re-exports account for over two-fifths of Singapore’s total sales to other countries in 2000. This is evident in that Singapore’s principal exports are electronic components, refined petroleum, gold, computers, and packaged medications, while its principal imports are electronic components, refined petroleum, crude petroleum, gold, and computers. New Zealand’s re-export proportion was nearer 4 percent, although this does not include imports of inputs such as oil and fertiliser, which are vital in the production of exports.

In the nineteenth century, New Zealand’s cables from Europe came through Singapore. Its defence was seen as critical to New Zealand; the ‘fall of Singapore’ in 1941 resounded through our thinking for decades, so much so that until recently we maintained an army base there. Once it was our key Asian international air terminal, including when we were flying west to Europe.

Such links have become more tenuous in today’s changing world of communications, but New Zealand and Singapore work together on a variety of international issues. Singapore’s first international trade agreement still in force is the Closer Economic Partnership signed with New Zealand in 2001. It is our second; our first is the 1983 Closer Economic Relations with Australia, which replaced the 1966 New Zealand Australia Free Trade Agreement.

Evolving out of that partnership, the two countries have worked together on a range of other international deals including:

2005: Trans-Pacific Strategic Economic Partnership P4 – with Brunei and Chile;

2009: ASEAN-Australia-NZ FTA – 12 countries;

2018: Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) – currently 12 countries;

2022: Regional Comprehensive Economic Partnership (RCEP) – 15 countries.

Additionally, they are involved together in the following sectoral initiatives:

            Digital Economy Partnership Agreement (DEPA);

            WTO Joint Statement Initiative (JSI) on e-commerce;

            Small Advanced Economies Initiative;

            Singapore-New Zealand Declaration on Trade in Essential Goods.

(The last deserves special mention. It was signed in April 2020, just after the beginning of the COVID pandemic, to which it is a response, indicative of the warm and ongoing relationship between the two countries. Seven other countries have since made non-binding ministerial declarations.)

Some of these agreements are ‘open plurilateral’ – that is, they are designed to allow countries not involved in the original agreement to join (as happened with the United Kingdom joining CPTTP in 2023).

The commonality of the two countries arises from both being small. Each depends on a rules-based international trading order which favours unrestricted (or very limited restricted) trade. In a free-for-all world it is too easy for small nations to be bullied. Lee Kuan Yew’s comment that whether elephants make love or war, the grass gets trampled, is apposite for New Zealand too.

A close analysis of the Treasury assessment of the Medium Term in its PREFU 2023 suggests the economy may be entering a new phase.

Last week I explained that the forecasts in the just published Treasury Pre-election Economic and Fiscal Update (PREFU 2023) was similar to the May Budget BEFU, except that it showed weakening in the fiscal position.

What I did not discuss was the PREFU 2023’s medium-term outlook which presents the economy returning to track after wobbling last year and this. A serious forecaster always has a medium-term view although there is always a high degree of uncertainty (fan) around it.

I should not be surprised if Treasury is currently reviewing its medium-term outlook. A group of diverse macroeconomists with which I am associated are. Some of their issues are too technical for a column but here is my response to their discussion.

I focus here on the external sector, asking whether there has been some structural change in the last few years. The possibility is there in the PREFU 2023 forecast of the Net International Investment Position (what we owe overseas less what is owed to us) rising from about 50 percent now to near 60 percent in 2027. That suggests that a substantial element of our economic growth in the next few years will be the result of overseas borrowing.

The forecast rising net debt is largely driven by the current account deficit (i.e. import payments over export receipts). Currently they amount to about 8 percent of GDP. The deficit comes down but remains higher than in the decade before 2022, which is the arithmetic cause of the rising net debt. The high current account deficit seems to come from three causes:

First, there is some reduction in our export prices, especially for dairy products. The Treasury forecast expects no significant recovery. This suggests a structural change probably arising from the slowing down of the Chinese economy and their consumption of our food exports. Lower export prices mean lower export revenue, and that increases the current account deficit. It also reduces the prosperity of the farm sector.

Second, while the volume exports of goods has continued to expand, there has been a falloff in service exports, particularly tourist receipts. I have not seen a thorough account of what is happening here so I must be cautious. There are two major possibilities. One is that the post-Covid recovery has not worked through to the tourist sector yet. Rather, after two years of restrictions, Northern Hemisphere tourists are visiting nearby destinations, and when they have exhausted them they will move on to more distant ones. The other possibility is that there has been a structural change in the international tourist industry – perhaps airfares are going to be permanently higher – so our tourist industry is on a lower growth track. Given the importance of the tourist industry’s generation of foreign exchange, the latter scenario would represent a major structural change, as would lower export prices.

The third possible structural change is the fiscal stance. To go back to last week’s PREFU column, the big change seems to be the falloff in corporate tax receipts. PREFU 2023 gives no account of why this has happened and expects the receipts to be back on track in a couple of years. Let’s hope it is right.

Even so, public debt continues to rise faster than GDP. PREFU 2023 expects net public debt (excluding the NZ Superannuation Fund) to be near 40 percent of GDP over the next few years, in contrast to 20 percent or so before COVID, with no expectation of a significant fall.

(There are a number of measures in the PREFU 2023 forecasts. I am not fastening on a single one in the way the election ‘debate’ does, but looking at them all. As I said, the issue is technically complicated.)

If the government is borrowing more, then someone has to be lending to it. Generally that ‘someone’ is overseas, although the channel through which the loans flow  is complicated. As a rule, the New Zealand Government borrows in New Zealand currency, but further along, the lender to the government is, typically, converting foreign currency into New Zealand dollars. Suppose the public borrowing is used for diesel to fund capital investment. Ultimately, the diesel has to be paid for with foreign currency.

(This is a severe omission in explanations like Modern Monetary Theory when they ignore the foreign sector. The index of Steve Keen’s The New Economics: A Manifesto – which, by the way, is a much better exposition of MMT than his earlier book – does not mention the balance of payments, exports or imports. Were modern economies so simple.)

Forgive me if I don’t give here the details of the complex analysis. What seems to be happening is that we are not adjusting our economic behaviour for the expected reduction in the terms of trade. Over the next four years, consumption and investment are expected to grow more slowly than total production (GDP) – public consumption is actually forecast to decline – but the production is less valuable because imports are more expensive relative to exports, so what we can afford to spend is growing slower than consumption and investment. (PREFU 2023 does not publish sufficient tables to be sure of this.) Thus, to maintain our desire for growing national expenditure, we have to borrow more overseas so that foreign debt rises.

The good news is part of that borrowing is for business investment, which is expected to rise faster than consumption, and will, presumably, add to productivity. Even so, it is not obvious that national consumption should be rising quite as fast as expected. A neutral observer, observing that public spending is already constrained might suggest that the restraint should be on private spending, although those with political agendas might argue differently. (Remind me of the economic case for general tax cuts.)

This conclusion is not the outcome I expected when I first began analysing the medium-term PREFU 2023; facts have a bad habit of getting in the way of preconceptions. Ultimately then, PREFU 2023 seems predicated on a structural change in our terms of trade with slower economic growth prospects in the medium term. Oh dear.

A close analysis of the Treasury assessment of the Medium Term in its PREFU 2023 suggests the economy may be entering a new phase.

Last week I explained that the forecasts in the just published Treasury Pre-election Economic and Fiscal Update (PREFU 2023) was similar to the May Budget BEFU, except that it showed weakening in the fiscal position. A summary might be that the commentary on the Treasury forecasts should have happened four months earlier.

What I did not discuss was the PREFU 2023’s medium term outlook which presents the economy returning to track after wobbling last year and this. A serious forecaster always has a medium-term view although there is always a high degree of uncertainty (fan) around it.

I should not be surprised if Treasury is currently reviewing its medium-term outlook. A group of diverse macroeconomists with which I am associated are. Some of their issues are too technical for a column but here is my response to their discussion.

I focus here on the external sector, asking whether there has been some structural change in the last few years. The possibility is there in the PREFU 2023 forecast of the Net International Investment Position (what we owe overseas less what is owed to us) rising from about 50 percent now to near 60 percent in 2027. That suggests that a substantial element of our economic growth in the next few years will be the result of overseas borrowing.

The forecast rising net debt is largely driven by the current account deficit (i.e. import payments over export receipts). Currently they amount to about 8 percent of GDP. The deficit comes down but remains higher than in the decade before 2022, which is the arithmetic cause of the rising net debt. The high current account deficit seems to come from three causes:

First, there is some reduction in our export prices, especially for dairy products. The Treasury forecast expects no significant recovery. This suggests a structural change probably arising from the slowing down of the Chinese economy and their consumption of our food exports. Lower export prices mean lower export revenue, and that increases the current account deficit. It also reduces the prosperity of the farm sector.

Second, while the volume exports of goods has continued to expand, there has been a falloff in service exports, particularly tourist receipts. I have not seen a thorough account of what is happening here so I must be cautious. There are two major possibilities. One is that the post-Covid recovery has not worked through to the tourist sector yet. Rather, after two years of restrictions, Northern Hemisphere tourists are visiting nearby destinations, and when they have exhausted them they will move on to more distant ones. The other possibility is that there has been a structural change in the international tourist industry – perhaps airfares are going to be permanently higher – so our tourist industry is on a lower growth track. Given the importance of the tourist industry’s generation of foreign exchange, the latter scenario would represent a major structural change, as would lower export prices.

The third possible structural change is the fiscal stance. To go back to last week’s PREFU column, the big change seems to be the falloff in corporate tax receipts. PREFU 2023 gives no account of why this has happened and expects the receipts to be back on track in a couple of years. Let’s hope it is right.

Even so, public debt continues to rise faster than GDP. PREFU 2023 expects net public debt (excluding the NZ Superannuation Fund) to be near 40 percent of GDP over the next few years, in contrast to 20 percent or so before COVID, with no expectation of a significant fall.

(There are a number of measures in the PREFU 2023 forecasts. I am not fastening on a single one in the way the election ‘debate’ does but looking at them all. As I said, the issue is technically complicated.)

If the government is borrowing more, then someone has to be lending to it. Generally that ‘someone’ is overseas, although the channel through which the loans flow  is complicated. As a rule, the New Zealand Government borrows in New Zealand currency, but further along, the lender to the government is, typically, converting foreign currency into New Zealand dollars. Suppose the public borrowing is used for diesel to fund capital investment. Ultimately, the diesel has to be paid for with foreign currency.

(This is a severe omission in explanations like Modern Monetary Theory when they ignore the foreign sector. The index of Steve Keen’s The New Economics: A Manifesto – which, by the way, is a much better exposition of MMT than his earlier book – does not mention the balance of payments, exports or imports. Were modern economies so simple.)

Forgive me if I don’t give here the details of the complex analysis. What seems to be happening is that we are not adjusting our economic behaviour for the expected reduction in the terms of trade. Over the next four years, consumption and investment are expected to grow more slowly than total production (GDP) – public consumption is actually forecast to decline – but the production is less valuable because imports are more expensive relative to exports, so what we can afford to spend is growing slower than consumption and investment. (PREFU 2023 does not publish sufficient tables to be sure of this.) To maintain our desire for growing national expenditure, we have to borrow more overseas so that foreign debt rises.

The good news is part of that borrowing is for business investment, which is expected to rise faster than consumption, and will, presumably, add to productivity. Even so, it is not obvious that national consumption should be rising quite as fast as expected. A neutral observer, observing that public spending is already constrained might suggest that the restraint should be on private spending, although those with political agendas might argue differently. (Remind me of the economic case for general tax cuts.)

This conclusion is not the outcome I expected when I first began analysing the medium-term PREFU 2023; facts have a bad habit of getting in the way of preconceptions. Ultimately then, PREFU 2023 seems predicated on a structural change in our terms of trade with slower economic growth prospects in the medium term. Oh dear.

David Seymour is usually more a talker than a fighter, an ideas man; but he’s been flexing his political muscles during this election campaign. Running as high 13 percent in major media polls this year (and even 18 percent in one Roy Morgan), ACT has been threatening to become the most successful minor party ever under MMP. (New Zealand First got 13.3 percent in 1996, in the first MMP election). But with two polls showing ACT slipping to 10 percent, has the mouse roared too much and is Seymour misreading the mood for change?

In this week’s Caucus podcast, we look at what the polls are suggesting a change of government may look like. Labour and the Greens are painting the picture of a National-ACT coalition as the most free-market, right-wing government New Zealand has ever seen. If New Zealand First is needed, they predict chaos. And as Guyon Espiner says in the podcast, Luxon’s inexperience alongside Peters’ and Seymour’s belligerence could mean we are back at the polls in no time if the votes require that three-way coalition arrangement. 

At this stage, voters don’t seem to be concerned. National leader Christopher Luxon has caught up with Labour’s Chris Hipkins in the preferred prime minister stakes as National has reached 39 or 40 percent in this week’s polls. that suggests that, while New Zealanders may not be taking Luxon to their collective breast, he’s passed a certain sniff test. He’s not the liability Labour was hoping he’d be. Sure, he repeats lines like a parrot and his tax plan doesn’t add up, but he’s good enough. And he’s working hard not to appear mean and scary. Just this week Luxon said, “I consider myself very much a centrist and I’m very much a pragmatist.” So voters don’t seem to be afraid of a hard swing to the right as in 1984 or 1990. And most of all, he’s not the incumbent government. 

Just as the British public voted out Winston Churchill within weeks of VE Day at the end of the Second World War and chose a new government to ‘win the peace’, so the New Zealand public seem to want to wash their hands of the pandemic government. So long and thanks for all the vax.

That puts the pressure on National to, as Lisa Own puts it, deliver the sunlight. Voters are wanting better times and any new government will be on the clock to deliver, which could be hard in this global economic (and literal) climate.

But to form a government, Luxon will almost certainly need ACT. Enter Seymour stage right. And he’s very much not interested in propping up a centrist government. In a revealing interview on TVNZ’s Q+A last year he said National tends to campaign from the right and govern from the left, never overturning Labour’s reforms. “The ACT Party says that’s just not good enough,” Seymour told Jack Tame in July 2022. In the first 100 days, that’s the litmus test. Are you prepared to take some of this stuff on?”

ACT knows minor parties only get so much time in government, and even less at 10 percent or more. He doesn’t want to be what the Greens have been to Labour the past six years. Expect a full court press from a party motivated more by liberal principles than shiny BMWs. To quote Eminem, Seymour knows he’s going to “only get one shot, do not miss your chance to blow”.

Seymour does not want Luxon the centrist, he wants Luxon the Air New Zealand CEO going line by line through the budget to cut costs. By Christmas he wants many of the Ardern and Hipkins era reforms consigned to history, from Three Waters and gun laws to co-governance and fair pay agreements. Most of those National will happily concede or have promised to axe themselves. Seymour will want to go further. As the presumptive minister over-seeing his new Ministry of Regulation, he will look to shrink the size of government. And as Owen says in this week’s episode, he’s identified on Checkpoint that tax reform is top of his list; ideally a move to ACT’s two-tier tax system (17.5 percent and 28 percent).

This week he floated the idea that if National and ACT are a majority of MPs after the election but National won’t go far enough, he might offer a new minority government confidence, but not supply. That is, Luxon could go to the Governor-General after the election and say he has the confidence of a majority of MPs, but that he doesn’t have the majority needed to pass the Budget next year. That negotiations were ongoing. 

It’s never been done before and it would likely never fly. While the Governor-General would likely have to accept such an unprecedented offer and let National form a minority government, in truth confidence and supply go together like a horse and carriage. I tell ya brother, you can’t have one without the other (hat tip: Frank Sinatra). New Zealand’s constitutional conventions say pretty strongly that if you can’t pay the bills, you can’t run the government. And it would be anything but the “strong and stable” government Luxon is currently promising on high-rotate. 

Labour and the Greens want to use this prospect of instability and a swing right to fret voters into a rethink. So far Luxon and Nicola Willis are assuring voters – if they are in fact worried – that they can and will restrain ACT. But the questions will only grow in the next month.

That could spell risk for ACT. While the polls suggest a mood for change, it’s hard to see a mood for a big liberal change. Not for the “real change” that Seymour wants. As is almost always the case in New Zealand elections, voters are signalling they want rid of the incumbent, not inviting massive policy shifts. As Espiner says, sometimes voters treat governments like a game of beach cricket – it’s just someone else’s turn.

Seymour risks overplaying his hand and pushing ‘beach cricket’ voters back to National (as we’ve seen in this week’s polls) or even to New Zealand First. Because there stands Winston Peters, once again reassuring voters this isn’t his first rodeo and he can be the centrist handbrake to ACT’s promise to ‘take this stuff on’. Peters hopes that – and a little race-baiting – is enough for NZF to reach 5 percent.

So does Seymour moderate his language or double-down? Do voters on the right swing back to National now they are looking stronger, consider NZF or do they go to ACT to encourage more substantial change?

Luxon for now parrots the line that he only wants to talk about National and anything else is hypothetical. But every political future is hypothetical. National’s tax plan is hypothetical, but he still talks about it. Under MMP, voters deserve to know not just what single parties want to do, but what coalition governments might do. Luxon has ruled out some ACT policies and will be under pressure to take a position on more.

So the key campaign questions have become what National and ACT can agree on and whether New Zealand First reaches 5 percent on election day and is needed as part of any coalition deals.

Follow Caucus on Apple Podcasts, Spotify, iHeart 

 

 Another poll, another 27 for Labour. It was July the last time one of the reputable TV company polls had Labour’s poll percentage starting with a three, so the limbo question is now being asked: how low can you go?

It seems such an unlikely question because this doesn’t feel like the kind of election that delivers a 27 percent major party. Usually parties crumble because of internal dissent, a tanking economy or radical reform.

Labour has been cautious in its reforms; many of its supporters say too cautious. The economy’s sub-par, but take away the partisan politics and it’s pretty clear that’s the result of war in Europe, global inflation, China’s woes and paying off the costs of a pandemic either major party in government would have accrued. (Before you argue, look at how a National government responded to the global financial crisis and Christchurch earthquakes). Inflation is falling, we were never in a recession, the credit agencies are giving us AAAs, and unemployment has stayed low. What’s more, Labour has united behind Chris Hipkins and backed him to run this campaign as he wants. There’s none of the back-biting and dysfunction of the Shearer/Cunliffe/Little years.

Yet as we discuss on this week’s Caucus podcast, voters this far into the campaign are proving unwilling to take another look at Labour. They’ve done their Covid time; seen the failings of KiwiBuild, light rail and the rest; tsked at Cabinet ministers behaving badly; wept at the price of kumara and so far been unwilling to reconsider this government.

The right bloc of National and ACT is holding around 47-49 percent. It’s tight when it comes to whether they will need New Zealand First to have a majority – a nightmare scenario for any major party trying to govern with less than 40 percent support, as Guyon Espiner says – but it mirrors the results John Key and various ACT leaders delivered through three elections. Things are looking good for the right.

What’s perhaps yet under-appreciated is the disaster a 27 percent result would be for Labour and its future. If we assume Labour will hold 30 seats (the assumption being it loses it red wave wins of 2020 and maybe one or two more), then 27 percent and New Zealand First in Parliament would give Labour just four list MPs. 

Those list seats would be taken by Grant Robertson, Jan Tinetti (assuming she loses Tauranga), Ayesha Verrall and Willie Jackson. It would see the exit of senior MPs Andrew Little, Adrian Rurawhe and David Parker. But perhaps more importantly – if some marginal seats also fall in a swing back to National – Labour could lose its next generation leaders, such as Peeni Henare, Kieran McAnulty, Ginny Andersen, Priyanca Radhakrishnan and Camilla Belich.

Given most people still two-tick, the swing back to National in the party vote is likely to be reflected in seats as well. The Newshub Nation poll in Wellington Central this week illustrated this, with National’s party vote in the seat doubling from 14 percent in 2020 to 28 percent and its candidate vote rising from 18 percent in 2020 to 28 percent.

Hence the concern for McAnulty and co. The margin between the late-20s and early-30s matters immensely to Labour’s future. One Labour MP I spoke to this week said the party was still confident of rebounding and, as Julian Wilcox has heard as well, the focus is now on turnout. That MP said that crucially, MPs were still focused on the party vote and hadn’t turned inward, attempting to save their own seats. The party was holding together.

What should happen the next day but Greg O’Connor in Ōhāriu – in a hotly contested race with National’s deputy leader Nicola Willis – is reported saying at a local debate, “let’s face it, unless something changes in the debate tonight [referencing the 1News leaders’ debate this week], Nicola’s likely to be the next Finance Minister”. O’Connor is trying to appeal to an electorate that famously values access to its local MP, but that line will cut like a knife for his leader and colleagues.

The Caucus team also discussed the first leaders’ debate, aka the middle managers’ debate. Lisa Owen acknowledged the detail was there, but asked where was the hope, the rainbows and sunshine? She says the leaders did “a two-step” around the big issues and the hosts agreed the big winners may have been the parties who weren’t there. The minors already have a third of the vote, according to the polls. Only the 1996 and 2002 elections saw less vote captured by Labour and National combined. And if Luxon and Hipkins can’t lift their game, the minor party proportions could yet grow.

Luxon did get his ‘deckchair’ moment, when he told the humanising story of he and his wife sitting in their first home with only a single deckchair and a TV on a box as furniture. It was the moment he needed to help ward of voter’s concerns that he’s a rich Auckland businessman who doesn’t get them.

Hipkins, though likeable and considered, couldn’t find his moment. There were chances, such as when he warned voters against a National-ACT-New Zealand First coalition. But he never rammed them home. As an example of what Hipkins was looking for – and will still be looking for in the next debate – we played a clip of the final 1993 leaders’ debate. Jim Bolger is onto what he thinks is a winning moment, saying he is working across the aisle with Jim Anderton and Winston Peters on employment issues, and in a clearly rehearsed line asks Mike Moore why he won’t join them. Moderator Paul Holmes says it’s a reasonable question and asks Moore to answer. Moore replies, “And it demands a reasonable answer. [pause]. Because I don’t trust you Bolger.”

Boom. Delivered to a Prime Minister who had gone back on several high-profile commitments, in particular his famous “no ifs, no buts, no maybes” promise to abolish the superannuation surcharge, it was a mic drop moment. A sword to the heart. Hipkins – a scrappy working-class boy like Moore, a politician he admires – needs to find the sort of cut and thrust Moore had in his prime.

But he’s running out of chances to get Labour back into the 30s and back into this campaign. Hipkins needs to find some song-and-dance routine that resonates. Whether it’s a swing or a two-step, Hipkins needs some new dance steps if he doesn’t want to be doing a limbo. He’s got to find a way to make “grumpy” voters take another look at what he’s offering, or he could follow Moore as one of New Zealand’s shortest-lived Prime Ministers.

Follow Caucus on Apple Podcasts, Spotify, iHeart or wherever you get your podcasts