Recent public opinion polls are revealing some very interesting, if somewhat contradictory, insights into New Zealanders’ current thinking about the Covid19 crisis and the national response.

The most recent 1News Colmar Brunton poll reported that 92% of those surveyed considered that the government “had responded appropriately to the coronavirus outbreak” – up from 62% when the same question had been asked in February. To a second question, 86% rated the “government’s response to the economic impacts of the coronavirus outbreak” as good or better.

Yet, at virtually the same time, the Commission for Financial Capability was reporting its own survey data showing that already one in ten households had missed a mortgage or rent payment because of the Covid19 emergency, and that 34% of households had already experienced some financial difficulty, and a further nearly 40% felt on the brink of doing so. A similar recent survey by Research New Zealand reported that 75% of respondents were concerned about the impact the crisis was having on their children. That survey also reported that there have been significant increases in the level of concern about losing one’s job (67%), being able to pay the mortgage (59%) and being able to pay the rent (61%).

So, while at a more global level, New Zealanders are happy with the way the government has responded to date, they are becoming increasingly concerned about the longer terms impacts on their families, the future of their jobs, and their capacity to meet their weekly outgoings. And evidence is mounting every day of the serious impact on employment and business – this week alone has seen Air New Zealand confirm 1,300 job losses, the Millennium and Copthorne Hotels chain say over 900 of its jobs are at risk, and the long-established southern department store H&J Smith foreshadow around 175 potential job losses as it looks to downsize to survive. Taxi company Green Cabs has gone into liquidation, costing 160 jobs.

As more small to medium sized businesses resume after the lockdowns, the more likely it is that these numbers will escalate considerably as the stark reality of how difficult business and trading conditions are going to become hits home. Moreover, for the first time since probably the 1930s Depression the job losses and business failures will start to hit those who have never previously had reason to even consider such a possibility would affect them.

  
Treasury estimates that unemployment will peak at 9.8% by September this year, and start to fall back after that have been dismissed as “wildly optimistic” by analysts such as Infometrics, with most other commentators predicting unemployment to rise to well above 10% by September and fall only slowly after that. Already, the numbers on the Jobseeker benefit have risen around 27% to just over 184,000 in just five weeks between the move to Alert Level 4 from late March and the beginning of May. The government’s announcement this week of a new temporary tax-free payment to help those who have lost their jobs because of Covid19 confirms its recognition of the severity of the situation we are now facing.

The worry for the government now must be that at some point not too far away the two apparently contradictory strands of public opinion will crossover. Public concern about the social and economic impact of Covid19, already sharply on the rise, will overtake support for the approach the government has taken so far.

Throw in a general election in just over three months and it becomes especially challenging. Already the Greens and New Zealand First – the government’s support partners, both polling below the 5% threshold in the most recent Colmar Brunton poll – are starting to actively distance themselves from the Labour Party, just in case. The Greens have been critical of this week’s emergency relief package as introducing a two tier welfare system, too narrowly focused on what they describe as the middle classes, while New Zealand First has taken more direct aim at the Prime Minister claiming somewhat incongruously that she agrees with them that the country is taking too long to move to Alert Level 1. Neither of these reactions is about policy – both are much more about struggling smaller parties sensing that public disgruntlement will rise and stellar support for the government fall as more and more households and businesses are directly impacted. Quite understandably, they want to be on the right side of public opinion when the crossover occurs. 

Labour’s response has to be built around the ever-increasing stature of the Prime Minister, as it hopes to be able to keep enough wind in its sails to hold an increasingly fracturing government on course in the lead-up to the election and maintain the momentum it has established so far. It cannot afford to be sidetracked by crew members scrapping openly on the foredeck about which sails to hoist for the run home, while the previously wallowing National Party has started to look for more favourable airs.

The uncertainty of this and the contradictions in public opinion, and where they might all head, have added even more to the fascination of what is already shaping up as New Zealand’s most dramatic and unusual election ever.        

DUNNE SPEAKS

Anyone who doubted that Simon Bridges is a hardened fighter got their answer with his response this week to the leadership rumblings within the National Party. For a leader whose judgement and decisiveness had been questioned on a number of occasions during the Covid19 outbreak, he displayed a remarkable clarity and swiftness in bringing the increasingly festering boil of the National Party leadership to a head. Friday’s leadership vote has certainly taken the public by surprise, and looks to have caught a number of National MPs off-guard as well.

While there had been speculation for some time about how secure Simon Bridges’ leadership was, the conventional wisdom was that nothing would be done this close to the election. For a start, none of the potential candidates to replace him would have wanted to be seen to precipitate a divisive and potentially electorally destructive coup just four months before an election. Nor was there any sign that Simon Bridges would decide to stand aside voluntarily for the sake of the party, as then Labour leader Andrew Little did in 2017. And there was certainly no Jacinda Ardern coming forward to replace him. After the election, and with the likelihood of another term in Opposition things might look a little different.

Typically, politicians brush aside public opinion polls, good or bad, lest they be accused of acting like the “poll-driven fruitcakes” former Prime Minister David Lange once described his Caucus critics as. However, privately, they take them very seriously, especially those bearing bad news. In 1990, bad polls after bad polls forced then Prime Minister Geoffrey Palmer to make way for Mike Moore, barely 59 days before the election, as Labour MPs worried their seats were at stake unsuccessfully sought rescue. Bad polls led a group of Labour MPs to call on Labour leader Helen Clark to stand aside in 1996, but she called their bluff and survived. It is no different today. There are undoubtedly a number of National MPs worried that recent bad polls mean they will be without seats after the September election, hence the search for an alternative leadership.

It is apparent now that after much speculation about who might replace Simon Bridges that the focus has settled on Bay of Plenty MP Todd Muller, with Auckland Central’s Nikki Kaye as his running mate. While the numbers for change may have been beginning to firm behind the Muller/Kaye ticket, it is not clear that they were ready to be thrust into limelight as yet, the bad polls and the proximity of the election notwithstanding. Indeed, the several hours’ hesitancy between Bridges’ claim that there was a challenge which he would move to head off through as early a vote as possible, and Muller’s later confirmation that he was the challenger suggests as much.

So, by immediately opting for a leadership vote, and bringing the timing of that forward to Friday, Bridges has – at least temporarily – grabbed the initiative. Muller and his supporters have been placed on the back foot – they now have to put up, or shut up. It is a very bold gamble by Bridges who, publically at least, seems confident it will succeed. Time will tell.

However, the leadership chalice which either Bridges or Muller will pick up on Friday is likely to be a very poisoned one. Hotly contested leadership challenges always produce further divisions, no matter the superficial goodwill dispensed on such occasions. If Bridges wins, his immediate challenge will to be deal with Muller and his supporters. Too much conciliation and he risks being seen as weak; too much retribution and he will be seen as petulant and overly vengeful. If Muller wins, he will have to make some sort of peace offering to Bridges and his supporters to get them on-side for the election campaign. It is likely to be an unsatisfactory outcome either way, with the internal divisions it opens up certain to take some time to heal.

From the perspective of both sides the hope has to be that the Caucus vote produces a decisive result. Bridges cannot afford to be re-elected by a very narrow margin; nor will Muller be seen as enjoying the confidence of the Caucus if he prevails by just one or two votes. Normally, the results of Caucus leadership votes are not officially released, but the numbers invariably make their way into the public arena very quickly after the vote has taken place. If the vote is close, both the government parties and the media will have a field day right through until the election pointing out the polarisation within the National Party Caucus.

From the public’s perspective, while there will be interest in the relative merits of Bridges or Muller as leader of the National Party, and who might be better for the party’s prospects, the overriding feeling will be a sense of unease at the level of internal division that has been exposed. They will be asking themselves the question that should be of primary interest to the National MPs: how can a party that is this divided today present itself as a credible, united team with a coherent and focused plan for the future they are all committed to, when the election comes around in just seventeen weeks?

MY SECOND WEEKLY COLUMN IS ON NEWSROOM.CO.NZ

I saw 33 Budgets and many other financial statements introduced during my years in Parliament. Each had their own drama attached to them – some much more than others. The 1984 “Rogernomics” Budget of Sir Roger Douglas and Ruth Richardson’s 1991 “Mother of All Budgets” were probably the most sensational. However, none of them was developed and introduced in quite the dramatic circumstances of this year’s Budget.

For that reason alone, it is a remarkable yet most unusual document. No government has ever announced a spending package remotely approximating $50 billion over a four-year period, yet never before, not even in wartime, has a government had to deal with such a rapidly emerging and pervasive crisis as Covid19.

To its credit, and despite the obsequious obligatory references to the now canonised first Labour Government, the Minister of Finance resisted the urge to delve into Labour’s ideological back-pocket to fund his solutions (although that day may well come when the time comes to pay for all the spending he has announced). Rather, with unemployment projected to rise to almost 10% by election time, he has focused on trying to save up to 140,000 jobs over the next two years, and the various means by which that can be achieved. And he has shown himself unafraid to run massive deficits - $28 billion in the coming financial year; almost $30 billion the following year, dropping to $16 billion by the time of the 2023 election – to achieve that.

The immediate urge to turn to more taxes to fund those deficits has been resisted for the time being (the months before the election) but cannot be ruled out in the future. In the meantime, the government is relying on the strong balance sheet it inherited to bridge the gap through borrowing, increasing the debt to GDP ratio from around 19% at present to almost 54% by 2024. Even that figure is low by current comparable standards in other countries – Australia’s current debt to GDP ratio is around 42%, which they laud as low by world standards, and which will undoubtedly rise as a consequence of Covid19,  Britain’s debt to GDP ratio is predicted to be 95% by the end of the year, and Germany’s is projected to be at 75%. So, the Prime Minister was right to an extent when she spoke of being able to spend the money previously set aside for a rainy day, assuming another does not come along in the meantime.

Along the way, the government has been able to commit spending on a mix of capital and other projects that will fix infrastructure deficits (upgrades to the rail network and new interisland ferries, for example) – although its record to date on delivering major projects leaves considerable doubt whether these will happen – and packages to protect and create jobs. The extension of the wage subsidy scheme for a further eight weeks will be welcomed by many businesses, although there must be big questions about what happens at the end of that period. Especially since the election will then be right upon us, and the combined effects of a cold winter and consumer demand perhaps becoming a little more restrained will be putting even more pressure on business and employment than is happening already. Maybe that is what a fair chunk of the currently unallocated $20 billion additional expenditure is being held for.

Overall, the government appears to have front-ended much of its response to get the economy ticking over as soon as possible. It must be hoping that the uptake and forecasts of strong economic growth from 2022 will provide much of the revenue to sustain its future spending projections. Clearly, mounting international demand for loan finance from other countries seeking to rebuild their own Covid19 shattered economies will make it harder for the government to  raise funds offshore in the years ahead, despite currently historically low international interest rates and the government’s strong balance sheet.

Here is where the overall methodical nature of the Budget’s provisions starts to look shaky. While much activity has been announced or foreshadowed, it has been done in the absence of any demonstrable strategy for the journey ahead. The commitment to keeping jobs is certainly a laudable objective, but it is no substitute for a forward-looking view about how the New Zealand economy might develop sustainably and prosperously in the changed international environment now facing us. To that extent, it is a very introverted document, sadly at a time of international crisis when New Zealand needs to be looking as much to its future trading prospects as it does to protecting the current jobs of so many.

Budgets have often been criticised for being long on ambitions, and short on practical policies to achieve them. This Budget goes almost to the opposite extent. It is not obvious where the government wants to see New Zealand by the end of the decade, when it is clear worldwide that a lasting consequence of Covid19 will be a profound change in the way economies operate and interact. In the absence of even a mere inkling in the Budget of the government’s thinking in this regard, it is hard to escape the conclusion the Budget is primarily a marking-time document, aimed first at getting through the coming election, and then buying a little time thereafter to consider wider future implications.

There is perhaps another explanation for this pedestrian aspect of the Budget. This is, after all, a government of three parties facing an election in a few short months. Each therefore needs to be able claim some achievements in the budget as its own. For New Zealand First, the already announced rescue package for the racing sector, and the big increase in New Zealand assistance to the Pacific stand out. The Greens are laying claim to the billion dollar “Jobs for Nature” package. Labour will no doubt focus on the wage subsidy extension and the commitment to building 8,000 homes as part of its public housing programme. With each party having its own audiences to appeal to, it makes the task of presenting an overall coherent Budget theme that much more difficult.

The Minister of Finance faced a uniquely difficult balancing act in bringing this Budget together. Typically, the budget process begins around the end of the previous year and comes to fruition in late March to early April, just after the time the Covid19 crisis hit here. So, rather than finalising a generous election year Budget at that time, as had been widely expected, the Minister and his officials virtually had to go back to scratch and start almost all over once again. He has therefore done extraordinarily well in bringing such a full Budget together in just a few weeks.

In these circumstances, his lack of boldness for the future is understandable. At first glance, his critics on both the left and the right seem disappointed by various aspects of the Budget, for different reasons. The Minister may therefore be tempted to conclude he has got it “about right.” The team of five million – the ones who made the real sacrifices of recent weeks – may well agree, at least in the short term. But as things get worse before they start to get better the question will be asked whether this essentially conservative Budget has done enough to secure the country’s longer-term future.

   

New Zealand has been on a remarkable roller coaster ride over the last couple of months as it has first confronted and now flattened the Covid-19 curve. But now, as the ride is starting to perhaps become a little smoother, some cracks in the basic machinery that require immediate attention, are becoming somewhat obvious. The haste to achieve perfection, while understandable, has seen some corners cut to the detriment of our democracy.

The restoration last week of a functioning Parliament after weeks of unnecessary suspension has been welcome and positive. However, one of its first actions was simply embarrassing. In the rush to be seen to be doing something positive for the struggling small to medium business sector, squashed up against the wall by the closedowns brought on by the Covid-19 lockdown, the Minister of Revenue introduced a Bill to provide tax relief to the sector. Because it was acknowledged that the sector’s needs were extremely pressing, the government decided to rush the Bill through all its stages in one afternoon, rather than follow the normal process that could take up to six months. That of itself was neither unusual nor irregular – Parliament does have the authority to act swiftly in situations where it considers an urgent response is necessary.

What was unusual was that the Minister introduced – and Parliament passed – the wrong Bill, accidentally bringing into law a multi-billion-dollar loan scheme, and only one MP seemed to realise what was going on. He was ridiculed at the time but was subsequently proven absolutely correct. While such an incident does not show Parliament at its best, the primary responsibility for this error rests with the Minister of Revenue. He has shamefully and weakly tried to shift the blame to the Parliamentary Counsel’s Office for providing the wrong Bill, but there is no escaping his direct responsibility for not having checked before he got up to speak in the House that he was actually introducing the Bill he meant to. The good intention of moving swiftly to aid struggling businesses was completely undone by Ministerial shoddiness and basic incompetence. Now, the whole process will have to be gone through again, and the hope must be that the Minister might take the time to check he has the right Bill this time.

Then came the leaked emails revealing that the Police held major concerns whether they had the legal authority to enforce aspects of the lockdown, given that the Solicitor-General in official advice, which the Attorney-General has steadfastly and wrongly refused to release, had apparently suggested there was no legal basis on which the Police could stop, let alone detain, people under the lockdown. Added to this have been questions about whether the Director-General of Health, who has been exercising sweeping powers during the lockdown, has been going beyond the somewhat narrower brief envisaged by the Health Act 1956.  At the same time, the Court of Appeal has hinted at concerns about the legal process adopted to impose the lockdown. In dismissing an appeal in a specific case, the Court said that it had nevertheless raised wider issues that could be the subject of a separate, possibly urgent, hearing. The President of the Court of Appeal observed in a reference to various arguments being raised by legal academics about the legality of the lockdown that there extraordinarily complex questions needing answers. He further observed that a report of Parliament's regulations review committee looking at government powers in emergencies was “hardly approving".

Early this week the government announced that Covid-19 recovery related legislation would not require a Regulatory Impact Analysis. Most people would have been none the wiser about what a Regulatory Impact Analysis is, and why the suspension of the requirement should be of concern, so the announcement raised virtually no interest.

However, Regulatory Impact Analyses are an important check on the way the Cabinet does its business. Their significance is set out clearly in the Cabinet Manual – the primary authority on the conduct of Cabinet government in New Zealand. It makes it clear that a Regulatory Impact Analysis must be undertaken for “any policy initiative that includes consideration of regulatory options (that is options that will ultimately require creating, amending or repealing Acts or disallowable instruments).” All such proposals going before Cabinet require such an analysis to “ensure that Cabinet has the best available information on the nature and extent of a policy problem, policy options, and risks and impacts.” The analysis is usually made public when a Bill is introduced to Parliament.

Regulatory Impact Analyses are intended to warn governments against actions that are impractical, unworkable or otherwise unnecessary, and alert the public to the risks involved. They have probably never been more necessary than they will be in putting together the post Covid-19 economic recovery package, yet they are being abandoned. It smacks very much of a government that now seems less interested in the “facts” and proper accountability for its decisions, than being seen to be “doing something”. When governments assume that they know best, and that the law and convention can be pushed aside if they conflict with their plans, the public has every reason to become concerned.

During the Covid-19 situation to date the government has won plaudits for being clear and decisive in its actions. People have felt included in the process, and that, plus a still huge sense of community fear about Covid-19, has secured their compliance. That is good and we should all be proud of the sacrifices we have individually made. However, none of that justifies treating due process, and sticking to the law, as just some sort of optional extra that can be picked up and discarded as it suits, as now seems to be the case. 

This is the time for the government and its authorities to be seen to be acting in absolute accord with the law, not doing their best to get around it when it does not suit them. After all, this is the government that promised to be the “most open and transparent ever.”