Tax has often been an issue in New Zealand elections, but seldom the dominating one. Political parties tend to keep their plans quiet at election time and only announce them once they are in office. Neither Labour’s introduction of GST and halving of the top tax rate in 1986 were contained in the party’s 1984 election policy, nor was National’s 2010 tax switch and GST increase foreshadowed in its 2008 manifesto.

Indeed, the last election campaign where tax was the dominant issue was probably in 1957. That year, with the introduction of PAYE income tax from April 1958, the National government promised taxpayers remission of one year’s tax and a personal rebate of 25% of income, as compensation for the change. That rebate would have amounted on average to about $5,570 in today’s dollars. Labour countered with a flat rebate of £100 (equivalent to just over $6,100 today) plus the one year’s remission of income tax. In its last pre-election advertisement, Labour simply asked voters “Do you want £100 or not?”. It narrowly won the election but when the “Black Budget” followed in 1958 and increased taxes, Labour was doomed. It lost office in 1960 and did not return to government for twelve years.

Tax looks set to have a central position in this year’s campaign. Labour’s pledge to remove GST from fresh fruit and vegetables (estimated to benefit households by up to $5 a week) and improved Working for Families tax credits, has been countered by National’s plan to boost the income of an average family by up to $250 a fortnight through a combination of direct tax rate adjustments and childcare and Working for Families tax credits.

Labour’s programme is estimated to cost around $2 billion over four years from 2024 – National’s package will cost $14.6 billion over the same period. Labour’s package will be substantially funded by removing tax deductibility for depreciation on commercial buildings (which it had only recently re-introduced). National’s will be funded by a combination of government spending reductions (“reprioritisations” in its language) and four new revenue measures, bringing in altogether around $3.1 billion a year in additional revenue.

Until now, Labour has been claiming National favoured “tax cuts for millionaires” but National’s tax package shows that is not the case. Both parties are aiming their policies at what National has been calling the “squeezed middle”. Given that National’s package looks considerably more generous than Labour’s, the focus will likely shift to National’s costings and how credible they are. Labour will recall with relish the $10 billion hole in National’s 2020 fiscal plan and will be looking to find likewise again. It will find it harder, though, to criticise National’s planned $1.5 billion annual spending cuts, given its own announcement earlier this week of $4 billion in spending cuts, on top of the $4 billion already announced in this year’s Budget.

The focus will therefore shift to National’s proposed new revenue measures. Like Labour, National is planning to remove tax deductibility for depreciation on commercial buildings. National’s plan to move to user-pays immigration levies will probably not arouse too much attention. However, its foreign buyer tax and online gambling services tax may prove more controversial, not so much for the policy intent, but more for their practicality. Both new taxes should be popular with “squeezed middle” voters, concerned about foreign buyers of real estate and the impact of online gambling services.

National is budgeting to get just on $750 million a year from its new 15% foreign buyer tax on homes worth over $2 million. It will be hoping that foreign investors, shut out of the market because of Labour’s ban on house sales to non-residents, will now be attracted back to New Zealand in sufficient numbers to realise its revenue goal. But reaching that revenue goal every year is likely to be a mighty challenge, and reliant on many factors beyond the government’s direct control. With the online gambling services tax National is taking a punt that offshore companies operating these services will not feel sufficiently adversely affected by the new tax to withdraw altogether from the New Zealand market.

Nevertheless, there is a certain cleverness about these two measures. Labour will try to criticise the foreign buyer tax as opening the New Zealand market once more to non-resident wealthy foreign buyers at the expense of New Zealanders, but the $2 million threshold before the tax applies is unlikely to have much effect on the “squeezed middle’s” end of the market. And for wider social policy reasons, Labour will be pressed to criticise the online gambling services tax. The test for National with both these new measures will therefore be whether their revenue estimates stack up. Having made the commitments, National’s ongoing credibility will suffer if it cannot pay for them beyond year one.

In 2014, Sir John Key destroyed Labour’s campaign with his “Where’s the money coming from, Phil?” question to Labour leader Phil Goff during a televised debate, which Goff could not answer. National hopes to have avoided that spectre by setting out its plans to fund its tax cuts programme. Its challenge now is to persuade voters that not only are they workable, but, more importantly, that they are affordable.

Unlike the crudity of the 1957 tax election campaign, which essentially came down to which party could bribe voters best, this year’s campaign looks like a more sophisticated game of chess. Each side is primarily trying to trap the other, rather than promote good policy. The merits of various proposals will therefore run secondary to the mechanisms by which they will be implemented. That will leave it up to voters to scythe their way through the rhetoric and the political mind games to decide whose policy suits them best and is the more credible.

The party that wins that argument will likely lead the next government.

 

The Prime Minister was right when he said lifting the remaining Covid19 restrictions earlier this was week was an anticlimax. Most New Zealanders had, like the rest of the world, been treating Covid19 as “just another illness” for a long time. They had largely been ignoring the self-isolation requirements that had remained in place here ten months longer than in Australia.

 

So, the removal of the last restrictions, and the accompanying predictable chorus of woe from the band of zealots that had so enjoyed ruling the media roost during the pandemic, was more a reminder of the worst of national times than a cause for celebration. 

 

What was particularly galling though was the way the Prime Minister tried to brush off the tough times so many New Zealanders had endured over the last three and a half years. As Covid19 Minister he was the one who presided over the concentration camp system that MIQ became. He was the one that kept families divided, unable to be with dying loved ones or attend family funerals. He was the Minister who suggested that Aucklanders might require permits and have designated times to leave town for their summer holidays at the end of the long 2021 Auckland lockdown. And who will ever forget his shameful treatment of mothers-to-be like journalist Charlotte Bellis, to whom he was obliged to subsequently publicly apologise, when she wanted to return home to have her baby? 

 

It was therefore little wonder that in the lead-up to the election he was keen to banish any lasting memories of Covid19 and his role in managing it. Whereas Dame Jacinda Ardern rode a wave of public support for her handling of the early stages of the Covid19 response to a landslide election victory in 2020, Chris Hipkins knew full well there be no such wave for him. The last thing he wants is to be reminded of his Covid19 actions during what is already shaping up to be Labour's most difficult election since 2008.

 

A recent report from the international media and software giant Bloomberg on international lessons to be learned from the pandemic rated New Zealand’s response the best because the number of deaths recorded here was marginally lower than what might have been normally expected during a similar period. It attributes this performance to a combination of our geographic isolation, border closures, and lockdowns, alongside clear, consistent leadership, at least in the early stages of the response.

 

However, it also points out that the “severe lockdown” came at a cost. It noted the high cost of border closures on the tourism sector which accounts for “about 19% of the country’s export revenues, far higher than the 7.9% or so in France and Italy and 9.5% in the US.” Keeping the economy afloat in such circumstances “meant that government debt increased faster than in almost any other developed economy, rising 43% in local-currency terms compared to a 15% jump in the UK and 5.4% in Japan”.

According to Bloomberg, the pandemic has “left harmful after-effects”. Between March 2021 and October 2022, it reported there was a sharp rise in emigration with emigrants outnumbering immigrants by 215,571, equivalent to about 7.5% of the country’s labour force. That has contributed to rising inflation and the cost-of-living crisis New Zealand households are now experiencing.

Bloomberg’s overall conclusion about New Zealand goes to the heart of Hipkins’ current dilemma about how to deal with the ongoing consequences of the pandemic. It says, “New Zealand made its isolation from the world the cornerstone of its success against Covid. It may end up its Achilles’ heel as well”.

However, there are signs New Zealanders are embracing a more normal way of life again and quickly re-engaging with the rest of world once more. Travel companies report significant increases in the numbers of people travelling abroad over the last year. On the domestic front, the success of the recent FIFA Women’s World Cup shows that New Zealand is once more open to the world, and ready to welcome tourists. These indications confirm that most people have moved on from the pandemic and are now far more preoccupied with current circumstances and how they cope with those, than recalling the dark days that caused them.

But this feeling may not last. It was the same at the end of World War II, the last great international disruption before the Covid19 pandemic. Initial public euphoria gave way over the following few years to public impatience at the slow rate of progress toward economic and social recovery. By 1950, incumbent governments in Britain, Australia, and New Zealand had been voted out as a result.

Hipkins knows that the pandemic and Labour’s handling of it is no longer the election winner it was in 2020. Rather than invoking it at every opportunity as was the case then, Labour today barely mentions it. Getting rid of the last Covid19 restrictions this week was therefore about consigning the pandemic to the past, so Labour can focus unencumbered on the future as the election nears, without the reminders of the dark years.

But whether all those whose lives and businesses were disrupted or ruined by MIQ, the lockdowns, and border closures regard this week’s decision as just an anticlimax as the Prime Minister does, remains to be seen. Their answer may come on election day.

 

From this coming weekend election billboards will be going up all over the country as candidates and parties seek to promote themselves and their messages to voters in the lead-up to the General Election on October 14. Early voting will begin on October 2 and, if the trends of the previous two elections are maintained, most people will cast their votes before election day.

In 2020, almost 68% of votes were cast before election day, up considerably from the 47% cast early in 2017. The 2020 early turnout figure may have been influenced by people voting early to avoid being caught in queues on election day because of the lingering fear of exposure to Covid19, but the trend is undeniable. By election day this year most voters will have already voted.

This new pattern of voting has significant implications for the political parties and their campaigns. Their campaigns will effectively be over by the start of October, now less than eight weeks away. Parliament will likely finish sitting on August 31 and will be formally dissolved by the Governor-General on September 8, with the formal writs for the election issued on September 10. From then, there will be just on three weeks until the commencement of early voting.

Most parties have been moving steadily into campaign mode for some months now, and this will intensify as the formal campaign period begins in September after Parliament has been dissolved. By then, most of the parties will have released their major policies, with perhaps only one or two surprises left for the September campaign period. Also, during September, there will be the nightly advertising on television by the political parties, and the televised debates between the major party leaders and other key party spokespeople.

A potential complication this year is the Rugby World Cup. This is not the first time a Rugby World Cup competition has occurred in a New Zealand election year – the 1987, 1999 and 2011 World Cups all took place in election year. But unlike those years, where the Cup finals had taken place well before the election, this year’s competition coincides with the election campaign, with New Zealand’s opening match against France taking place on September 8. The quarterfinals in which New Zealand should feature begin on the weekend of the General Election.

The extent to which the Rugby World Cup might have an impact on the General Election is unclear. Conventional wisdom holds that if the All Blacks are doing well that will be of assistance to the government of the day. In that regard it is notable that in 1987 and 2011 when the All Blacks won the World Cup, the government of the day was returned at the election a month or so later, but when they lost in the semifinals in 1999 the government also lost the election a few weeks later. This year, however, the election will be over before the Rugby World final, so the results are less likely to be of impact. The more likely impact will be during the campaign period itself, and on the level of public interest in what the parties are saying then.

For that reason, alongside the impact of early voting, the next few weeks will be the most intense of the campaign cycle. One significant event will be the release of the Pre-election Economic and Fiscal Update on September 12. This will be the final official announcement on the state of the government’s books and will shape the economic debate between the parties for the balance of the election campaign. Labour’s long awaited tax policy and National’s alternative should also be released by then, giving voters plenty of information to digest before making their voting decision. Also, National’s party list – the only major party list not to be released so far – will need to be finalised and released prior to the deadline of September 14.

Former All Black captain Richie McCaw apparently told the All Blacks’ World Cup team when they assembled this week that the one thing to expect during a World Cup was the unexpected. The same holds true for election campaigns. The 2002 campaign was rocked by the Corngate scandal; in 2005 there were the revelations about the Exclusive Brethren and the National Party; and in 2008 there was the Global Economic Crisis. The 2014 campaign featured the Moment of Truth with Kim Dotcom, and the lead-up to the 2017 campaign saw the unexpected arrival of Jacindamania. It remains to be seen whether there will be a surprise distraction that emerges during the coming campaign.

Once the election is over, the writs for the election issued in September must be returned to the Clerk of the House of Representatives by November 9. Then, the Governor-General issues a proclamation summoning the new Parliament – New Zealand’s 54^th – to meet within six weeks, and so, the whole electoral cycle starts all over again.

 

 

Seasoned politicians and political observers follow the opinion poll ratings of the various parties in a way others might consider obsessive. But they never get too hung up on any specific poll result, focusing instead on the trend of a series of polls over time upon which to base their assessments. 

 

Even then, the poring over the entrails of the various parties' poll ratings runs secondary to the attention they pay to one other important poll figure. The "is the country on the right or wrong track" question is considered to be the far more accurate reflection of the real political mood of the country, and therefore the best guide to the likely outcome of the next election.

 

For example, a Roy Morgan poll taken a few weeks before Labour’s landslide election victory in October 2020 recorded 71% of respondents feeling the country was heading in the right direction, with less than 20% considering it was moving in the wrong direction. By contrast, a similar poll earlier this week showed just 29% of respondents now believe the country is on the right track, with 61% considering New Zealand was moving in the wrong direction.

 

Successive Roy Morgan polls have shown the right track/wrong track indicator turned negative in early 2022, about the same time all the major polls started recording National polling ahead of Labour for the first time since early 2020, before the arrival of the pandemic and the subsequent “Covid” election. These results also parallel Roy Morgan’s consumer confidence polls which have shown consumer confidence has been negative since early 2022.

 

Although individual party rankings have bounced around a little in the same period, the underlying trend is undeniable. The electorate’s disposition has been largely negative for about twenty months now, and that trend is strengthening. In such circumstances, any government faces immense difficulties in restoring public confidence that it can turn things around.

 

Right now, as the opinion polls show the election horse race between the various parties moving inexorably in favour of the centre-right bloc, the major parties’ responses to the long-term confidence trends are similarly intensifying. Labour understands, if it does not appreciate, these current feelings of uncertainty and declining confidence, and so is trying to structure its campaign around reassuring voters that it is best equipped to lead them through during these trying times.

 

It will therefore focus on the positive, although declining, approval ratings of the Prime Minister, in direct contrast to the far less positive responses to National’s leader. Labour will try to buttress this with some bold new policy announcements, like last week’s leak that GST will be removed from fresh fruit and vegetables. In that respect, its recently revealed “In it for You” slogan captures neatly the party’s message that here is the government, and the Prime Minister in particular, with their sleeves rolled up, just getting on with the job of responding pragmatically to the “bread and butter” issues worrying New Zealand households today. It is a simple and straightforward strategy, with an implicit defiance of its critics reminiscent of Jim Bolger’s infamous “Bugger the polls” comment so many years ago.

 

Whether it will work, given the seemingly now entrenched view that New Zealand has been moving in the wrong direction under Labour for some time now is a highly contestable point. But it is the only card it has left to play. In doing so, it will need to be mindful of cynicism that these yet unannounced policies are simply being rolled out now because the election situation looks dire, when they could have been introduced at any point during the last six years Labour has been in power.

 

National also understands the importance of the right track/wrong track sentiment. As the Opposition, it knows it has little influence on current policy direction. But it also knows it is extremely difficult for incumbent governments to win re-election when a substantial number of voters thinks the country is heading in the wrong direction. So, its focus is more on reinforcing current negative voter sentiment, rather than wooing them with bold new policies. Hence its slogan to “Get New Zealand back on track”. Where specific new policies have been released, such as the roading announcements of recent weeks, they have harkened back to the direction of the previous National-led government, when a majority of voters felt the country was moving in the right direction. It is likely any further policy announcements will be similarly strategically designed.

 

Even New Zealand First appears to understand the significance of the right track/wrong track question, promising to “Take our country back”, although the “back” it envisages is a time most New Zealanders are not old enough to remember. In any case, it conveniently overlooks that it was part of the government whose actions led to the current level of wrong track sentiment.

 

In this environment, there is consequently plenty of scope for potential support parties likely to be in the next Parliament such as ACT, the Greens and Te Pati Maori to be bolder in their policy offerings, as they have been. They can afford to do so, knowing that while their more outlandish pledges will appeal to their core supporters they will never be implemented fully by either of the major parties, so they will be free to campaign on them again at the 2026 election.

 

The election is likely come down to the country’s future direction. Therefore, the outcome is more likely to reflect the negative sentiment of the last couple of years, rather than any positive reaction to bold, new policies unveiled in the last minute heat of an election campaign.