By Terry McFadgen*
The Royal Commissioners who recommended that we adopt an MMP voting system nearly 40 years ago were inspired by a belief it would bring a wider range of opinions and personalities into Parliament, break the stranglehold that the two major parties held over policy, and help bring the country together.
What they did not foresee was that with the growth of populist politics, MMP would achieve very few of these goals as considerable policy influence was transferred to parties who could parlay very few votes into significant policy victories in coalition deals.
What they also failed to foresee was that MMP would encourage a more extremist stance from both main parties as they were forced to move further towards the extremities in order to shore up their centrist voter bases.
Labour’s alliance with Te Pati Māori and the Greens on co-governance, the He Puapua initiatives, and on oil and gas exploration, and the National Party’s policy concessions to ACT on tax, the Treaty, and “regulatory overload” are examples.
New Zealand is by no means alone in experiencing these forces. Consider the way Trump has dragged a somewhat reluctant Republican party to the right, or how the ERG group within the UK Tory party has forced Rishi Sunak to promote the sending of asylum seekers to Rwanda.
These moves away from the centre also impose high economic costs on the community as electorates whiplash between governments that have few key policies in common.
Consider the costs involved in our recent change of government. The new coalition has abandoned Three Waters, Auckland Light Rail, Get Wellington Moving, the purchase of new Cook Strait Ferries, and the reorganisation of Te Pukenga which was in progress. It has also disestablished the Māori Health Authority and the Productivity Commission, and abandoned health system centralisation.
Several minor ministries have been disestablished- others have been required to effect name changes and make significant reductions in personnel. And a new “Ministry for Regulation” has been created.
On a quick back of the envelope calculation, these costs total between $500m and $750m, depending on how some contractual issues are resolved.
This cost is enormous in the context of a current fiscal deficit that needs to be reduced by around $4-5b per annum to meet international good practice.
But the problems go way beyond short term transitions costs.
As readers will be aware, New Zealand faces some severe economic and social challenges.
We have house prices which exclude half the population from home ownership and an unsustainable external deficit of about $25b per annum which requires a big reduction in domestic demand, and a major increase in export earnings, to achieve better balance.
And then we have school absentee rates which guarantee a cohort of unemployable youngsters in the emerging era of advanced robotics and AI, an infrastructure deficit approaching $150b, some of which needs urgent funding, and the loss every year of roughly 20,000 of our most ambitious citizens to the country next door offering 30% higher wages.
To these core problems we now face additional funding demands from local bodies for water and land development, and additional funding requirements for health and defence.
Under a worst case scenario, New Zealand faces a severe devaluation to correct its external deficit, continuing high interest rates reflecting a deteriorating credit position, and a lot of social dissension over housing.
Whilst all of these issues can be resolved with effort, none can be resolved in a single three-year electoral term. The solutions require persistent effort over much longer periods, applying consistent policies. Look at Singapore to see what this can achieve.
What we badly need is a national consensus on key economic policies.
A new national consensus might include these elements:
Immigration- We need a consistent immigration policy to provide a stable platform for infrastructure planning and residential land release. The country also needs to have a conversation about the dangers to social cohesion of loose immigration policies. A target of around 40,000 new immigrants per annum feels right.
Housing- a cross-party housing policy would commit to providing affordable housing for the entire population based on significantly lower real house prices than we are seeing today. Ideally this would be achieved by having flat nominal prices coupled with modest inflation for a lengthy period.
Tax- Labour’s 2019 Tax Working Group pulled together the best tax brains in the country to make recommendations on tax policy. Those recommendations stand today and call for a Capital Gains Tax. In addition, we need to consider the merits of a low-level land tax, applied at least to unoccupied residential land.
Savings- New Zealand’s household savings are inadequate and are largely responsible for a cost of equity penalty relative to Australia which drives the on-going loss of many of our businesses to Australian acquirers. Over time, we need to revamp KiwiSaver benefits to match those in Australia
Infrastructure- many of the delayed infrastructure projects that blight our communities would benefit from private sector participation in ownership. We should also not baulk at introducing additional government debt funding as needed. Credit agencies will not respond adversely to the right investments.
You can develop your own list-but the key question is not the precise content of a policy consensus, but whether a consensus is even possible given the potential for minority parties to undermine it through noisy dissent aimed at attracting fringe voters.
I say its unlikely because the mainstream parties will run a mile, scared of losing votes to the extremists.
New Zealand thus faces a cruel dilemma: The need for policy consensus is urgent given the challenges ahead, but the political framework for that consensus is absent. The public need to speak more loudly on this issue.
Until, as a nation, we can reclaim the middle ground New Zealand’s future will remain at risk of a very uncomfortable economic and social adjustment. As the old saying goes, unless we hang together, we will hang, together.
*Terry McFadgen was a founding partner of Simpson Grierson, and subsequently undertook management roles in Australia and New Zealand including roles as CEO of Fletcher Building and, in Australia, AV Jennings the house builder. He also acted as an external monetary adviser to the RBNZ.
20 Comments
We need a diverse range of people with various backgrounds in different areas to all come together with a sense of national pride and duty to the people who elected them and whom they represent. We need full accountability both past and present, transparency, and more involvement in local and central government by the voting public as opposed to letting someone else think for them without actually understanding who and what they are voting for.
We need people who understand realities - physics for starters.
That rules out all those who mention 'funding'.
Which rules out most of them.
(because 'funding' isn't the problem; resource allocation is, and funding was only resource allocation by proxy. Trouble was - and is - that those who think in 'funding' terms, miss the point that unlike debt, resources cannot be keystroked into existence).
Although misunderstood funding IS shorthand for resources....a simplistic but necessary shorthand.
What would be achieved if we had to explain physics every time we needed to make a decision?....physics was not the realm of many in my time in education and everyone can vote.
We must play the hand we are dealt as well as we can.
The current National party/govt is definitely middle ground and despite the coalition most of the policies and thinking are middle ground. It was the last lot who were not and were busy implementing policies that they did not have broad consensus or even a mandate for - hence the change over cost. And they certainly didnt explain the cost of what was being implemented
There has been a massive tax increase over the last 6 years with BA to show for it - hard to argue that further increases are necessary until service delivery improves for what is already handed over
There is no way that Nat is middle ground. I might classify them more accurately as being a lobby wet dream that doesn't care much about people's needs. What country on earth besides here focuses on building roads and putting more petrol products in use when every drop of petrol products is imported? Why are electric vehicles and rooftop wind and solar so disincentivized in a country who's best realizable resource is electric generation? We have massive electrical generation potential - but it is stymied by short sighted industry lobbies. What country has it's best and brightest emigrating en-masse? Labor aimed at the wrong targets, but Nat is steadfast in targeting short term greed from regressive lobbies.
"The Royal Commissioners who recommended that we adopt an MMP voting system nearly 40 years ago were inspired by a belief it would bring a wider range of opinions and personalities into Parliament, break the stranglehold that the two major parties held over policy, and help bring the country together."
The Royal Commission also recommended that the Maori seats be cancelled, there being no logical or democratic reason for their retention following the introduction of proportional representation.
They also recommended that there was no need to increase the number of mps either. But in what David Lange described as the most cynical motive he ever witnessed in parliament, the mps nominated the increase because they though it might help to defeat MMP on the premise that if the public don’t think much of us now they won’t want more of us then. Of course NZ’s parliament has always had its fair share of duds arrive in parliament but I would suggest that pro rata, these have increased markedly since MMP increased their numbers.
I fundamentally disagree with the premise of this article.
Two smaller parties NZF / ACT got about 20% of the vote. Those voters should be respected.
And 3% of voters supported TPM, those voters should be respected also.
I don't see his problem.
There are differing views, not everybody will get everything they want.
In reality it has taken all this time to arrive at a government in true MMP form. That is a larger party in coalition with two junior parties each of sizeable representation. MMP gained electorate approval mainly because folk were pretty disenchanted with the performances of the two main parties. Muldoon’s power crazy antics and the utter disintegration of the 4th Labour government. However NZ as an electorate was of insufficient size and maturity to do MMP justice and instead ended up voting in the same old parties as governments but with some hangers on. This strange feature is well illustrated in the 2020 election in which the mechanism of MMP was used to sideline the Green Party and in so doing, arrive at FPP result for Labour. In other words MMP was used to defeat the actual purpose of MMP.
In other words MMP was used to defeat the actual purpose of MMP.
That's an interesting premise I hadn't thought much about. So I think you are saying that traditionally conservative voters, voted liberal to keep the most liberal of parties out of government?
But, that doesn't take into account the turmoil of different leaders of National all in a short time leading up to the election, does it? I thought LAB got the first-ever MMP single-party majority, more because it simply looked a more stable executive - and so people voted for stability.
But, your premise is interesting. I wonder if anyone has studied that empirically? It was indeed a landslide of proportion never before seen under MMP.
I generally agree with the authors comments. MMP seems to give the extreme voters too much say in the running of the government. I guess that many of the smaller party MPs prior to MMP would have found a home with the main parties giving these two parties a more balance viewpoint. I think it would be easier to get consensus with two parties which is what the main issue is here.
There has been too much money wasted on projects that the NZ public had little input into.
Enlightened Capitalism works. This demands that reins and traces must be included to guide capitalism to power the nation forward. Nats have lost the fairness guideline to it's lobby. Labor has shown more interest in minority complaints than majority needs. What use is work if the benefits are not realizable as the rich tilt the table? What use is elite training if you must emigrate to realize your dreams? It's protected groups that have so unwisely tilted government to overtax every group other than themselves that is the heart of the problem. Why did the duopoly happen and nothing is done? Why are landowners so under taxed while workers pay for everything? Why has legislation created such an unhealthy imbalance favoring capital over work?
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