Protests and economic criticism cloud Coalition’s first anniversary as pressure mounts for it to deliver on campaign promises

The week leading up to the Coalition’s first birthday has been particularly challenging, with the largest protest in Parliamentary history and economic attacks from the left and right.

Polls published to-date have shown the three-party alliance retaining the support of voters but after a full year in office, is the public starting to blame them for New Zealand’s problems? 

Prime Minister Christopher Luxon and his cabinet were sworn into Government on November 27th last year, following almost 45 days of coalition talks. 

It has become clear the former business executive made a major error in those negotiations when allowing the Act Party to promote its Treaty Principles Bill throughout the term.

The bill is seen by many Māori as a beachhead for a broader backlash to their growing status in New Zealand’s political economy and they have rallied powerful resistance to it.

At least 42,000 people—but possibly more—marched on Parliament this week to show their support for the Treaty of Waitangi and general unhappiness with Crown–Māori relations.

Heat of a hīkoi 

Luxon has been painted as the most anti-Māori Prime Minister in modern history, despite entering politics with an intention to preserve the National Party’s strong track record.

His maiden speech bragged about work done at Air NZ to “champion and mainstream te reo and Tā Moko” as well as create career pathways for young Māori and Pasifika.

But former minister, Chris Finlayson told RNZ many in the National Party appeared to have lost touch with its “history and tradition” and were “more concerned about their careers”.

Matthew Hooton, a vociferous critic of the Prime Minister, wrote in a column that Luxon only agreed to the Treaty Principles Bill because he lacked an understanding of political history.

He needlessly conceded to the Act Party and signed himself up the “worst possible option” which enraged Māori while also “bitterly dividing his own party,” Hooton argued.

It is worth noting there’s not yet any evidence in the polls that this is hurting National. The most recent Taxpayers’ Union–Curia numbers showed it was winning support from Act.

David Seymour may have miscalculated his own supporters' appetite to fight a culture war with the economy in deep recession and household budgets under crushing pressure.

Councils should focus on the basics, the government says, while itself pursuing hopeless constitutional reform which stirs up a huge fight with a fifth of the population.

Seymour put out two press releases about regulation reform on the day of the hīkoi but I seriously doubt anyone read either of them, and he did not bring them up in Parliament.

What’s the plan?  

Which brings us to the other criticism whacking the government this week: economics. 

Voters almost always name the economy among their top issues and particularly when they are living through the worst recession since the Global Financial Crisis in 2008.

The election result was more a rebuke of inflation than anything else. Analysis by the Financial Times found incumbents lost support in every election held this year. 

Voters did not seem to care about the incumbents’ political ideology —some were liberal, others conservative—only that they oversaw a period of inflation and must be punished.

The Government’s overarching mission must be to get the economy “back on track” as promised. It is fortunate that inflation has fallen but other metrics have been darkening. 

Economists from across the political spectrum this week criticised the coalition’s policies, offering valid arguments on both sides, though neither was entirely fair.

Robert MacCulloch, a macroeconomics professor, said virtually no progress had been made on any of the key economic issues the government was supposed to be tackling. 

His list was long: Economic growth was stagnant, competition weak, tax system unreformed, regulations not slashed, social investment not started, plan for rising healthcare costs non-existent, fiscal deficit worsening, and the housing supply dwindling. 

MacCulloch’s conclusion was that Finance Minister Nicola Willis was a “steady-as-she-goes” policymaker who was unwilling to make the bold actions needed to solve problems.

Hooton echoed this in his own column, complaining the Prime Minister had not articulated an economic policy that could change the growth trajectory. 

“Luxon had nothing to offer but some modest yet unaffordable tax cuts and a belief his mere election might motivate an economic boom,” he wrote. 

This was a similar accusation made by a group of left-leaning economists who wrote to Willis and Luxon this week, begging them to rethink their plans to dramatically cut spending. 

Obsessively balancing the Crown accounts and reducing debt may be a sound fiscal policy, they argued, but it did nothing for the economic wellbeing of the country.

Spending reductions should be suspended and advice should be sought on an economic rationale for fiscal policy choices made in Budget 2025. 

The author of the letter suggested increased investment in infrastructure and core services would be a better approach, even if it meant taking on more debt and potentially raising taxes in the future.

Not everything is fiscal

As I said earlier, I think both these critiques don’t fully acknowledge the Government’s economic plan — which will take years to put in place and many more to have an impact. 

Willis has been in Antarctica throughout all this, but she would defend her fiscal policy as being a necessary first step to stabilising the economy and creating a solid platform on which to build future growth. 

She would likely agree that it was not, in and of itself, an economic growth strategy, and has said publicly she views austerity as a mistake she does not want to repeat.

When the Treasury warned it would downgrade future economic growth forecasts, associate finance minister Chris Bishop said the government would not be a “slave to a surplus” in any particular year.

This was to say it wants to avoid the austerity doom-loop and won’t cut spending in response to economic downgrades, just as it won't boost spending in response to upgrades.

Keeping spending constant eventually acts as a countercyclical policy by banking surpluses during good times and allowing deficits during downturns. 

Labour, when in Government, ran a pro-cyclical policy by increasing its spending when the economy boomed and then being forced to cut when it crashed. 

Willis has inherited that policy and has begun the process of making it predictable and countercyclical again, in a somewhat Keynesian tradition with National Party characteristics.

But stability alone is not an economic growth plan. Other cabinet ministers have largely been given the job of reinvigorating growth without the help of fiscal stimulus. 

The plan goes like this: build better public infrastructure, remove barriers to private developments, reduce regulations and compliance costs, attract foreign and domestic capital investment, and disrupt uncompetitive sectors (banks and supermarkets).

Eventually, this will hopefully encourage private business expansion and grow the economy.

As MacCulloch says, not a huge amount of progress has been made on these goals and the decision-makers may lack the confidence to make big, risky reforms.

But the coalition does have an economic plan—love or hate it—it just isn’t led by fiscal policy and will take a considerable amount of time to have an impact.

Next, the National Party will need a plan to rebuild Crown–Māori relations, having unnecessarily burned those bridges in the rush to form a coalition.