National Party leader Christopher Luxon was sworn in as Prime Minister on Monday morning, starting the clock on the first 100 days of his coalition government.
Labour leader Chris Hipkins formally resigned earlier, clearing the path for the new government to take over and begin delivering on its campaign promises.
Once sworn in, Luxon and the Governor-General together appointed 27 other Ministers and two Parliamentary Under-Secretaries from across the National, Act and NZ First parties.
Each support party has secured three Ministers inside Cabinet, as well as some more junior roles, which has inflated the size of the executive council slightly.
Luxon will hold Cabinet meetings on Tuesday and Wednesday to agree to National’s 100 day plan with some modifications due to coalition agreements.
He said the top priority for the incoming Government was to “fix the economy” in an effort to slow the rate of inflation and bring down the cost of living.
“That does mean a series of things, making sure we are generating savings out of the public service and that government spending is prudent. But equally, doing things like making sure we get the Reserve Bank focused on a single target,” he told reporters.
National’s 100 day plan includes introducing legislation to remove supporting maximum sustainable employment from the Reserve Bank’s monetary policy mandate, leaving just its inflation target.
This was also included in the coalition agreement with the Act Party, alongside a promise to seek advice on three other policy adjustments.
The Reserve Bank is currently tasked with keeping inflation between 1% and 3% in the “medium term”, but the new government will seek advice on giving it a more specific time target.
It will also get advice on removing the Treasury observer from the Monetary Policy Committee and even returning to an old model where the bank’s Governor was the sole decision maker.
Stephen Toplis, head of research at BNZ, said employment and inflation were “inextricably linked” and removing the dual mandate would make “very little difference” to policy.
Toplis said BNZ’s research team had mixed feelings about giving the central bank a specific timeframe to achieve the inflation target. A short time limit might result in an unwelcome increase in volatility, and a long time limit would be no different from the status quo.
“We should repeat our strong view that inflation targeting is crucial but so too is flexibility. In that regard we are strong believers in being able to use the full width of the target band," Toplis said.
Other economic policies proposed in the 100 day plan mostly include overturning Labour-era policies.
These include the Auckland regional fuel tax, the Clean Car Discount, repealing the Fair Pay Agreement legislation, and restoring 90-day trial periods for big businesses.
National also intends to push through public spending cuts during this time. Public sector chief executives will be told to slash contractor spending and reduce their budgets by 6.5%.
Act’s coalition agreement co-signed this last agenda item but suggested it could go further with a reference to the increase in staff numbers since 2017.
The coalition agreements require both Act and NZ First to support National’s pledge card, fiscal plan, tax plan, 100 day plan, and its 100 point economic plan — with some exemptions.
For example, the taxpayers receipt will not go ahead and councils wanting to use the medium density residential standards will be required to hold a vote. Both are Act Party adjustments.
NZ First put the kibosh on allowing foreign buyers back in the housing market as a way to fund income tax cuts.
Tax cuts are not included in the 100-day plan and would likely be introduced as part of the May budget next year and come into effect in July.
The coalition agreements, while endorsing National’s 100 day plan, also require the government to form a “jointly agreed 100 day plan” based on all three parties' priorities.
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