Brian Easton examines the Coalition Government's 'muddle on' strategy

This is a re-post of an article originally published on pundit.co.nz. It is here with permission.

What does Budget 2024 tell us about the current government? Muddle on?

Coalition governments are not new. About 50 percent of the time since the first MMP election, there has been a minority government, usually with allied parties holding ministerial portfolios outside cabinets. For 10 percent of the time there was a majority government and for the remaining 40 percent it has been a coalition government. Even a coalition of three parties is not entirely new. The last term of the Clark-Cullen Government involved three – even four – parties although there were only two in the cabinet with the others holding portfolios outside.

Even so, the Luxon-led one of three parties in the same cabinet is unusual (although every government is unusual). It involves three parties, two of which – ACT and NZF – are strongly ideologically opposed. Winston Peters, from the centre-right of the National Party has explicitly said he wants to stop neoliberalism; David Seymour, on the Party’s extreme neoliberal right, has been only a little more diplomatic about NZF.

Others will write of the resulting political tensions, but as someone who writes about the government’s economic and other policies, I have to take into consideration ideological positions.

While the differences are evident in the way the parties are handling their individual portfolio, the annual budget is a whole-of-government operation which has practical consequences and is not just ethereal aspirations.

So I was hoping that Budget 2024 might shed some light on the political tensions between the wing parties and also those within the National caucus, which contains economics predilections of both the centre right and the neoliberal kind.

To my surprise, the tensions were not that evident in budget. Both ACT and NZF had big expenditure outlays and both seem to have agreed on the government spending cuts but preferably not in the portfolios they hold (although who knows what one day may be leaked to the parliamentary gossips). Both supported mild tax cuts – and some tax hikes – and an increase in government borrowing. Neither seem to have vetoed the other’s ambitions (ACT did want a different tax regime from National’s, but the Minister of Finance pointed out the proposal was impractical given the budget financing constraints.)

There are economic policy commonalities. All three parties are committed to spending big on law and order. The impression is they are all less committed to environmental protection and addressing climate change. (I don’t think they are predominately deniers; climate change mitigation is just low among their priorities.)

They are also agreed on ‘mainstreaming’ policy towards Māori socio-economic disability. To summarise, they are not denying there are serious health and poverty problems among many Māori. But they recognise there is similar distress among non-Māori and there are, numerically but not proportionally, more non-Māori suffering it. (A caveat is that the Pasifika proportions are similar to Māori ones.)

Mainstreaming targets all the distress irrespective of ethnicity rather than prioritising Māori and paying less attention to non-Māori. It is a strategy which deserves exploring but that requires more space than is available in this column.

I do not know where these inequality and poverty issues rank in the Coalition priority list. One journalist flummoxed the poverty issue during the budget lockdown by pointing out to the Minister of Finance that the (rather thin) child poverty report predicted there would be no reductions in child poverty in the next few years. (We are drifting further and further away from the targets set in the aspirational 2018 Child Poverty Reduction Act.) The Minister replied that the budget was increasing the incomes of families further up the distribution. The journalist – perhaps because he did not know enough – did not follow up with the obvious point that if incomes were rising in the middle but not at the bottom then inequality was increasing. Was that the government’s intentions? We have no idea how the Minister might have responded. Perhaps she would have smilingly flannelled.

We are left wondering what the Coalition Government’s strategy towards inequality will be. Neoliberal thinking does not focus on it. The centre-right gives it some significance – hence the interest in social investment (that is another column too). Inequality did not figure strongly in the Key-English Government’s thinking, although it did give additional support to families. However, by indexing social security benefits to prices and not to wages or general incomes – a policy which has just been reinstated – income inequality grew a little during its time. My guess is that this government will be much the same; certainly, it will pursue the reduction of child poverty even less vigorously than the Ardern-Hipkins Government did.

The big difference between the economic stances of the two flank parties is illustrated by the $1.2b set aside over three years for Shane Jones’s Regional Infrastructure Fund, while David Seymour has $47m over four years for his Ministry of Regulation. (In contrast, National got $5m for one year to establish a National Infrastructure Agency.)

Each was a part of a coalition agreement but they reflect quite different visions of how to run the economy. The NZF initiative comes from the highly interventionist approach which dominated economic policy in the first four decades after the Second World War. The ACT approach is an extension of the anti-interventionist approach which Roger Douglas and Ruth Richardson instigated and which has dominated economic policy in a milder form since.

I am not sure how the two approaches will be reconciled and I suspect that neither Chris Luxon nor Nicola Willis know either. Seymour will not have a lot of firepower against Jones until he has an operational ministry advising him. Perhaps the first great political conflict will be resolving the detailed powers in the Fast Track Approvals Bill, which currently gives considerable power to ministers in the great interventionist policy tradition.

Deeper, there may be a commonality in that both parties are prioritising GDP growth and profit (which is a signal for it) over wellbeing and sustainability. (This is a pro-business coalition.) Whether that reflects the majority of the public I cannot say, nor whether the strategy will be successful in the long run.

In the short run we are seeing the Coalition Government announcing much new policy as on-the-hoof response to political pressures and its mistakes. It is a muddle-on strategy, isn’t it? Much like Budget 2024. Promises were made in opposition. Some were quickly implemented in the first hundred days, not always mindful of the long-term implications. Those implications are beginning to shape the Coalition Government, rather than it leading the shaping.

*Brian Easton, an independent scholar, is an economist, social statistician, public policy analyst and historian. He was the Listener economic columnist from 1978 to 2014. This is a re-post of an article originally published on pundit.co.nz. It is here with permission.