Back in business: On the New Zealand election result 

New Zealand cannot afford to jettison welfarism while setting right the economy 

Updated - October 18, 2023 09:44 am IST

Published - October 18, 2023 12:11 am IST

After Saturday’s national election, New Zealand is poised to get its most right-wing government in years with the conservative National Party and its libertarian ally ACT winning most of the votes and the Labour Party of Prime Minister Chris Hipkins seeing a major erosion of its popular support. With most votes counted, National’s vote share went up to 39% from 26% in 2020, while Labour’s share collapsed from 50% to 27% in the same period. The Green Party, a Labour ally, won 11% of the votes and ACT secured 9%. Labour’s fall was particularly significant as under the leadership of the charismatic Jacinda Ardern, it had swept the national elections three years earlier. Ever since New Zealand moved to the proportional representation system in 1993, 2020 was the only time a single party got an absolute majority. Ms. Ardern’s leadership was widely praised, especially during her handling of the COVID-19 crisis (New Zealand saw one of the lowest per capita death rates). She was also seen as an icon of liberal politics, and Labour promised to tackle child poverty, climate crisis, and narrow inequality. But she stepped down in January this year citing burnout. By that time, her popularity had also tanked, with many increasingly frustrated over the country’s economy.

Mr. Hipkins campaigned on Labour’s achievements including the tackling of the pandemic and child poverty and promised to continue its broader agenda aimed at “helping the working people”. But the Opposition’s criticism that Labour had failed to bring in the “transformational change” it had promised, after six years of power, seems to have hurt the party. Its stringent COVID-19 lockdowns and border controls also contributed to the economic woes. There was a brief recession this year and the country is still reeling under high inflation and high interest rates. National Party leader Christopher Luxon, a former airline executive, focused his campaign on the economy, and promised to cut interest rates and government spending. Voters, driven by concerns about the economy, punished the party which they had voted for overwhelmingly three years ago, and turned towards Mr. Luxon. He will assume power at a critical time for New Zealand. While any radical change in foreign policy (which is leaned towards the U.S. without irking China) is unlikely, at home, Mr. Luxon is likely to move the government away from Labour’s welfarism. He has to address the cost of living crisis and bring the economy back to its growth trajectory. But he should also be mindful of structural issues such as homelessness, child poverty and inequality that have plagued New Zealand’s economy for decades. He has to balance his pro-business policies with incremental redistribution.

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