Friday 1 July 2011

National's Nightmare Scenario

The Stuff Of (National Party) Nightmares: The bloody red dawn of Bolshevism has haunted the dreams of conservative New Zealanders since 1917. The National Party was founded in 1936 to make sure it never happened here. Seventy-five years later the Nats are still frightening us with red-in-tooth-and-claw bogeymen. The Mana Party leader, Hone Harawira, has just become the latest personification of the Right's fear of revolution.

THE NATIONAL PARTY, Act, the Maori Party and Peter Dunne have a nightmare they’d like to sell you.

Let me summarise it for you.

It’s November 27th 2011. Less than twelve hours ago, the New Zealand electorate delivered up a result that has sent the New Zealand Dollar into free-fall.

Instead of returning Prime Minister John Key’s unprecedentedly popular National-led government to office – as all of the mainstream media’s pundits were confidently predicting  – the electorate has (surely unwittingly?) supplied Labour with all the necessary components for a left-wing coalition.

Though Labour polled just 32 percent of the Party Vote (12 percentage points fewer than National’s 44 percent) the leader of the Opposition, Phil Goff, has been gifted a set of allies who, between them, attracted 18 percent of the Party Vote.

Theoretically, Mr Goff can become Prime Minister.

His most “acceptable” ally, the Green Party, with 10 percent of the Party Vote, brings twelve MPs into the House of Representatives – its largest parliamentary contingent to date.

The veteran campaigner, Winston Peters, in spite of (or, perhaps, because of) the viciousness of the media campaign waged against him, has gleaned 5.2 percent of the Party Vote and is ready to return six NZ First MPs to the chamber.

But the man who has well and truly spooked the financial markets isn’t Mr Peters – it’s Hone Harawira.

On the receiving end of even more political vitriol than the NZ First leader, the leader of the newly-formed Mana Party has, nevertheless, not only held his Te Tai Tokerau seat, he’s led his party to a 3.5 percent share of the Party Vote, and five MPs.

Even worse, Mana’s Co-leader, Annette Sykes, has taken the Maori seat of Waiariki from the Maori Party’s Te Ururoa Flavell.

Indeed, the aggressive campaigning of Mana’s candidates in all seven of the Maori seats has allowed Labour’s candidates to come through the middle everywhere except Tariana Turia’s seat of Te Tai Hauauru.

Reduced to just a single MP, the Maori Party is no longer in a position to offer the National Party the numbers it needs to govern.

Between them, the Greens, NZ First and Mana hold 23 seats in the House of Representatives. When these are added to Labour’s 40 seats, Mr Goff finds himself (but only just!) in possession of the constitutionally required parliamentary majority. If he can secure an undertaking from the Greens, NZ First and Mana that they will vote with Labour on all confidence and supply motions, then the Governor-General will ask Mr Goff to form a government.

Overseas investors are stunned and confused. American and British observers simply cannot get their heads around the fact that, in spite of being 12 percentage points ahead of their nearest rival, Mr Key and his National Party have actually lost the New Zealand general election.

Further alarmed by the New Zealand media’s lurid descriptions of Labour’s “radical” allies, investors begin dumping their New Zealand holdings for whatever they can get. The value of Kiwi plummets. Interest rates soar.

By Monday morning, every newspaper in the country is screaming “CRISIS!”

This is when National, Act, the Maori Party and Peter Dunne expect you to wake up, shudder, and utter a solemn vow that such terrible things must never be allowed to happen.

BUT, if you’ll go on dreaming just a little longer, you’ll discover that by mid-day on Monday, Mr Goff has told a crowded press conference that only the Green Party will be joining his government as a full coalition partner.

Both Mr Peters and Mr Harawira, says the Labour leader, have opted to sit on the cross-benches, and are making no demands whatsoever on either himself or the Greens.

He reaffirms to the excited journalists that Confidence and Supply has been assured by both Mr Peters and Mr Harawira, and that any private members bills introduced by NZ First or Mana will be responded to by his minority government thoughtfully, responsibly, and according to their merits.

By Tuesday evening the Kiwi is regaining ground against all the major currencies. Large Chinese investors have signalled their interest in meeting with all the leaders of what the media is already calling “The Grand Left Alliance”. Even the NZX shows signs of recovery after 24 hours of frantic trading.

SEE? Not such a scary nightmare after all.

This essay was originally published in The Timaru Herald, The Taranaki Daily News, The Otago Daily Times and The Greymouth Star of Friday, 1 July 2011.


Anonymous said...

Still a nightmare for the left if Goff remains at the helm. He ain't left. Period.

just saying

Anonymous said...

I take it that this is a no to mmp..


Chris Trotter said...

Au contraire! db.

By eliminating (or unfairly diminishing) the parties advocating radical change, FPP and SM merely reinforce the dominance of the old parties' neoliberal orthodoxy.

MMP gives all our democratic voices the very best chance of being heard - long may it endure!

Idiot/Savant said...

I think it speaks volumes that you're expecting other parties to do all the work of making Labour government.

Graeme Edgeler said...

The answer you get to may be correct, but you need to reconsider your numbers.

1. You assume, even if the Maori Party drops to 1 electorate, that it couldn't still get enough of the party vote (~1.2%) to get someone in on the list. Even if it tanks in the electorate races because of a split with Mana, this may still be possible.

2. You assume that National loses a fair bit of its 'current' support, but seem to assume almost none of that goes to ACT, or that John Banks doesn't win Epsom. This too may be a leap too far.

3. You haven't run your numbers through a Sainte Lague calculator: 3.5% of the vote just simply is not enough to get Mana 5 MPs!

Of our five MMP elections the lowest vote percentage that would have been needed for a winning electorate MP to bring in four list MPs with them (or two to bring in three on the list as in your scenario) was 3.64% in '96 and '08 (i.e. in elections when the wasted vote was high). If the wasted vote is low, as in your scenario, it could be more like '05, when 3.82% would have been needed. That's around 87,000 votes; the Maori Party got just under 56,000 in '08, so where's Mana getting the rest? In your scenario, it sure ain't from the Greens!

And finally, this is the markets' nightmare scenario. National's nightmare scenario is a repeat on 2002.

Unknown said...

If Goff can create a drastic reduction in the value of the Kiwi dollar and change ownership of NZ corporates from overseas to local interests then he will have done NZ a big favour.

Anonymous said...

Well, Mr Trotter is right that a Labour aligned with the Green party means the majority vote (National stays put) as does the moderate left 'buzzword' prejudiced social vote stay Green( 2-5% not a bad guess of that). The opposite of that situation though also means there is divergence of National party vote which is hard to know the particulars of, but a decent share of it at least would presumably be Labour's way, although NZ First & Act would also be the other main beneficiaries, & at the least Labour doesn't get thumped at poles.

Also given the background of many of the Mana guy's advisors, it's probably well to point out that as long as he keeps to the serendipity of his distinctive situation, there is a chance for the quick solidification of a genuine radical left to the 5% mark, up or down, and that support would come from all over the political spectrum if done properly. Replacing the racism with anti-colonialism/imperialism and a majority economic/social program directly addressed to fixing the problems in his electorate ( the poorest in the country) with the notion that it is only a template of approach, not rigid particulars for a nation, would simultaneously make him a hero to that electorate & solidify a hard left from outside the current point in time an allowance of seriousness. That would allow him to keep his Mana, which is probably quite important, as no matter how proficient at swearing about politics he may be, that will only go so far unscathed with his new political party.

Sue Bradford would make a good number two for him, for being in a position/platform that hasn't got a lot of 'relative' hypocrasy, she would also make quick headway against the semi-negative perception that alot of neutral people may have against her past ( which isn't entirely unearnt ) as well as for the uncomplicated newness of the particulars of difference for this genuinely radical left delusion this time around - Which is important, for like Sue Bradford's experience, the public has seen it and heard it all before a few times.

While such radical left wing delusions can be dangerous if they get out of hand in the application of the state for their prescribed utopias, we have a situation where some radical left wing delusions in the mix would be positive because of the particulars of m.m.p. These particulars makes such swings even harder work for such consensual realities seemingly to be agreed upon & stuck with by a pop. even with fully pervasive propaganda control behind the cause - look at the relatively non-mention of carbon taxes( their implementation & continuing application of being the only country in the world taxing the public for this most fundamental of natural life cycles) for some evidence of the instability inherent to m.m.p systems in denying basic demand & supply forces of the most dis-empowered foe(the public). And for that, we have to thank the creative effort fronted by Bruce Beetham, the Social Creditor.

- Mstr Humphery Pinkerwrinkle the 15th -

Madison said...

I agree, this is what can really happen under MMP. But only if the parties are even remotely capable of working together. I seriously doubt the ability of Hone to work with anyone or of Labour to go back to Winston. Surely there are better ways to make some change.

Plus, given past history and actions I don't see Labour dealing with any minor parties favourably and stomping all over their dreams as per their usual MO.

Anonymous said...

I hope this is exactly how it pans out. God help us all if National get back in!

Allie said...

I don't think National are so ideologically-driven as you think, anymore.

Could be wrong, of course. I don't think about this as much as you. My impression, however, is that they have evolved rather a lot since 1936. It was a different world.

Chris Trotter said...

I wish you were right, Allie, but the reaction of the Right to Hone harawira and Mana has convinced me that, like the Bourbons, the National Party and its allies in the press have "learned nothing and forgotten nothing".

Chris Trotter said...

Graeme, I bow to your undisputed mastery of the MMP number-crunching side of things.

Forgive me for being so broad-brush.

Gerrit said...

Surely much more interesting would what changes this new left wing party would bring to New Zealand society.

As we witnessed with the change from Labour to National at the last election, not much actual structural change happens when the pendulum swings left or right. It is not a very big pendulum swing in regards left or right policies in New Zealand. Both parties are or have been equally keen to sell of assets,etc.

The scenario of a left wing bolchevik parliament getting elected is entirely feasable, but will they have the willpower to dissolve parliament and set up a true authoritarian bolchevik state?

If they dont dissolve parliament and the left wing reforms do little to improve the KPI for measuring how much better the poor are getting wealthier (measured by any means you like) then a three year terms is all that is likely.

Be interesting what changes we would see when the combined policies of NZ First, Mana, Maori, Greens and Labour parties are implemented.

Or will they spend three years arguing and end up doing nothing?

Loz said...

The dream is really that markets are going to return to any form of "normal" the day after New Zealand’s election.

Greece has half a trillion dollars of debt obligations that it can't service and any default will send shockwaves through the international web of banks. The current response is to frantically find more cash for the country to borrow – not a solution but it may buy a few more months. Ireland Portugal and Spain are almost ready to follow suit. The United States is only four weeks away from defaulting on loans unless adopting GOP demands for massive spending cuts that will violently contract the economy (US citizens currently owe more per capita than the Greeks).

The international economic arena suddenly collapsing or just continuing an orderly implosion will be a major factor within the New Zealand election or any possibility of constructing a grand coalition government. None of the parties have formulated a strategy over attracting disappearing sovereign credit. None are pre-empting large current account deficits materialising as a result of disappearing disposable income in foreign markets. No policies exist for the impact of Australian Banks being forced to increase mortgage interest rates. No solutions have been uttered for the prospect of wide spread negative equity coupled with a contracting job market and a collapsing property market.

All the discussion around a grand coalition of the left is based on party labels and a few personalities instead of cohesion of policy on how to deal with a developing crisis that seems inevitable.

Labour is still advocating the same market led, export driven solution that has led to this point. The Greens advocate the reintroduction of higher graduated tax rates and capital gains taxes as their method of financing. New Zealand First is actually supporting the reduction of corporate tax and GST while our home-grown Mugabe-radical-revolutionary wants the tax-payer to double the pay of beneficiaries while being vague on how his beliefs about skin colour will affect those who will be paying. There is no coherent economic framework for the parties labelled as being of the left and no method apart from printing money or expecting new loans to be available for the government to meet spending commitments.

If a governing agreement could be formed between such disparate parties an implosion would be inevitable when confronted with the economic crisis of the first term.

Regardless of the election result we can be absolutely certain that the country won’t be waking up the day after the election and saying it's all just a bad dream.

Brendan McNeill said...

Chris, a fascinating scenario to be sure.

The weakness I think, thankfully, is that the Greens would struggle to get 10% of the popular vote. Just remind me, who are their leaders again?

Furthermore, there are some large egos that would require stroking in order to obtain confidence and supply in that unholy coalition of interests.

Why would Winston and Honi agree to sit on the cross benches in order to put Labour MP's into cabinet?

It may be what we deserve, but we can pray it's not what we get!

Victor said...

An interesting scenario but I suspect support for both National and Labour will solidify, at the expense of smaller parties, as the election approaches. That tends to be the way things go.

I have a further suspicion that the only smaller party that hasn't yet peaked is New Zealand First. Even then, they're unlikely to get to 5%.

And, of course, all of us could be wrong.

jh said...

Mathew Hooten says it is only the blue collar working classes who are worried about w2 claim and foreshore and seabed as they are directly in competition. He (ofcourse) is happy that the wealthiest members of society can use there wealth to get whatever they want (which is what we see if places like Fiji).
Sue Bradford (as usual) is arguing for tangatawhenua.

Phil said...

Both Mr Peters and Mr Harawira... have opted to sit on the cross-benches, and are making no demands whatsoever on either himself or the Greens

You have got to be fucking kidding me.

Anonymous said...

Loz has misunderstood the EU strategy.

Portugal, Ireland and Spain are all quite capable of sorting their balance sheets out in the medium term, provided there are no more shocks.

hence, the frantic attempts to buy more time for Greece, until P.I and S are sound enough to let Greece fail in isolation.

that such time-buying comes at the economic cost to Greece of making them sell every thing they own is something which Kiwis will recognise from the 80s and 90s.

The political cost is that the Greeks also have to deal with a change in their retirement age from the low 50's to the low 60s in the blink of a working persons lifetime.

the unknown cost is how long the mediterreanean states overall can cope with youth unemployment in the 25% + bracket, but this is what the EU is designed to cope with - free movement of peoples (young moveable peoples) to those states able to absorb them into the service sector for a half decade or so until they feel able to return home.

Victor said...

Anonymous @ 3:11

An interesting post and I certainly wouldn't dismiss your argument out of hand.

However, I'm not convinced that the EU's amorphous decision-making processes are capable of consistent allegiance to so determined and neat a plan. I think that utter panic has more to do with things.

Moreover, the willingness of the EU's wealthier members to continue taking in young, aspiring workers from less favoured regions should not be taken for granted.

Under the pressure of recession, there are signs of the richer states moving into a phase of renewed nationalism.

Indeed, a consequence of DSK's alleged cavortings in New York might be Marine le Pen in the Elysee. What, then, would be the chances of continued freedom of movement of labour?

Dave Kennedy said...

Being the only Party with a comprehensive economic strategy that could be clearly articulated to the voting public the Greens found themselves with over 20% of the party vote. With Labour only gaining 30 seats, the Greens 24 seats made the resulting coalition more of a partnership of equals. For the first time in New Zealand's history the Deputy Prime Minister's position was jointly held by the Co-leaders of another Party. Due to the growing support, internationally, for the stable and increasingly relevant Green policies there was only a slight downturn in international economic confidence.

The first year was a tumultuous one, however, as the Green policies of listing lobbyists on a public register changed the political effectiveness of many who had previously enjoyed secret access to the government. The capital gains tax was also heavily fought as was the large investment in dealing with tax avoidance from banks and large corporates. However there was huge public support when Government revenues increased dramatically and the need for borrowing was almost negated. The shift in much of the funding from motorways to public transport created positive spin offs around the country and dependency on oil dropped considerably. The new jobs created through many green initiatives brought the heart back to local communities and Dunedin's Hillside workshops received international recognition for innovation in rolling stock design.

Markets prices for New Zealand's agricultural products increased dramatically as New Zealand's sustainable farming practices became wider known. Despite production dropping to more sustainable levels the increase in demand for NZ produce meant higher prices and profits actually increased. Green agricultural technology began to challenge tourism as an export earner.

With the minimum wage increasing dramatically (and wages in general) the domestic economy boomed and unemployment was reduced to almost 3%. Christchurch was named a top tourist destination as its innovative rebuild became a model for sustainable and environmental design and its many parks re-established it as New Zealand's "Garden City"......

Anonymous said...

Well, at least you're ambitious - dare I say aspirational - for the Greens, bsprout. Which is to be admired - virtually no-one in the 'left' political parties has the balls to openly state they want to replace the treacherous Labour as 'the main' party of the left (ie of the people & environment). Go to it!

But might I suggest the Greens should rapidly rethink the capital gains tax, on the grounds it fails to solve the problem it is brought in to address, namely, unaffordable house prices (unless you make it a 100% CGT, ie a house price freeze). Why? Because even a high CGT level, say 90%, still leaves the ability to make a small percentage, which on large capital values makes a significant cash amount. That is, it is still worth the low speculative risk of buying and flicking on real estate for the far lower capital gains even under a high level of CGT.

And if a CGT were effective, it would have the perverse effect of encouraging spending all your income instead of saving and investing. Leading to unsustainable consumption of material goods. Hmmmm. Not too green aye?

Mad Marxist.

Dave Kennedy said...

Anonymous-The median income in New Zealand is a pitiful $27,000, barely a livable wage, and 20% of our children live in homes dependent on benefits. A much needed increase in wages will not necessarily mean an over expenditure in material goods. It may mean that instead of buying largely second hand clothing and cheap rubbish food, families can finally purchase New Zealand made products and locally grown food. Saving and investing can only occur when one has a disposable income that currently most New Zealanders don't have.

What you claim as aspirational and ambitious is actually essential if we are to come out of our current situation with any form of positive future for our children.

Victor said...


I would agree with you that, given our low median income, an increase therein need not, of necessity, involve either a huge increase in overseas indebtedness or unsustainable increases in material consumption.

But it will be the work of many years to achieve the qualitative changes in our economy needed to yield such an increase on a sustainable basis.

What are we to do in the meantime both to remove the raw edge of penury from the lives of far too many New Zealanders and to stimulate our domestic economy back to life?

How, moreover, do we achieve these goals without a further substantial and potentially ruinous rise in overseas borrowing, excessive inflationary pressures and/or 'selling off the family silver'?

I would cautiously suggest the following steps, to run alongside a capital gains tax.

Firstly, reverse at least some of the upper income tax breaks instituted by the current government.

Secondly, follow the example of the Conservative-led government in the UK by making, say, the first $10,000 of earned income totally tax free.

Apart from the relief of poverty, these steps would serve the purpose of putting more money into the hands of people who will spend it in ways that would stimulate our domestic economy, with minimal impact on either our external accounts or the inflation rate.

The same cannot be said concerning tax breaks for the more affluent New Zealanders, who, typically, either burrow extra income away or invest it in economically sterile property deals with extensive help from overseas funding sources.

A further advantage of making the first $10,000 tax free would be the added incentive to seek and stay in employment, thus reducing at least some welfare costs. Hopefully, the overall impact of these policies would be to increase the number and range of jobs available for those who wish to take them.

Thirdly, and most tentatively, I would suggest zero rating for GST on unprocessed foods.

The object of this exercise would be: firstly, to make lower incomes go further; secondly, to improve the nation's diet, leading to a subsequent lowering in health costs; thirdly, to help further shift expenditure to items originating in New Zealand.

I could envisage two plausible sets of objections to such proposals. Firstly, there will be those concerned with a perceived blow- out of our public accounts.

However, New Zealand has one of the lowest per capita rates of public debt in the developed world. This indebtedness is ultimately only problematic to the extent that it contributes to our overall level of international debt, both public and private.

We might actually reduce our overseas indebtedness by shifting the tax burden onto consumers of luxury items and imported capital and off the shoulders of consumers of necessities.

The second set of objections is likely to come from those concerned over our dismal savings record and who fear that putting money into the hands of ready spenders will frustrate moves to increase savings levels.

In the medium to long term, their concerns are absolutely justified. But, in the short term, we need to stimulate our economy, so as to generate the income(s) that will make sustained saving possible for the average household.

Anonymous said...

to put that UK tax free level into perspective, in NZ spending dollars it would be a tax free threshold of @ $20 000 NZD.

given that the NZ basic unemployment benefit is around $7 000 per annum, it makes the paltry $5000 figure currently being debated look pretty pointless.

(BTW, its a Lib Dem policy, not a Tory one, and its aim is not about improving the lot of folk on welfare, but of making it more worthwhile for them to take a job (any job) than it is to stay on welfare).

It is closely tied with dramatic changes to welfare payments overall, and cannot be seen as an isolated tax policy change.

the $5K NZ proposal is more an an emulation of UK tax policy from the 90s than an emulation of current policy, and TBH, I would not be at all surprised to see the whole shebang form the basis of the Nats manifesto for November, given the noises they are already making on housing and welfare - if they can get the initial tax 'hit' past English - which is where the three year electoral cycle becomes an issue in NZ, since a policy which will take 4-5 years to fully realise and which has a very high initial cost becomes very difficult to 'sell' in a 3 year electoral cycle with a Greek level of current account deficit.

Anonymous said...

@ bsprout and Victor - I did not say anything about those of us on low incomes. What I said was that if a CGT is effective (ie if it shuts down speculative investment, specifically in housing), then the speculators will either:
1) invest in the sharemarket (yeh right) or elsewhere
2) spend their capital instead

It is 2) that concerns me. Housing speculators seem to mostly be those lacking economic expertise to safely invest elsewhere, so they invest in housing as an 'easy' way of making returns. Take that away and they may just spend instead, and such middle class investors won't be spending on an extra bottle of milk - it will be discretionary spending on consumer goods, which helps the environment like a hole in the head....

Also, please explain how a CGT on housing is fair, but not on other forms of appreciating asset, like jewelery, art, classic cars, etc.

But this is off-topic. Sadly, we are relying on the Greens to bring the intellectual heft to economic policy in Chris' putative coalition, and the CGT is an example of a dodgy idea being grabbed by all on the left without much analysis.

Mad Marxist.

Victor said...


I'm aware that the UK's tax threshold policy was in large part a sop to the Lib-Dems and that it is far more designed to ease people into employment and keep them there than to reduce poverty levels.

That doesn't make it a bad idea, though, particularly when decoupled from the swingeing welfare cuts with which the Con-Dems have conjoined it.

I'm also aware that, translated into NZ$, the UK policy would mean a tax threshold of $20,000. I suggested $10,000 to take account of our lower mean income and cost of living. But my essential concern was with the principle rather than the amount.

I was also being deliberately modest with my suggestions, because, apart from anything else, I'm concerned about the lack of imagination that National shows, even when compared to other conservative administrations overseas.

By the way,I suspect that their lack of imagination will keep any notion of raised thresholds firmly off their manifesto. But, I agree, you can never tell for sure what Mr Smile-and-wave will think of next.

Mad Marxist

I too am concerned about the unwillingness of NZ's rich and middle class to think beyond property investments.

CGT is, to my mind, a necessary but not a sufficient policy platform for any party that wants to achieve a genuine economic 'step change'.

There is a vast amount of work and discussion needed on issues like a sovereign wealth fund, Kiwi Saver, the Cullen Fund, compulsory Super payments, buy-ups of farmland, tax breaks for R&D etc.

Somewhere within that morass of policies, ideas and initiatives is, I hope, a formula for taking us forward in a way that encourages New Zealanders to invest in their country's economy.

However, I'm just a suburban scribbler without any claims to economic omniscience. So I'll leave it to others to shed any additional light there may be on this melange of ideas.

Meanwhile, from a point of view of 'Natural Justice', I'm sure you're right about the unfairness of targeting gains on property and not those on other forms of appreciating assets.

But, from a pragmatic point of view, taxing other forms of appreciation is unlikely to produce either substantial additional long-term revenue, a reduction in overseas borrowings or a flattening of price increases in an essential commodity (viz. real estate).

Of course, the point about tax take would no longer hold true if Kiwis became major investors in bullion, Kruger Rands etc. Even then, though, a CGT is a good place to start, even if it means biting the bullet and agreeing with the Greens.

Anonymous said...


Hone, yesterday the left was really in the shit
Hone, when you came along it really helped us quite a bit
The dark days are gone, and the bright days are here,
My faith in your new party is so sincere.
Hone, one so true, I love you.

Hone, let me touch the hem of your feather cloak
Hone, thank you for being such a pc bloke
You gave to me a chance to be on the news
Now I can temporaly lose my blues
Hone so true, I love you.

Hone, thank you for the chance to be up there on the box
And on the ratings, even 0.7% it rocks
My life was torn like a used rugby world cup ticket
Now we don’t even need to picket
Hone one so true, I love you.

Hone, thank you for the parliamentary seat
Hone, thank you for the kudos that goes with that, its neat
You're my spark of nature's fire,
You're my pavlova and number eight wire
Hone one so true, I love you.

Hone, yesterday I had no direction
Hone you gave me a political erection
The dark days are gone, and the bright days are here,
My Hone one shines so sincere.
Hone one so true, I love you.