State of the nation / New Zealand
The Kiwis’ new prime minister Jacinda Ardern is boldly searching for solutions.
Jacinda Ardern was the change that New Zealanders didn’t know they wanted. For nine years her Labour party had been in the wilderness before she was made its leader just weeks ahead of last September’s election. The economy was thriving under a government led by the soft-right National party and polls suggested that it would be re-elected for a fourth term. At the time Ardern said that her promotion to leader of the opposition had landed her the “worst job in politics”. Less than three months later she was sworn in as the Pacific nation’s third female prime minister.
How to explain that meteoric rise in a country that is ostensibly sitting pretty? Its strong economy and low rate of unemployment have lured home the tide of Kiwis that once poured across the Tasman Sea, record levels of immigration have fanned a construction boom and tourism is thriving. Meanwhile, China’s demand for Antipodean produce has seen bucolic pastures converted into intensive farms.
Yet not all New Zealanders are feeling the benefits of their national booty: central bankers have been left scratching their heads over tepid growth of wages as inflation has eaten up workers’ raises; a housing shortage has sent prices skyrocketing as the population grows; and locals are worried about environmental degradation, caused partly by dairy farms.
Despite those concerns, the Labour party emerged from the election in second place, with 37 per cent of the vote. Ardern wound up in office because any party that commands a parliamentary majority may form a government under New Zealand’s system of proportional representation: she teamed up with the Greens and the populists who hold the balance of power. This “coalition of losers” is viewed as the country’s most left-wing government in years. Ardern’s challenge will be to champion the economy alongside the rights of the individual – and she doesn’t seem one to shrink from it.
Purity: The world’s longest-running tourism campaign – “100% Pure New Zealand” – has captured imaginations since 1999. Travellers come to scale mountains and leave with a positive picture of the pristine country, which not only helps Brand Kiwi but also Kiwi brands abroad.
Rugby: The All Blacks are the best international sports team in history; they have lost only three games since winning the World Cup in 2015. The team’s intimidating haka and all-star indigenous players have helped to build recognition of Maori culture worldwide.
Fatalism: For super-rich survivalists preparing for Armageddon there are worse places to hide than the ends of the Earth. Dozens of doomsayer billionaires have invested in boltholes in New Zealand. In the event of a cataclysm, the country’s greatest weakness – isolation – becomes its biggest strength.
Things that need fixing
Housing: An overheated market has started to cool but the nation still faces a shortfall of 71,000 homes. With about 41,000 people sleeping rough, New Zealand has some of the highest rates of homelessness in the developed world.
Environment: Dairy farming and reliance on cars has increased greenhouse-gas emissions by about 25 per cent since 1990, making New Zealand one of the world’s worst-offending countries relative to population size.
Inequality: Life has improved for the Maori who make up 15 per cent of New Zealand’s population. Yet they still face lower incomes, worse housing and poorer health than other Kiwis. Equality remains a long way off.
Since taking office Ardern has held together a coalition of unlikely bedfellows and completed an ambitious 100-day plan, which has reinstated free tertiary education and increased paid parental leave. She is also lifting the minimum wage. To address the housing crisis she’s launched a programme that aims to build 100,000 homes, while banning foreign non-residents from purchasing property.
New Zealand must juggle the competing interests of a security alliance with the US and economic dependence on China. Concerns about the latter’s influence are growing, with the country accused of making donations to NZ political parties. Meanwhile, the relationship with Australia is souring. Aussie and Kiwi citizens can live and work freely between their countries but the 600,000 New Zealanders residing in Australia say that their rights are being eroded. Ardern also got off to a bold start by criticising Australia’s refugee policy and warning the US that New Zealand will not bow to pressure within the UN over a vote condemning Trump’s recognition of Jerusalem as Israel’s capital.
The nz$278bn (€164bn) economy has grown in recent years, buoyed by record levels of immigration and a construction boom. Even with a growing population, unemployment has dropped below 5 per cent, helped by the thriving tourism industry, which directly employs 7.5 per cent of the workforce. Yet prospects for the economy have looked increasingly uncertain since last year’s election. Growth slackened to 2.7 per cent over the year to September, from 4.4 per cent in mid-2016, and business confidence has plunged to depths not seen since the financial crisis. The slow-down might accelerate if those companies now hold off on investment and hiring.
The country is blessed with plentiful water but a debate is bubbling over who owns it. The government has always held that under common law no one does – a position that helps it avoid difficult negotiations with the Maori, who say that they have rights to the resource. The upshot is that water is free for households and businesses. Yet some Kiwis are frustrated by foreign bottling companies, which suck up pristine liquid and sell it for a profit overseas. Others disparage dairy farmers for their heavy irrigation: just 2,000 of them use the equivalent amount of water as 60 million people. Ardern suggested that a tax on commercial usage might be fair but was immediately shot down by her coalition partner.
It’s a nation famous for its wine but beer is catching up. In fact, the proliferation of trendy breweries is such that tourists can now follow a beer map across the country to make sure they don’t miss out. Small brewers increased their production by 22 per cent in 2016 (that’s considered slow by recent standards) and their brews, once the choice of a handful of hipsters, now account for 10 per cent of total consumption by value. With about 1,600 options on shelves, the market may soon be saturated. But what if more beer could be exported? That would be a problem worth solving – New Zealand already ships out a huge share of its wine reaping roughly nz$1.7bn (€1bn) in export earnings annually.
“The big issue for this government will be fixing the housing market. That’s what they campaigned on the most. They’ve made proposals but it will be a major task for years ahead. They can’t do it in the first 100 days.”
Economist and executive director of think-tank The New Zealand Initiative
“The previous government used unsustainable immigration to boost the headline growth figure and hide the fact that per-capita GDP was falling. The new government will be more focussed on per-capita gdp – the people who are already here.”
Consultant and columnist
“There are reasons to think that this will be the most left-wing government we have had in New Zealand for many decades and arguably the most left-wing in the English-speaking world for many decades.”
Lecturer and political commentator
Monocle view: There’s a reason billionaires are chomping at the bit to get their hands on a New Zealand passport but the country could stand to take charge more when it comes to regional politics.
Grade: A-. Jacinda Ardern has been a breath of fresh air for the country’s international image but she needs to tackle real issues at home such as inequality and growing populism.