Robert MacCulloch: Coalition talks: On economics, Luxon is arguing about nothing with Winston Peters & David Seymour

As coalition negotiations drag on, it has been left to speculation about what disagreements are taking place. They cannot be on economic issues. The differences in terms of finance-related policies between National, ACT and NZ First are trivial and inconsequential. It cannot be that the nation doesn't have a new government due to sticking points over matters like National's foreign buyer tax which has been featuring prominently in the mainstream media, nor for that matter any other tax or spending policy. For example, the foreign-buyer tax would only raise around 0.1% of GDP.

In terms of other tax policies, here is one of NZ Firsts "founding principles":

Our long-term objective is New Zealanders paying less tax.

It is identical to National's and ACT's. As for fiscal policy, NZ First wishes "to create surpluses to deal with unfunded commitments and to pay down debt". It could be copied from the ACT Party. None of them is offering anything remotely resembling a radical restructuring of a single part of our economic landscape.

So what is going on? The main differences between the coalition partners lie in the non-economic arena, particularly matters pertaining to race. NZ First doesn't remotely share National's vision of mass immigration since in its view that does not put New Zealanders "First". And of course on Treaty issues, ACT & NZ First are miles away from National.

Consequently, forming a coalition appears to be fraught not because of anything to do with economics, but because NZ First and ACT know full well that should the Nats water down those two parties strongly-held views on race-related matters, then both those two minor parties will be abandoned by their supporters at the next election.

Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.