We like to do self-congratulatory back patting from time to time at this Blog. Why? Since we believe we get most of our economic predictions in NZ correct. The reason is that we chase facts, have good sources, and solid bases for making predictions, rather than an agenda of trying to brain-wash readers into our preferred way of thinking, like most journalists in our Main Stream Media.
In November 2021, we ran the headline The Next Election (in 2023) will be a Cost of Living Election. Although NZ was in the midst of Covid back then, cost-of-living did become the No. 1 election issue two years later. We predicted inflation would take off & interest rates rise to combat it, before any other commentator - including the Reserve Bank. Which brings us to Election 2026. It will be a Tax Choice Election. And tight.
The National-ACT-NZ First Coalition is in more danger than the polls suggest. We're not far from 2025, which is its last full year of government before the next election. GDP in 2024 is officially not growing - we're stagnant at 0%. That has put the coalition under enormous pressure to find the revenues to fund New Zealand's welfare state - its health & pension systems, which are being stressed due to ageing population - let alone invest in water supplies, Dunedin & Whangarei hospitals, & build new infrastructure. Should economic growth be tepid in 2025, which it likely will be, public services will become run down. NZ Labour's solution will be a copy of the UK Labour Party's "solution" being rolled out at we speak. Hiking taxes on the wealthy. Whoever leads NZ Labour in 2026 will defend their Election Platform along similar lines to the UK Chancellor now, "Labour will launch a new era of public & private investment in hospitals, schools, transport & energy as momentous as any in the party’s history in this week’s budget", Rachel Reeves said. The choice will be presented as "underfunding public services" (National) versus "investment in the country's future" (Labour). The folks targeted by Labour to pay the bills will be wealthy NZers. Just like the British PM Sir Keir Starmer is currently doing in the UK.
Why the similarity to British politics? Because, for all the pretense NZ is growing up, forging its own identity, when it comes to economics it certainly is not. In terms of those institutions, we're still squarely a British Colony. Our health system is the same model as Mother England's. Its "socialized medicine" - which means single public provider / single public payer, whereby wealthier folks can opt out with private insurance. Our education is based on the UK's "specialize early" approach, whereby after leaving school, students go, for example, straight to law, medicine, or engineering, doing specialized degrees - rather than the US 'liberal arts' approach, where you specialize later. Our parliament & court systems are "adversarial", copying the British. We don't have an "inquisitorial" French-style approach where a judge is appointed to investigate facts. NZ corporate law is based on the British shareholder model. We drive on the left, being one of the few, other than Britain, and the Union Jack's in our flag. Where did Jacinda Ardern learn politics? London, in UK Labour PM Tony Blair's office - not exactly a marae. And her new best friend is Prince William.
What this means is that NZ has not moved on and done its economic institutions differently from the UK. When Margaret Thatcher started her market reforms in the 1980s, NZ did its market reforms at the same time. Both in the UK & NZ, there was a backlash against those reforms, although they have nearly entirely been kept in place in both countries. Now both the NZ Labour Party and UK Labour Party are promoting capital taxes to go after the rich, and "rebuild" public services - with the British set to increase their rate and NZ Labour set to propose them. Ironically, those most in favor of demanding a break from the UK by saying the Treaty never ceded sovereignty, which includes the Opposition Leader, leftist armies of University academics, historians & legal "experts", are the same ones who support classic UK approaches to economic management. They don't want French style health-care, where everyone can choose to go public or private, since they hate privatization, like British Unions. They don't want Singapore-style savings schemes let alone US style anything. That group are trapping us in a colonial mindset more than any other. They've colonized NZ economics, and are about to propose UK Labour economic solutions for NZ Election 2026.
Why the similarity to British politics? Because, for all the pretense NZ is growing up, forging its own identity, when it comes to economics it certainly is not. In terms of those institutions, we're still squarely a British Colony. Our health system is the same model as Mother England's. Its "socialized medicine" - which means single public provider / single public payer, whereby wealthier folks can opt out with private insurance. Our education is based on the UK's "specialize early" approach, whereby after leaving school, students go, for example, straight to law, medicine, or engineering, doing specialized degrees - rather than the US 'liberal arts' approach, where you specialize later. Our parliament & court systems are "adversarial", copying the British. We don't have an "inquisitorial" French-style approach where a judge is appointed to investigate facts. NZ corporate law is based on the British shareholder model. We drive on the left, being one of the few, other than Britain, and the Union Jack's in our flag. Where did Jacinda Ardern learn politics? London, in UK Labour PM Tony Blair's office - not exactly a marae. And her new best friend is Prince William.
What this means is that NZ has not moved on and done its economic institutions differently from the UK. When Margaret Thatcher started her market reforms in the 1980s, NZ did its market reforms at the same time. Both in the UK & NZ, there was a backlash against those reforms, although they have nearly entirely been kept in place in both countries. Now both the NZ Labour Party and UK Labour Party are promoting capital taxes to go after the rich, and "rebuild" public services - with the British set to increase their rate and NZ Labour set to propose them. Ironically, those most in favor of demanding a break from the UK by saying the Treaty never ceded sovereignty, which includes the Opposition Leader, leftist armies of University academics, historians & legal "experts", are the same ones who support classic UK approaches to economic management. They don't want French style health-care, where everyone can choose to go public or private, since they hate privatization, like British Unions. They don't want Singapore-style savings schemes let alone US style anything. That group are trapping us in a colonial mindset more than any other. They've colonized NZ economics, and are about to propose UK Labour economic solutions for NZ Election 2026.
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.
5 comments:
UK Labour appears to have made a strategic mistake in sending 100 activists to the US to help Kamala Harris. Donald Trump may win the presidential election and he certainly holds a grudge. It could be quite entertaining!
Spot on as usual - but is their mindset " colonial" or rather hard Marxist Left who - as in France - want the state to provide cradle to grave care ( paid for by wealth distribution from the shrinking middle class who have worked hard for what they have )?
PS. Most people do not know that the Maori economy has a lower tax rate ( 17% ) - or pays no tax at all due to its charitable status. Hence the booming Maori economy. More than anything else, this fact emphasizes the 2 tier society that is emerging fast.
This should be openly debated in the 2026 Election campaign.
Our salient privatisation problem is currently in the electricity market, the gaming of which has helped send several firms out of business. In the UK, the privatising of rail services has been a disaster, and London's privatised water service is a disgrace. So the distate for privatisation is quite understandable.
Fortunately, come our 2026 election, the U.K. will be 2 years into what is promising to be one of the most economically catastrophic Labour governments ever, by which time the current coalition will be able to point to that and say to the electorate, "Do you want that to happen here?"
Having said that, I think, no I know, that there is an expectation amongst electors who voted for the coalition parties that between them they will deliver on waste reduction, reduction of bureaucracy and a return to democracy and the removal of preferably, all race based privilege. 2 years to deliver.
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