Bad signs from across the ditch

After just 100 days of Labour government across the Tasman, New Zealanders are already being beset by bigger government, bigger spending and more taxes. In a foretaste of what Australians could expect from a Shorten government, Prime Minister Jacinda Ardern is quickly dismantling the successful deregulation/market reform approach that served New Zealanders well under former National Party prime ministers John Key and Bill English. Like Mr Shorten, Ms Ardern plans to lift the minimum wage. And like Kevin Rudd and Julia Gillard when they succeeded John Howard in 2007, New Zealand Labour is moving against the workplace reforms she inherited from the Key-English years.

Unfortunately for our nearest neighbour’s prosperity, income tax cuts legislated by the last government will be axed to pay for Labour’s big-ticket spending on education, welfare and housing. In line with Mr Shorten’s policy, NZ Labour is also withdrawing negative gearing tax breaks for many property investors. Unlike Labor in Australia, Ms Ardern is committed to the revised Trans-Pacific Partnership. She can count on the National Party to back it in parliament. The Greens, with whom she has a supply and confidence agreement, refuse to do so.

A rank populist in most matters, Ms Ardern is moving swiftly to re-establish the welfare state her predecessors succeeded in winding back more effectively than any other government in the world. Between now and 2024, free tertiary education is being ushered in, along with higher student allowances. Financial detail, as Jamie Walker writes today, is notably scant. The cost of Labour’s ambitious plan to alleviate child poverty remains unknown. In a sphere better left to market efficiencies, Labour is also committed to building 100,000 “affordable” homes over 10 years, half of them in Auckland.

Predictably, business confidence has slumped since NZ First leader Winston Peters formed a surprise coalition with Labour following last year’s election. According to the ANZ bank’s business outlook survey, business sentiment is at a two-year low.