In today's email we ask what might our Government look like, post-election; take the pulse of Whanganui and Te Tai Hauauru; and learn why a leading academic thinks we need an official inquiry into China's growing influence into our affairs.
1. Three flavours of change
Now the parties have released almost all their policies and the smoke is clearing around the polls four days from the election, it's worth looking at what the three different flavours of new Governments might mean for businesses and consumers.
There is still the small chance National will be re-elected with its current support partners to repeat the current formulation of Government for a fourth term. But National's fall in the polls and the departure of Peter Dunne make that increasingly unlikely and its policy formulation is well known.
So in the next couple of days' emails I'll focus on the key differences in the policy mixes of the following three options:
A Labour-led Government with a supply and confidence agreement with New Zealand First.
A National-led Government with a supply and confidence agreement with New Zealand First.
A Labour-led Government with supply and confidence agreements with the Green and Maori parties.
2. Interest rates will not rise more
One concern some in business and people with big mortgages have is that a change of Government might blow out debt, push up interest rates and undermine foreign investor confidence. National has certainly focused on that fear.
That is not justified given the current fiscal plans agreed to by the major opposition parties and the mood on global markets right now.
Labour's fiscal plans involve increasing net debt by around $7 billion more than the existing Government's plans to a peak of $68 billion by 2019/20, before reducing debt to $67.5 billion and 20 percent of GDP by 2021/22 from 23 percent this year. That means Labour is reaching the 20 percent threshold two years slower than National. Labour is forecasting surpluses would rise from $2.5 billion this year to $6.6 billion in 2021/22.
Bill English argued on Sunday that Labour's plans would increase interest rates beyond the increase already expected by the Government. (Treasury is already forecasting 150 basis points of rate hikes by 2021, although this is a more aggressive forecast than the Reserve Bank's own forecast for just one 25 basis point hike by late 2020).
But as former Reserve Bank economist Michael Reddell pointed out yesterday, National's own forecast is for rising interest rates. He also cited research from Adrian Orr (now NZ Super Fund CEO) and Paul Conway (now Productivity Commission Economics and Research Director) in 2002 that suggested that Labour's relative increase in the net debt track would increase long term bond yields by one basis point. That's 0.01 percent.
Currently, the New Zealand 10 year Government bond yield is 2.50 percent and down from as high as 3.02 percent at the end of last year. It is also down from 2.62 percent since the start of the campaign. It is also down from just over 7.0 percent at the end of 2007. Most other OECD countries have much higher debt to GDP ratios and international bond investors see a percentage point or two difference as neither here nor there.
Global investors are not concerned about potential for a change of government. The New Zealand dollar has been slightly more volatile in recent weeks, but remains entrenched in range from 71.5 USc to 73 USc. Compared to the volatility of the pound and the US dollar during the Brexit and Trump elections, the Kiwi is dollar is becalmed, despite the reports of the currency 'plunging' or 'spiking' on various polls results.
English argued on Sunday that New Zealand First's largely uncosted and expensive fiscal policies (which include forgiving student loans for graduates who stay in New Zealand, removing GST from food, employing an extra 1,800 police officers and returning GST from tourists to councils) would also blow out any Labour-led Government's debt.
Firstly, Labour would have to agree to those policies, which it would be unlikely to do without New Zealand First gaining a much bigger share of the vote than the six to eight percent currently indicated by the polls. Secondly, National would also face those same pressures.
Labour and the Greens have also agreed a fiscal responsibility pact that includes remaining in surplus through the economic cycle and reducing net debt to 20 percent of GDP by 2021/22. The Green Party reaffirmed that commitment with its final fiscal plan released last night, which actually had a slightly faster debt repayment track than Labour.
I will include more of these analyses of the three different flavours in coming days.
3. A focus on Whanganui
Newsroom's Sam Sachdeva and Shane Cowlishaw set off on a road trip through the key regional and Maori electorates of the North Island yesterday morning on their way to Auckland for the big events there on Saturday night.
They went to Whanganui yesterday where a couple of very tight battles are shaping up. We asked them to talk to the candidates and the locals to get a feel for what's happening on the ground in regions that most national media don't get to look at closely very much.
It turns out Chester Borrows' replacement candidate for National in Whanganui, Harete Hipango (pictured above) has a real battle on her hands to keep Labour's Steph Lewis from winning it back after 12 years in National hands.
Hipango, 52, said the race is close. “Whichever way it goes, I’ll still continue to give service," she said.
Lewis, 28, (pictured below on the left with Jacinda Ardern in Whanganui yesterday) is optimistic, pointing out Borrows was the first National MP to hold the seat for more than a term.
“I’ve always said Whanganui is a winnable seat...I believe it’s very, very close, and I can do it," she said.
See Sam's full piece on Whanganui's prospects and its election here on Newsroom Pro, where it was published first yesterday.
4. Howie up for the full 80 minutes
The other big battle focused in and around Whanganui and the central North Island is that for the Maori electorate of Te Tai Hauauru.
It could even prove crucial in the overall result, given a Maori Party win there would give it an extra seat and insurance in case Te Ururoa Flavell loses Waiariki (although one poll suggests that's unlikely at the moment).
Labour incumbent Adrian Rurawhe is seeking to hold off his main challenger, Maori Party candidate and former Kiwis league player Howie Tamati.
A Maori Television-Reid Research poll gave Tamati a surprise 13-point lead, but Rurawhe seemed unfazed yesterday as he waited for Ardern to finish shaking hands and posing for selfies.
“I try to avoid talking about the methodology they use, but the reality is it’s the largest electorate in the North Island, and only 25 per cent in the electorate have landlines so 75 per cent are never going to get polled,” Rurawhe said.
His door-knocking has delivered more positive results, while the new leadership team has also provided a boost - particularly Kelvin Davis as deputy.
“I had him here and we got 150 people...a lot of them I’d never seen at a Labour event before.”
While Te Tai Hauauru covers a swathe of the lower North Island, from the South Waikato to Porirua, Rurawhe says voters’ issues are often the same: poverty and inequality, housing (from homelessness in Porirua to the quality of rentals in Rangitikei), and suicide levels.
Tamati has clocked up about 2,000 kilometres travelling around the electorate, and says people’s concerns are “pretty standard”, including health, housing and employment.
As for his seeming lead, Tamati says “polls are polls”, and unsurprisingly opts for a rugby league analogy to describe his attitude.
“I never get ahead of myself - you’ve got to play the full 80 minutes,” Tamati said.
5. Call for inquiry into China's activities here
In the wake of our joint investigation with the Financial Times into National list MP Jian Yang's background, a leading academic has called for New Zealand to have an official inquiry into China's growing influence into our affairs.
Professor Anne-Marie Brady from the University of Canterbury says Australia is planning to introduce a law against foreign interference activities at the end of the year and may ban all foreign political donations. She says New Zealand should do the same.
Brady, acknowledged internationally as an expert on Chinese affairs, has just presented a paper to a conference in the United States entitled Magic Weapons: China’s political influence activities under Xi Jinping.
She said that after watching China’s growing influence for several years, it was time for a special commission to investigate its impact on New Zealand’s democracy.
Brady said recent revelations that Yang did not declare his background in military intelligence when applying for citizenship are extremely concerning.
See Mark Jennings' full report on Newsroom on Brady's comments and other information on the activities of candidates for political parties.
It also includes details on National's political donors and on Labour MP Raymond Huo and Labour List candidate Chen Naisi, who have connections to the Beijing-aligned international political grouping known as the United Front.
6. Back in the USSR
Michael Reddell also takes a closer look at China in comparison with the USSR of the 1970s in this opinion piece on Newsroom.
He compares China's regime today with the Soviet Union of the 1970s and finds too many similarities to ignore, particularly around its use of military intelligence and its control of information.
7. Coming up...
Bill English is campaigning in Blenheim today.
Jacinda Ardern is campaigning in Wellington today.
8. Some fun things
The country's most famous Massey Ferguson, Myrtle, and a less-than-subtle insult aimed at Jacinda Ardern at the Morrinsville water tax protest yesterday were the subject of plenty of twitter banter, thanks to the twitpic (above) from Benedict Collins:
Chris: "Speaking as a doctor, I implore you, please, if you fart red, get yourself checked out quickly."