In today's email we dig into which of Winston Peters' big and small ticket items the coalition negotiations might hinge on.
1. And they're off
Negotiations to form a Government began in earnest yesterday in Wellington with New Zealand First's negotiating team meeting for more than two hours each in a Beehive conference room with teams from National and Labour in that order. Winston Peters said he remained confident of a decision by October 12.
Little of substance emerged from the talks yesterday as the respective leaders kept their comments to a minimum when arriving and leaving.
Winston Peters said on the way in to his meeting with Labour that he had "precisely nothing to say about these meetings at all until they are completed."
However, he made a few more comments on the way out to reporters, including that the meetings had been constructive and "we've got a lot of work done."
He said there was nothing to suggest talks would not be completed in time for a decision on a Government by Thursday, which is the day he named (reported first on Newsroom on July 25) when there would be a decision.
He also seemed to suggest that policy was more important than ministerial roles, suggesting the potential for a deal where policy concessions were agreed before New Zealand First took a role on the cross-benches with some sort of supply and confidence deal that did not involve cabinet or ministerial roles.
Asked about policy vs ministerial roles, he said: "Let's sort out the things that really matter. Policy is everything, otherwise it's just about personalities isn't it? And that's your guys' game."
Asked what type of governing arrangements he preferred, he said: "If you go into talks with a mind that's not neutral, not independent...if you go into it with an open mind, you'll possibly get the right outcome.
If you don't keep your eyes wide open to all the possibilities, you may miss a great chance for your country and for the country's economic and social progress."
Peters said all nine permutations of arrangements were still on the table. He has never specified what they were, but are thought to range from full coalitions to remaining on the cross benches with a number of supply and confidence options, including abstention.
New Zealand First announced last night that new meetings would start with National at 9.30 this morning and with Labour at midday. Peters said yesterday he expected them to go on "into the night."
Peters also repeated he would take any deal back to his caucus and the New Zealand First board for a decision. "The board is on standby to turn up one day soon and things are under control," he said.
There were a couple of changes to the negotiating teams yesterday. Annette King was substituted in for Michael Cullen on the Labour side because Cullen was travelling. National included Paula Bennett for the first time. She was not included in the preliminary discussions on Thursday.
2. Winston's likely big ticket wins
Without much of substance emerging, it's worth revisiting what policies are likely to be in play and what are the range of possibilities for wins (and losses) for New Zealand First.
There are some big ticket items in budgetary terms over the long run that Peters is expected to secure from either side.
The first is his demand to keep the retirement at at 65. National pledged earlier this year to raise the age of eligibility to 67 starting in 2037 and finishing in 2040. Jacinda Ardern stuck with Andrew Little's policy of not changing the retirement age. It could be easily given up by National and a cynic might suggest the new policy was created as a type of straw man to be dismantled in case of emergency during negotiations.
Peters has also demanded a restart of contributions to the New Zealand Superannuation Fund immediately, which Labour has pledged to do too. National had plans to restart the contributions in 2021/22, but they could be brought forward, albeit at cost of billions, depending on the exact start date and the rate of ramp up.
3. Winston's likely small ticket wins
There are a range of easy to grant policy wins for New Zealand First with a limited cost in fiscal or policy terms, with two exceptions.
One of the biggest 'small ticket' wins for Peters in political impact terms would be a revamped Super Gold Card that becomes a debit card, a transport card (AT Hop and Snapper) and a Fly-buys style loyalty scheme.
He is also expected to secure some sort of manned re-entry to the Pike River mine, which he has spent a lot of time talking about. Peters met with the Pike River families again just before the beginning of the talks.
Another small ticket win would be the creation of a 'KiwiFund,' which is a New Zealand First proposal for a state-run and default KiwiSaver fund that only invests in New Zealand assets. It could either be run by Kiwibank or the New Zealand Superannuation Fund. Creating a state-owned KiwiInsure is less likely.
Other small ticket items relating to banking and finance would be an Inquiry into bank profits and shifting Government banking from Westpac to Kiwibank, both of which New Zealand First have called for. National and Labour would have few political or budgetary problems granting both.
There are two 'small ticket' items in budgetary costs that would be difficult for National to achieve though.
The first is New Zealand First's demand to reduce net migration to 10,000, which would not cost much in fiscal terms, but would have much bigger economic and political implications. Such a large cut would be problematic for National's supporters in agriculture, aged care, tourism, retailing and hospitality.
It would also cut against its campaign rhetoric about keeping the doors open for the economy to keep growing, at least in total terms (as opposed to per capita or per hour worked terms). Labour would find it easier to cut migration to closer to 40,000 with its existing policy, but would struggle beyond that given opposition from its own supporters.
One potential fudge for National would be to pledge to cut permanent residency approvals to 10,000 per year from around 45,000 currently. That would not immediately reduce net migration, but would mean those students and others already here as temporary workers would lose hope of getting permanent residency.
Five percent of the workforce is already on temporary work visas. That could increase under such a policy, which would also prove a nightmare for immigration lawyers and Immigration New Zealand.
The second small ticket item that could prove problematic in political and policy terms for National is a foreign buyers' ban on land and housing, and a foreign ownership register.
National campaigned to keep capital flows unhindered and its biggest donors certainly want to keep the doors open. John Key has previously suggested a stamp duty on foreign buyers was one way to get around the current restriction on bans written into the Korean and Taiwanese free trade agreements. But that is a long way from the buyers' ban that Peters wants and Labour is prepared to give.
4. Winston's likely big ticket losses
There are some policy demands that are likely to be too expensive and politically difficult for both National and Labour to grant.
The biggest and hairiest of which is New Zealand First's calls for removing GST on basic food items and corporate tax cuts to 25 percent for most businesses and 20 percent for exporters. Both break the 'broad base, low rate' principles of taxation.
The other one that would prove logistically and fiscally difficult is direct GST revenues from tourism back to regional Governments for tourism infrastructure and directing the non-service components of GST on rates back to regional Governments. Auckland Mayor Phil Goff called yesterday for GST on rates to be directed back to Councils.
One fudge for both National and Labour would be to create more and bigger tourism infrastructure investment funds to be paid for from the general coffers.
Another big ticket item that would be logistically and politically difficult for both sides is Peters' demand for the Auckland Port to be moved to Auckland by 2027. The total cost to the central Government of firstly buying the port off Auckland and then investing in the rail and port infrastructure to make the move would be high single-digit billions of dollars. It would also be logistically difficult, given most of the imports need to be brought back to Auckland.
A more likely response from both National and Labour would be for the Government to fund a regional port study and a feasibility study of such a move.
The other big ticket item that is unlikely to be granted by National is New Zealand First's call for a deposit guarantee on New Zealand's banks. The Reserve Bank is opposed and the potential cost could put New Zealand's credit rating at risk. But it is supported by Labour and the Greens, so could be a wild card if Peters chooses to go with the left.
5. BNZ's Healy wants capital gains tax
The election again seemed to settle the debate among voters about a capital gains tax. They essentially voted again against such a tax, but unusual voices continue to step up to say one is needed.
The latest is BNZ CEO Anthony Healy, who told Rod Oram in an interview for Newsroom that a Capital Gains Tax should be considered.
"I do think the shape of our tax system needs to be looked at, particularly when you consider some of the widening gaps between rich and poor," he said.
"I think addressing that through redistribution, particularly with a capital gains tax, would certainly be something I'd like both (potential) governments to be considering."
6. TPP at risk in coalition talks
Newsroom's Foreign Affairs Editor Sam Sachdeva has taken a good long look at the prospects for New Zealand in the Trans Pacific Partnership, given the debate about forming a Government over the next week.
After years of talks, the eleven countries that make up the Trans-Pacific Partnership are set to wrap up negotiations on the sidelines of Apec in early November.
Yet whether New Zealand will be able to sign off on the free trade deal it helped initiate remains to be seen, thanks to uncertainty over the shape of the next government.
While National has been a staunch advocate of the TPP, power rival Labour and kingmaker NZ First have both been outspoken critics of aspects of the deal.
What are their chances of making the changes they want, and could New Zealand’s involvement in the deal fall at the final hurdle?
7. Coming up...
Government-forming negotiations will continue this week. Winston Peters has previously said he expected to make his choice by October 12 (this Thursday), which is the day the writs are returned to confirm the election result.
8. One fun thing
Just to get away from politics for a bit, here's a tweet that gave me a giggle this morning.
Andrew Mulligan: "Hey Auckland. What are the fireworks for? Is it because the LVRs are working?"
For those wondering where Saturday's final election results are, have a look at our special emails sent on Saturday afternoon and Sunday morning. They'll be back in your inbox.
Also, there's been an update to Rod Oram's column from Friday. The EPA denied a full and formal review was being done, although Peter Gluckman did not demur when Rod asked him about the review repeatedly last week. Gluckman is clearly concerned about the EPA's direction and the new chief scientist for MfE is investigating.