[Filed 18 November and published in Boardroom Magazine December 2013]
Elections change politics but not necessarily policy direction. So there are two questions for 2014: will the politics change much; and will the policy direction change?
In 2011 the politics changed little. National stayed in office, supported by the same three parties as after 2008 but needing at least two for a majority instead of ACT alone as in 2008-11.
Moreover, the Maori party claims it voted more often against National than Labour did in National’s first term and now sounds like an opposition party, especially when new co-leader Te Ururoa Flavell is talking.
That reflects its mauling in 2011, the Tai Rawhiti by-election and recent polling, which for the first time has Labour ahead in the electorate vote overall in the Maori electorates. To survive the Maori party has to detach from National.
Slimmer politics usually means more timid policy. Not so for John Key’s cut in leeway post-2011.
Before the 2011 election National strategists talked of the need for “results” to put to voters in 2014. So policy change has accelerated. This is now the most reforming cabinet since the late 1980s radical reforms.
The list is long, headed by major changes to resource management, local government, environment and labour law. Add welfare reform, state sector reform to judge agencies by “outcomes”, not just “outputs”, fiscal consolidation (taking spending down to 27 per cent of GDP by 2020) and tighter management of assets. Throw in asset selldowns to raise capital for irrigation, infrastructure and schools and hospitals.
The dominant objective is GDP growth. Ingredients include less red tape, friendlier mining rules, water to boost agriculture, weaker climate change action, more accessible and more disciplined government agencies and ultra-fast broadband (UFB).
The Labour party has bought into the fiscal straitjacket, with maybe some lengthening of the sleeves for itself and a bit more to accommodate the Greens and, if needed, New Zealand First. Labour backs the UFB and some resource management and local government changes.
But it has sworn to reverse many of those changes and the labour law reforms. It would redirect welfare and education reform, toughen climate change and environmental law and change direction in health and housing. It would be less generous with mining and prospecting licences (though would face down the Greens’ extremism) and with foreign investment approvals (though less stringent than the Greens and New Zealand First would want).
Labour calls this “hands-on” government, reflecting its reading of economic theorists’ diverse criticisms of the market-liberal orthodoxies in the wake of the global financial crisis.
Hence proposals for sweeping changes to monetary policy, a single state purchaser of electricity from generators, 100,000 houses built by the state for lower-income buyers and a state-backed insurance company, plus tighter tax on trusts and foreign-owned companies and a capital gains tax.
Labour has talked of criminal liability for directors for the likes of the Pike River mine collapse. Many voters would approve.
Is that just a throwback to the 1930s-70s “mixed-economy”? The difference, Labour says, is that it wants to work in partnership with firms, not-for-profits and local authorities, not as overlord.
The message for companies is that a Labour-Green-based government would aim to make major policy change, not just trim the edges. So boards and top management would logically be proactive in Labour’s “partnerships” to influence changes so firms can live with the changes. In behind that, forward-thinking boards will make contingency plans to cope with the “regulatory risk” lurking in the 2014 election.
How likely is that risk?
National faces a lonely election. ACT can offer help only if can get disgraced John Banks to retire in favour of a saleable candidate for Epsom and even then National voters will take some persuading to vote that candidate in. Will National voters (improbably) indulge Peter Dunne one more time? In any case, the maximum Act and Dunne can add to the National side is a net one seat.
The Maori party can offer at most two seats and instead may desert.
So, unless another helper emerges or Winston Peters (on the reasonable assumption he clears 5 per cent) can somehow be persuaded against huge odds to join Key, National must engineer a seat for Colin Craig’s Conservatives which would add three or four MPs to its own total.
That looks bleak for National. But Labour has yet to get traction. The economy will be mildly positive for middling households next year. National might well just squeeze back.
But if it does, it will most likely not be the vigorous reformer of this term. Some finishing off 2011-14 reforms and fine-tuning will likely be its limit. But even that could be good news for boards: a change of government in 2017 is likely to undo less of the 2011-14 changes than if the change is next year.