Jacinda Ardern must tread carefully, very carefully

Labour to make government with New Zealand First and perhaps Greens

Venkat Raman

Auckland, October 19, 2017

Labour Party Leader Jacinda Ardern has emerged as the Prime-Minister-in-waiting about an hour ago after New Zealand First Party Leader Winston Peters announced that he would go with Labour into a coalition government.

Ending Speculation

His announcement ended 11 days of speculation as he held talks with both National and Labour to determine the next government. Somehow, there was appeared little chance for National-NZ First combination, since there too many imponderables, apart from the animosity that blew up between Mr Peters and Steven Joyce.

And it was becoming apparent day-after-day since the negotiations started that Mr Peters was more inclined to go with Labour.

Miraculous recovery

“It is the worst job in the world,” Ms Ardern quipped when she was asked to comment on how she felt taking over the leadership of the Labour Party.

That was on August 1, 2017 and she had every reason to feel so.

Labour was sliding in opinion polls, its supporters and MPs were frustrated and there appeared little hope of redemption. The mainstream media had begun to write-off the Party saying that it would not have even one seat in the 52nd Parliament. Some journalists said that September 23, 2017 was not the Election Day as far as Labour was concerned but the Doomsday.

But Ms Ardern proved all of them wrong. Her positive attitude, disarming smile and most importantly, genuineness began to reverse the declining trend of Labour.

She proved that she was a leader of the masses at every meeting, interview and press conference. When she attended our Electionlink launch on February 28, 2017, she said, “I can sense the mood for change.”

Little did she know that the mood for change started with her Party hierarchy.

The Jacinda Ardern Cabinet

Ms Ardern may perhaps announce her Council of Ministers inside and outside the Cabinet tomorrow or over the weekend. She told a press conference that New Zealand First would have four Ministers and an Under-Secretary but did not spell out the position of Greens.

She also said that she had offered the post of Deputy Prime Minister to Mr Peters but would not say if he had accepted the offer.

However, it is almost certain that Shane Jones and Ron Mark would be Ministers in the new government.

Not bad for a Party that secured less than 8% of the votes polled.

Ms Ardern said that the Green Party would have to complete its internal process and then perhaps come on board.

Ms Ardern said that she and Party would live by their election promises and work with their coalition partners.

Changing are blowing

New Zealand First believes that an economic correction, or a slowdown, is looming and that the first signs have already emerged.

Mr Peters cited the following as indicators: housing market slowdown; Reserve Bank and trading banks nervousness; cessation of hot money into the economy; property ownership concerns; receding consumer optimism; and ebbing retailer confidence.

Stating that the negotiation process was tough, Mr Peters said there were great risks in whatever decision his Party made and despite having no influence on these risks, he and his Party were open to criticism.

“Our choice today relates to how best we mitigate, not worsen, their impact on as many New Zealanders as possible. As a party, New Zealand First believes that it has secured major policies to advance New Zealand economically and socially,” Mr Peters said.

The Dollar Slide

Even as Mr Peters was speaking, the New Zealand Dollar fell by half a cent.

But that is a normal, nervous reaction to any major political development.

BNZ Chief Economist Tony Alexander said that general policy orientation will shift slightly toward a bit more state intervention and environmental concerns.

He also said that it is unlikely that the operations of the Reserve Bank of New Zealand would be affected, especially in implementation of monetary and prudential policies.

We can expect bans on foreign buying of New Zealand properties and immigration rule changes aimed at cutting gross inflows by some 30,000 per annum – largely of low level students and unskilled people no longer able to get work visas,” he said.

A note of Caution

In a scenario where not a single party has a clear mandate, it would indeed be rule by coalition-a collection of parties and individuals who constitute them. Whether parties with diverse leanings and moderate proclivities would be able to keep their differences outside the cabinet and work together remains to be seen but if past experience is any indication-here and elsewhere-fragmented politics is always short lived.

But much would depend on the ability, nay willingness of the parties sharing power, to pool their resources and take the country forward. Even as Ms Ardern and her colleagues determine the best option that would sustain the government for the next three years, one thing is clear: political expediency makes strange bedfellows and it would be no surprise if the Greens, who were Labour’s worst election nightmare, make it to the treasury benches.

Economic credibility

Labour’s weakest point is its economic credibility. It has been able to coast along on a buoyant economy but has not been tested in a downturn. Its policy-settings are not well equipped to handle a sliding economy. But without the drag of the Left, Labour may be tempted to test innovative policies such as bringing the private sector into infrastructure development.

This and other pro-market moves in areas where state dominance is not performing would give a boost to business confidence and enable it to deliver better on its promises. If it doesn’t adopt growth-orientated mechanisms, the next election result could well be a different story.

But for the present, there is bright sunshine and Labour would try and make plenty of hay, irrespective of its form of government.

Jacinda Ardern has won the battle for recognition but should not lose the peace that follows. She should tread carefully, very carefully, especially because despite being losers in the game, National would be the most formidable opposition in the political history of New Zealand.

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Photo Caption:

Jacinda Ardern speaking at the launch of ‘Electionlink’ pages of Indian Newslink on February 28, 2017.

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