There will be plenty of pebbles under beach towels for government ministers this summer, with little time to make substantial policy reforms this quarter beyond managing Covid, writes Peter Dunne
Opinion: Parliament closed the year this week. For many MPs, that means they can enjoy a generally well-deserved break after another grueling year. In their own way, every party, even the National Party, now that its leadership has been resolved, can feel reasonably happy with the end of the year.
It has been another year dominated by Covid-19, the persistence of which has been frustrating both from a public health perspective and from a broader whole-of-government approach. For another year, that meant too many other policy areas requiring government attention were distracted or suspended by the demands (or, in some cases, the excuse) of the pandemic.
As this begins to take its toll, the consolation for all parties is the feeling that with the finally shift to the traffic light system on the back of widespread community vaccination, the days of endless lockdowns are behind us, and the the prospect of less abnormal times awaits us next year.
As New Zealand seeks to join the rest of the world it has been practically locked into for the past 20 months, there are major challenges to overcome in order for this to happen successfully. For example, a study by New Zealand Story, the government agency helping businesses promote themselves around the world, found in the aftermath of Covid-19 as key international markets like Australia, China and the United States , still saw New Zealand as progressive, inclusive and decisive, other important markets like Germany, Dubai and Japan now see us as isolated, unknown, unprepared and closed. All of this makes it imperative that as New Zealand reopens its doors to international trade, our history with the world is positive.
This, in turn, will put further pressure on the government as 2022 looms. With the next elections scheduled for the period October / November 2023, the electoral clock will be turning ever louder once the government process resumes in the new year. Because the three-month “blackout” – the period leading up to an election in which, by convention, governments do not make controversial announcements, introduce new policies, or make significant statutory appointments – will begin around June 2023. This means the actual time left for the government, this mandate to make progress on its overall agenda, is barely 18 months.
Over the past year, the Labor government has signaled several areas in which it wants to make major changes during this legislature, in order to capitalize on its comfortable one-party majority unlikely to be renewed as a result of the last elections. Even so, the complexity and controversy of some of them, as well as the continued requirement to focus on Covid-19, made delivering on the government’s ambitious agenda a more Herculean task than had been imagined. originally.
With time passing now, Covid-19 still demanding attention, and so little progress made elsewhere, it now seems highly unlikely that much of its larger agenda will materialize in the next 18 months. Already the controversial Three Waters has been postponed, with the prospect of it being resurrected in its current form, especially after next year’s local elections, now distant.
A question mark must also hang over the proposed health reforms, the removal of the 20 District Health Boards and their replacement by Health New Zealand. Assuming the public health system is not overwhelmed by Covid-19 cases in the meantime, at this point the government still intends to introduce and ideally pass legislation giving effect to its new structure of public health proposed next year.
It is difficult to see how this can translate into the effective roll-out of the new system by the middle of 2023, let alone how all of the new health professionals promised for Health New Zealand can be trained or recruited. at that time (especially given the continued drag on immigration, including skilled professionals).
The government could therefore eventually embrace the opinion of experts that the midst of a pandemic is not the most ideal time to undertake a major restructuring of the public health system and postpone substantive work on implementation. of its plans until the next legislature. At that point, it is also likely that better information will be available on the kind of structural changes needed in the healthcare system to prepare for the next inevitable pandemic.
The Pharmac examination is also problematic from a temporal point of view. The recently released Interim Independent Review Report was very critical of Pharmac’s current practices, but refrained from making formal recommendations for change. They will come in the final report due in a few months. Assuming that legislation is needed to give effect to at least some of them, the chances of it being passed by parliament in time to be fully implemented and operational by mid-2023 appear unlikely. .
The government’s housing problems, both in terms of affordability and availability, are well known and extreme. The Prime Minister’s recent plaintive observation that prices cannot continue to rise next year as they have been (despite being Prime Minister, she might have added) almost smacked of capitulation. Tax changes introduced by his government and other measures, such as the re-taxation of loan-to-value ratios by the Reserve Bank and credit restrictions imposed by commercial banks, have so far failed to bring down the prices. Today, it seems that only a declining economy will hold back the skyrocketing house prices.
Likewise, government initiatives to build more affordable housing have been a wet firecracker. This week’s announcement that planned changes to the modest first-time home allowance program have been postponed was further confirmation that the government is running out of housing ideas. His hopes currently appear to rest on the recent intensification deal with the National Party, although it is not clear whether National’s commitment remains as firm as it originally was.
Underlying all of these questions lie deeper questions about the long-term performance of New Zealand’s economy. The government has welcomed the apparent resilience of the economy over the past year or so following the pandemic, citing reasonable levels of growth and low levels of unemployment. New Zealand has so far been protected from the worst economic impacts of the pandemic due to the wage subsidy and business assistance programs introduced in the 2020 budget.
However, the additional borrowing of $ 53 billion that made it all have now been almost fully allocated, and the government announced that the switch to the traffic light system will end many business support programs that have kept most businesses, though not those in the hard-hit tourism and hospitality sectors, afloat so far.
Attention is now starting to shift to rising interest rates, after years of stability and abnormally low rates, and the return of inflation, now to its highest level in nearly a generation. The combination of rising interest rates and increased inflation will hit the pockets of many hard over the next year or so. And, over time, all the money borrowed in the last year will have to start repaying.
In turn, these factors will put further pressure on employment as local businesses continue to struggle in the aftermath of Covid-19, now without benefiting from ongoing government subsidies. Already this year there have been a record number of reported business closures and more can be expected as the post-Covid-19 crisis continues next year.
ASB Bank last week warned that the supply chain disruption is likely to keep prices high and hit consumers hard until next year. Shortages of raw materials and building materials caused by less certain international maritime arrangements will not be overcome as long as offshore perceptions persist that we have become isolated and closed. By implication, this makes us both a less reliable business partner and a less welcome place to invest and do business. This in turn will affect the certainty of domestic manufacturing production and export opportunities, putting additional pressure on local employment and household income security.
It’s no wonder that confidence surveys are already showing that New Zealanders are becoming much less optimistic about their future. We know from experience that once economic pessimism sets in, it develops a snowball effect that is difficult to reverse. And as public confidence decreases, so does the sense of uncertainty. These will be the last things the government wants before the 2023 election year.
For now, however, politicians will understandably be delighted to see 2021 and all of its struggles come to an end, and will instead expect a few weeks of sunshine, relaxation, and good family company, which they shouldn’t blame. .
Their respite will be temporary because 2022 promises to be an even more formidable year, regardless of which side of the House they occupy. Government and politics are likely to become much more tense and also contested than this year, which means it will be a fascinating year to watch.
In the meantime, may I take this opportunity to wish everyone a happy and peaceful Christmas and New Year, and good luck with all that 2022 may bring.
This is Peter Dunne’s last column for the year. He will be back at the end of January 2022.