Outcome From New Zealand’s Election Likely to Have Major International Implications

By: Jeffrey Caviston

On September 23, New Zealanders went to the polls to vote for their next government.[1] As a result of a shifting political landscape, party leadership changes, and the country’s proportional voting system, voters elected a coalition progressive-populist-nationalist government.[2] In contrast to the country’s pro-globalization, anti-regulation regime of the last 30 years, the new government is expected to pursue more isolationist policies, particularly in the areas of immigration and foreign trade.[3]

New Zealand’s Electoral System

Similar to the election systems employed for selecting members of the Scottish and Welsh legislatures, Members (MPs) of New Zealand’s 120-seat Parliament are elected through a Mixed Member Proportional (MMP) voting system.[4] The MMP utilizes a two-tier approach whereby voters cast two votes, an electorate vote and a party vote.[5] The electorate vote is used to decide the MP who will represent that voter’s district and operates on a First-Past-The-Post system, i.e. the candidate who receives the most votes wins.[6] The party vote goes toward the voter’s preferred political party and “largely decides the total number of seats each political party gets in Parliament.”[7] Using the results of both votes, a mathematical formula is then employed to apportion the seats in Parliament amongst the eligible political parties.[8] As noted by the Electoral Commission, because of MMP “[c]oalitions or agreements between political parties are usually needed before Governments can be formed.”[9] Thus, fringe parties can wield considerable influence in New Zealand by playing the role of “kingmaker” when one of the two mainstream parties fails to win enough seats.[10] This role usually involves the mainstream party agreeing to support some of the fringe party’s policies in exchange for the fringe party’s broad support of the mainstream party’s government.[11]

The 2017 Election and Forming of a Coalition Government

Leading up to the election, the center-left Labour Party picked up steam after replacing its leader with the more youthful—and apparently more likeable—Jacinda Ardern and taking a decidedly more progressive tone.[12] While the incumbent center-right National Party ultimately won more seats (56), Labour peeled off enough (46) to prevent National from reaching the 61 MPs necessary to form a government.[13] Labour then entered a “confidence and supply” bloc with the Green Party,[14] and both Labour and National began coalition negotiations with the nationalist-populist New Zealand First party (NZF) for its nine votes and control of government.[15]

On October 19, nearly four weeks after election day, the leader of NZF, Winston Peters, announced that his party would support a Labour coalition government (the “Coalition”), thus ending Nationals nine-year control.[16] Consequently, Ms. Ardern is set to become New Zealand’s Prime Minister with Mr. Peters serving as Deputy Prime Minister.[17] And although the Coalition will face strong opposition from National, there appears to be common policy agreement between Labour, Green, and NZF on several key issues.[18]

Potential Public Policy Changes Impacting the International Community

New Zealand’s Coalition government is expected to pursue major shifts in policy that move away from National’s more traditional, free-market-oriented approach toward a combination of progressive and populist measures.[19] A few areas of the law that received particular attention during the campaign—and are thus likely to see early changes under the new government—are immigration and foreign trade.[20]

Immigration

Perhaps the most striking departure from the previous government could involve changes to the country’s immigration policies. Since the latter decades of the 20th century, the influx of foreign investors and entrepreneurs into New Zealand has provided a boost to the island-nation’s economy.[21] However, in recent years there has been growing concern surrounding the consequences of such investment, namely increasing property values and decreasing job opportunities for locals.[22] Thus, pursuant to one of its major points of agreement, the Coalition is proposing a significant reduction in net migration into the country, somewhere around a 60% decrease from the current levels.[23] Relatedly, the Coalition is also proposing more benefits for college students with the apparent corollary effect of reducing the number of international students attending New Zealand’s universities.[24]

Foreign Trade

Following a recession in the early 1980s, New Zealand’s economy transitioned from being a heavily regulated, low growth market to a lightly regulated, high growth market reliant upon foreign trade and investment.[25] By utilizing its natural resources, e.g. farmland, forests, and climate, New Zealand has developed “a very export-driven competitive economy,” with primary commodities, i.e. unprocessed materials, representing about 15% of those exports.[26] At the same time, the influx of foreign investments have led to market diversification, with the result that New Zealand’s economy is no longer singularly dependent upon primary commodities.[27]

But recent developments have highlighted some negative consequences of New Zealand’s transformed economy. Speculation in property by foreign investors has been criticized for contributing to home price increases and making home ownership less affordable for New Zealanders.[28] Additionally, immigration has been “blamed for . . . stagnant wage growth” and employment opportunities.[29] In light of these apparent drawbacks, the leaders of the Coalition have openly criticized the country’s adherence to free market policies.[30] Moreover, similar to its approach on immigration, the Coalition is proposing strict limitations on foreign investment and ownership of property.[31] Ms. Ardern has also signaled dissatisfaction with the Trans-Pacific Partnership, leaving open the possibility that her country’s participation in the agreement could change.[32]

These proposals are reminding some of “Fortress New Zealand”, the period of heavy regulations existing prior to the 1980s which severely hampered New Zealand’s economic growth.[33] Cuts to foreign student visas may also “mean a decline of $250 million” from universities.[34] Moreover, there is concern that this change will cause reputational damage that may not be immediately recognized and could have lasting effect.[35] Nevertheless, it seems that under the Coalition, New Zealand is set to enter a new generation of economic policy fundamentally different that its last one.[36]

Conclusion

New Zealand’s new government stands in contrast to the country’s recent political and economic traditions. Given these traditions and the country’s election system, the Coalition represents a unique mingling of political interests. Ultimately, the next three years will reveal the extent to which these interests compel New Zealand to retreat from the economic principles of globalization.

[1] 2017 General Election, Electoral Commission of N.Z., http://www.elections.org.nz/events/2017-general-election (last visited Oct. 25, 2017).

[2] See Charlotte Graham, Jacinda Ardern, New Zealand’s Sudden Star, Gets Set to Govern, N.Y. Times (Oct. 20, 2017), https://www.nytimes.com/2017/10/20/world/asia/jacinda-ardern-new-zealand.html.

[3] Dan Satherley, What Labour Has Planned in Its First 100 Days, and How Likely It’ll Happen, Newshub (Oct. 20, 2017), http://www.newshub.co.nz/home/election/2017/10/what-labour-has-planned-in-its-first-100-days-and-how-likely-it-ll-happen.html.

[4] Where Else is MMP Used?, Electoral Commission of N.Z., http://www.elections.org.nz/voting-system/mmp-voting-system/where-else-mmp-used (last visited Oct. 18, 2017).

[5] MMP Voting System, Electoral Commission of N.Z., http://www.elections.org.nz/voting-system/mmp-voting-system (last visited Oct. 25, 2017).

[6] Id.

[7] Id.

[8] Sainte-Laguë Allocation Formula, Electoral Commission of N.Z., http://www.elections.org.nz/voting-system/mmp-voting-system/sainte-lague-allocation-formula (last visited Oct. 25, 2017).

[9] MMP Voting System, supra note 7.

[10] See Eleanor Ainge Roy, Winston Peters: Who is the Man Who Will Decide New Zealand's Next Prime Minister?, The Guardian, Sept. 23, 2017), https://www.theguardian.com/world/2017/sep/23/winston-peters-who-is-new-zealand-first-election.

[11] See id.

[12] Matthew Brockett, Jacinda-Mania Sweeps New Zealand as Labour Seeks Poll Upset, Bloomberg (Aug. 7, 2017), https://www.bloomberg.com/news/articles/2017-08-07/jacinda-mania-sweeps-new-zealand-as-labour-seeks-election-upset.

[13] 2017 General Election – Official Result, Electoral Commission of N.Z., http://www.electionresults.govt.nz/electionresults_2017/index.html (last visited Oct. 25, 2017).

[14] Green Party Ratifies Confidence and Supply Deal with Labour, N.Z. Herald (Oct. 19, 2017), http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11934957. A confidence and supply agreement basically provides a larger party with majority support when it comes to votes on the budget and whether to hold early elections. See Anna Bracewell-Worrall, What is Confidence and Supply . . . And How Does it Differ From a Coalition?, Newshub (Oct. 4, 2017), http://www.newshub.co.nz/home/election/2017/10/what-is-confidence-and-supply-and-how-does-it-differ-from-a-coalition.html.

[15] Edward White, New Zealand Government Coalition Result Slated for October 19, Fin. Times (Oct. 18, 2017), https://www.ft.com/content/f06d3907-8297-3740-8e0c-045688feeb4a.

[16] Graham, supra note 2.

[17] Ana Nicolaci da Costa et al., New Zealand Populist to Become Deputy Prime Minister, Foreign Minister, Reuters (Oct. 23, 2017), http://www.reuters.com/article/us-newzealand-election/new-zealand-populist-to-become-deputy-prime-minister-foreign-minister-media-idUSKBN1CS2SR.

[18] Jonathan Barrett & Ana Nicolaci da Costa, Incoming New Zealand Government to Review Central Bank Objectives, Reuters (Oct. 23, 2017), https://www.reuters.com/article/us-newzealand-election/incoming-new-zealand-government-to-review-central-bank-objectives-idUSKBN1CS2SR.

[19] See Satherly, supra note 3; Graham, supra note 2.

[20] Satherley, supra note 3.

[21] Org. for Econ. Cooperation & Dev. [OECD], Economic Surveys: New Zealand 19 (June 2015),  http://www.oecd.org/eco/surveys/New-Zealand-2015-overview.pdf; N.Z Ministry of Bus., Innovation, & Growth, International Investment for Growth 26 (Oct. 2015), http://www.mbie.govt.nz/info-services/business/business-growth-agenda/pdf-and-image-library/towards-2025/treasury-growth-report-bga-investment-2015-optimised.pdf [hereinafter Growth Report]. Accordingly, New Zealand tailors its immigration laws to provide for changes in its social and economic needs. See Immigration Act 2009, pt 1 s 3 (N.Z.).

[22] Incoming New Zealand Government to Review Central Bank Objectives, supra note 18.

[23] See Roy, supra note 10; Ardern Confirms Labour’s Immigration Target to Hold Sway, Radio N.Z. (Oct. 21, 2017), http://www.radionz.co.nz/news/political/342077/ardern-confirms-labour-s-immigration-target-to-hold-sway.

[24] Lincoln Tan, Labour-NZ First Coalition: Immigration Changes Follow Labour Policy, N.Z. Herald (Oct. 24, 2017), http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11936286.

[25] Economic Overview, N.Z. Now (Aug. 22, 2017), https://www.newzealandnow.govt.nz/investing-in-nz/economic-overview; see Growth Report, supra note 21, at 6-7.

[26] Economic Overview, supra note 25.

[27] See Res. Bank of N.Z., The Reserve Bank and New Zealand’s Economic History 11, 21, 25 (2007), https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Factsheets%20and%20Guides/factsheet-the-reserve-bank-and-nzs-economic-history.pdf [hereinafter New Zealand’s Economic History]; Growth Report, supra note 21, at 14.

[28] New Zealand Bans Foreign Home Buyers, BBC (Oct. 25, 2017), http://www.bbc.com/news/business-41745129.

[29] New Zealand Election Results: Jacinda Ardern Elected, Herald Sun (Oct. 19, 2017), http://www.heraldsun.com.au/business/work/new-zealands-most-powerful-young-woman-is-now-prime-minister-jacinda-ardern/news-story/0bc5d177ba9e41aaeac22a119a6a2a5e.

[30] Chris Baynes, New Zealand’s New Prime Minister Calls Capitalism a ‘Blatant Failure’, The Indep. (Oct. 21, 2017), http://www.independent.co.uk/news/world/australasia/new-zealand-new-prime-minister-jacinda-ardern-capitalism-blatant-failure-a8012656.html.

[31] Anne Gibson, Finance Expert: Foreign Land Sale Ban Could Hurt Economy, N.Z. Herald (Oct. 21, 2017), http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11932302

[32] Benjamin Cooper, New Zealand’s Incoming Leader Flags TPP Problems, Reuters (Oct. 22, 2017), https://www.reuters.com/article/us-trade-tpp-newzealand/new-zealands-incoming-leader-flags-tpp-problems-idUSKBN1CR042.

[33] Gibson, supra note 31; see also New Zealand’s Economic History, supra note 27, at 19–23.

[34] Tan, supra note 24.

[35] Id.

[36] See Graham, supra note 2.