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Falling into place

Falling into place

Ardern’s “transformation” is now just slow, steady adjustments in labour, debt and housing markets.

It wasn’t meant to be like this. In 2017, Jacinda Ardern, the newly elected Prime Minister, declared capitalism “a blatant failure” — echoing her MMP anointer, Winston Peters, who pronounced modern capitalism not friend but foe.

Progressives everywhere beheld their saviour. The young leader promised to fix the housing crisis, end child poverty, clean the rivers and advance “my generation’s nuclear-free moment” by solving climate change. She pledged to revolutionise education. She would “never ever be satisfied so long as there is even one life lost” to youth suicide. The new global political celebrity didn’t just recycle Barack Obama’s message of hope and change, but augmented it with love.

Beneficiaries of the status quo contented themselves that Peters was a biddable handbrake on genuine change. The same explanation met the emotional needs of Ardern’s supporters as her unmet promises piled up.

Everything was meant to change after October 2020. The failure of the 2019 “year of delivery” that in February 2020 polls had Simon Bridges on track to be prime minister was expunged from memory. Equally incomprehensible with hindsight is Ardern’s dithering in early March 2020 before boldly leading a world-historic pandemic response. Ardern’s election triumph, the most decisive for 70 years, was entirely her own and deeply personal, profoundly bonding her with those who believe she has saved their lives.

Nearly half a year later, restored progressive hopes and renewed establishment fears have given way to the realisation Ardern and Finance Minister Grant Robertson were the handbrakes all along. Whatever genuine reforming zeal they had seems extinguished by the failures of keystone policies such as KiwiBuild and fees-free to do anything at all. Through Christchurch and Covid, Ardern has metamorphosed into a Helen Clark- or John Key-like figure: the beloved leader of the nation, with cross-party appeal, but primarily committed to retaining o ice through the careful maintenance of the status quo.

So, having railed against the housing crisis for nine years in opposition and presiding over the worst house-price inflation for nearly 20 years, Ardern has decided houses shouldn’t get cheaper after all but keep rising in price, albeit with “sustained moderation”. Yet there is no policy programme to achieve even that, with forecasts picking house prices to grow by around another 10% in 2021. Undeterred by this mockery of her pre-2017 dreams (and those of her supporters trying to save for a first home), Ardern stands resolute against the capital-gains, land or wealth taxes she herself insists would dampen house prices or at least raise revenue for redistribution.

Likewise, she is adamant there will be no fuel-tax increases or new taxes of any kind. Income tax will remain unchanged, except for the new 39% marginal rate capturing some of the income of the highest-earning 2% of taxpayers — less ambitious tax hikes than Boris Johnson’s Tories are implementing in the UK.

Despite Ardern claiming child poverty motivated her to enter Parliament at the end of Clark’s reign, her government has failed to fully implement any of the 42 key recommendations made by its Welfare Expert Advisory Group more than two years ago. There has been no improvement for the quarter of Māori and Pacific children living in material hardship, or the 10% of their Pākehā peers.

Similarly, Ardern’s passion on climate change is expressed mostly in commissioning advice she may or may not heed. Her commitment to replace petrol and diesel vehicles with electrics or hybrids also pales beside Johnson’s. After her government wilted under pressure from Rio Tinto over its demand for even cheaper electricity, lobbyists for Big Dairy and other emitters are confident of defeating any Climate Change Commission recommendation about which they can generate enough fuss.

At Waitangi, the PM even declared her commitment to “transformation” to be inoperative. The buzzword now is that her government will be “foundational”, whatever that means. Nevertheless, the success of her Covid strategy suggests the factors required to secure her semi-permanently in off ice are now falling into place. The reasons will neither please those who swallowed Ardern’s promise of meaningful change nor distress those who feared it.

The final vindication of Ardern’s Covid response was early February’s labour force data, unexpectedly showing unemployment back below 5%, underemployment beginning to correct and average hourly earnings growing strongly, despite minimal wage rises. It was a near-miraculous result amid a global pandemic and confirmed Ardern was right that the best economic response to Covid was stamping it out.

The statistics reflect tens of thousands of people keeping their jobs who were expected to lose them. More broadly, the Reserve Bank is now expected to stop printing money and increase interest rates earlier than thought, subduing house-price inflation towards Ardern’s “sustained moderation” and improving bank returns for both retired Baby Boomers and Millennials saving for a first deposit. Those with access to the Bank of Mum and Dad need not worry as much as others about being shut out of the market again now the Reserve Bank has reimposed loan-to-value ratios.

But the good news for the middle class is no comfort for the poor. The reason average hourly earnings improved last year despite stagnant wage rates is that lower-paid jobs kept vanishing while work in higher-paid industries grew. That’s good news in the long run, but widens income inequality in the short.

Slow, steady adjustments in labour, debt and housing markets benefiting mainly the middle class without troubling the elites are hardly the radical transformation Ardern promised to progressive acclaim in 2017. It is more endorsement than rejection of the post-1984 economic consensus. Still, Ardern can claim it as a transformation of sorts, at least in the Clark or Key mould. And no political junkie could fail to note it worked for those two — at least in getting them both the third term prime ministers cherish above all else.

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