Lessons from New Zealand

UPDATE 19/10/2017: NZ First has announced that it form a coalition government with Labour and the Greens. For the full story, please see New Zealand's kingmaker has spoken.


UPDATE 10/10/2017: We still do not have a result but with all of the votes counted it's looking like a National (56 seats) + NZ First (9 seats) coalition will form a minority government. This is not a new situation for New Zealand, which last had a majority government in 1994. The difference this time is that instead of signing confidence and supply agreements with minor parties such as the centrist United Future, the classical liberal ACT Party, and the indigenous rights-based Māori Party, it now has to cede some actual decision making to the anti-foreigner NZ First party.


New Zealand recently held a general election and the result is still up for grabs, with neither the incumbent Nationals nor Labour gaining sufficient seats to form government in their own right. The conservatives have the most seats and thus can form a coalition with either the left-wing Greens or anti-immigration NZ First. Labour did not get sufficient seats to form government solely with the Greens and so it must strike a deal with NZ First if it is to emerge victorious. As the leader of NZ First Winston Peters put it, there are still 9 possible outcomes on the table and a result will not be known until at least 7 October, the date when all of the special votes have been counted.

But rather than dwell on the intricacies of the election itself and how much ground the major parties are going to have to concede to form government, we want to touch on a broader point. The New Zealand election result is now the latest in what is now a long list of elections around the world - New Zealand, Trump, Brexit, Denmark, Sweden, the Netherlands, France, and even Canada - where voters have pushed back against the status quo.

The familiar topics of multiculturalism, immigration and stagnant wages, a lack of "good" jobs, and the old enemy of ultra-easy monetary policy that has enriched those already holding assets at the expense of those less fortunate are regularly trotted out by minor, so-called "extreme" candidates. The NZ First party literally campaigned under the slogan of "had enough?", and listed its goals as "slashing immigration, reducing foreign ownership of New Zealand assets and reforming the central bank".

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Since the global financial crisis, property prices in all of the above countries and many more - excluding the United States where prices in freer States, e.g. Texas, help to offset socialist land use planning in states such as California - have soared no matter what metric you use. Property price indexes, prices to income, prices to rents, it doesn't matter because the story is the same.

Those who can have loaded up on central bank-sponsored debt to acquire as many property assets as possible in markets where supply has been artificially restricted by local, and in some cases national, governments.

Those who have missed out - even if it's just the perception of missing out - are taking their frustrations out where they can: the ballot box. Or in places where that is not possible, e.g. Hong Kong, the city streets.

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The next federal election in Australia is in all likelihood still a couple of years away. But if politicians continue to waste people's time and money with side issues instead of addressing the growing regulatory burden, electricity costs, house prices and flat wage growth, then there will be a serious voter backlash against the major parties. Learn from New Zealand, fix the hard issues or face a "kingmaker" likely in the form of Pauline Hanson's One Nation.

About the author

Dr Justin Pyvis is the Founder and Chief Economist at Pixelics. Justin is a published academic with a wealth of experience from working at AECOM, a global consultancy on the Fortune 500 and more recently with Asianomics Group, an economic, corporate and technical analysis research company based in Hong Kong.