The week in politics: Electioneering heating up - what deals lie ahead?

The Reserve Bank surprised commentators by cutting the official cash rate from 1.5 to 1% this week while Trade Minister David Parker contemplated an increasingly fractious world trade environment.

As well, in the week in politics, the Green Party and National clashed over climate change, raising the question whether the fragile consensus over the Zero Carbon Bill was under further threat.

Former United Future leader Peter Dunne also ponders next year’s election and suggests Labour and the Greens might want to think about an electorate deal in Wellington Central.

The week started with Greens co-leader James Shaw attacking National Party leader Simon Bridges.

Shaw told NBR he did so because he thought it necessary to call out Bridges on some of the things he had said on climate change. On the clean car discount Bridges had been “fear-mongering.”

“There ha been quite a change of tone recently. After the Australian election [Bridges] went over and met Scott Morrison. A social media team composed of Young Nats had gone and helped in the Australian election.

“It looks like that kind of misinformation. Dark ad type campaigning is the new normal,” Shaw said.

Dunne said there had been a change in tone from both sides.

“I thought that Shaw’s comments about Bridges at the Green Party AGM were pretty strong for him in terms of what he’s been saying previously. I think Bridges is probably realising that the election is getting closer and he needs to sharpen up his act. But I wouldn’t go much beyond that.

“I think the bigger risk is the removal of Todd Muller out of the climate change spokesmanship for National might just lessen their interest and commitment to some kind of bipartisan deal.”

Dunne said Muller had been a valuable performer and taking him out of an important portfolio, which everyone said was the major issue of the day, did send a bit of a mixed message.

Coastal shipping

In another move linked to climate change Transport Minister Phil Twyford said the government wanted to move more freight from roads to sea by developing a thriving coastal shipping industry.

“There’s no question that the blue highway hasn’t had the opportunity to move particularly the sort of high volume and heavy freight that’s not time-sensitive [that] can very efficiently moved around the coastline using coastal shipping,” Twyford said.

Dunne said coastal shipping’s demise had been brought on by the then National government passing the Maritime Transport Act in the 1990s. That made it easier for international shipping to move goods around coastal ports. While it killed the coastal shipping service it did not open up new opportunities for freight to be moved around the country by sea.

He said he was pleased the government was looking at the issue because heavy trucks were damaging the road network. But making changes to the coastal shipping industry would require a lot of investment.

“If you’re going to try to rebuild a coastal shipping industry it’s not just about the ships. It’s about the ports. It’s about the railheads to the ports. There’s a massive infrastructure development here and coastal shipping is more than just the major ports of New Zealand too.”

Trump’s tweets

Meanwhile, more tweeting by US President Donald Trump and an escalation in the trade war with China has spooked international markets.

The uncertainty brought on by the trade war and a fear it could lead to a major international downturn was at least one of the reasons for the Reserve Bank to drop the official cash rate to its lowest level ever at 1%. Governor Adrian Orr does not rule out further drops, including the possibility New Zealand might end up with negative interest rates.

The bank hopes its rate cut will encourage consumers to spend more and businesses to invest more to fuel economic growth. At the same time, it is also counting on increased government spending to give the economy a fill-up.

Dunne said it was clear darker times loomed but since the global financial crisis the New Zealand response to difficult times was not to retrench but to spend its way out of a downturn. Orr’s approach was similar by encouraging people to be freer with their spending.

The international trading crisis is a particular worry for Trade Minister David Parker, who said officials have told him protectionism around the world was as bad as it had been in the past 20 to 30 years.

Despite the gloomy news though New Zealand exports were up 7% in the first six months of this year. But most see tougher times ahead.

“We’re holding up pretty well but we’re concerned that we’ll be affected too,” Parker said.

Dunne said the government’s approach to continuing to negotiate new trade deals was the correct one.

While there was a lot of interest in a deal with the UK, once it left the European Union, Dunne said it was more important that New Zealand negotiated an agreement with the EU.

But for a government facing rising economic problems it must also consider how it gets re-elected next year.

A capital cup of tea

Dunne has suggested Labour might consider doing a deal in Wellington Central to ensure the Green Party makes it back into Parliament.

“The problem that both Labour and the Greens have – it’s not an insurmountable one in politics – but they’ve railed against these sorts of deals in the past. They’ve threatened to take away the one-seat threshold rule. They haven’t acted on that. So they’ve just got to go through a mountain of humble pie to get there but in politics anything is possible.”

He said with both the Greens and New Zealand First hovering near the 5% party vote threshold Labour could not afford to lose one of them, let alone both. It would be monitoring the polls carefully up until close to the election.

What will happen in the election? How close will it be?

“Who knows what conditions we will face. For instance, if the economy takes a nosedive in the first half of next year and people are feeling worried about their jobs and looking at a number of the spending promises and thinking, ‘hang on, how come we did all this spending and I’m losing my job’, then it can become very difficult [for the government].

“If, on the other hand, we see a very pronounced movement, not just in New Zealand but elsewhere, on things like climate change then I think the government could ride quite a big wave on its way home. But these are imponderables.”

Dunne said whatever happened, the mathematics of MMP meant any election was close.