The Kākā by Bernard Hickey
A financial reckoning of a departing PM's legacy

A financial reckoning of a departing PM's legacy

Ardern's legacy is $923b in extra net wealth for home owners, business owners, landlords and the Crown itself, but a tripling in demand for food parcels & social housing & 96,600 in severe rent stress
Ardern’s decisive and empathetic leadership through the terror attack and through Covid was admirable, although her legacy as a progressive reformer of Aotearoa’s political economy in the long run is mixed at best, as even her most dedicated supporters would admit. Photo: Lynn Grieveson / The Kākā

TL;DR: Former PM Jacinda Ardern will give her valedictory speech at 5.30 pm in Parliament today. She will rightly be farewelled with affection by her colleagues and by many, including me, who admired her decisive and empathetic actions as PM during the March attacks and the first year of Covid.

I recommend watching the full uncut interview from last night on 1News with John Campbell. Ardern was an extraordinary politician who achieved so much that wasn’t expected and worked brutally hard at much personal cost, but who ultimately didn’t deliver the improvements in housing, on climate and in child poverty she promised.

My financial reckoning of her time as Prime Minister shows her Labour Government’s policies from 2017 to 2023 made home owners, business owners and the Crown itself $923 billion richer, but that none of that wealth went to renters, who have more than tripled their demand for food parcels and for social housing. In the year to June 2022, 129,100 households said they were so poor after paying their rent that they had to ask for help from a food bank. The number of renting households deemed in a stressed situation and paying more than 30% of their income in rent, has risen to 278,500 from 270,500 in 2019, the first year this statistic was collected.

There were 96,600 households in the lowest 20% of income category who paid more than 40% of their income in rent.

After tonight’s speech, she will become an upaid Special Envoy for the Christchurch Call and join the Board of Trustees of Prince William’s Earthshot Prize, which aims to protect and restore the planet by 2030.

Paying subscribers can see more detail and analysis below the paywall fold and hear more in the podcast above. I have opened this up for all immediately in the public interest. Usually the email is closed beyond this point and the podcast is only available for paying subscribers.

News in our political economy

Lucky breaks - Stats NZ reported yesterday that climate emissions fell 3.5% to 696,000 tonnes of Co2-equivalent on a seasonally adjusted basis in the September quarter of 2022 from the June quarter, although that was largely due to a 26% fall in emissions from burning coal and gas to generate electricity because we had a wet winter that allowed hydro-electric power to dominate. Also, the closure of Marsden Point helped reduced manufacturing emissions by 8.6%, but transport, postal and warehousing emissions rose 9.3%.

Jacinda Ardern’s legacy in financial and social terms

There has been a lot of debate and will be more in the hours, days and months to come about the legacy of former PM Jacinda Ardern. Her valedictory speech at 5.30 pm this evening will be a milestone in the history of our political economy. Her leadership and Government has had a massive impact over the last six years, regardless of whether voters and viewers see it as good or bad. It is not small.

In my view, her legacy as a progressive reformer of Aotearoa’s political economy in the long run is mixed at best, as even her most dedicated supporters would admit. Her pledges to be transformational on climate, housing, public transport and child poverty went mostly unachieved because they clashed with another of her pledges from before the 2017 election — to keep Government debt and taxes low — which she and her closest ally Finance Minister Grant Robertson ultimately decided the Government had to prioritise to keep Labour in power. They chose low debt, low taxes and high land prices over more affordable housing and reducing climate emissions, having promised to do all of those things together.

Labour actually reduced net debt-to-GDP, its lodestar for all policy, from 5.9% of GDP in 2017 to 1.8% just before Covid, in part by delaying investment in hospitals, public transport and housing. It has since risen to 18.9% of GDP or $71.868 billion because of Covid spending and some capital investment, although this was below a forecast as recently as December that it would be 20.0%.1 Labour under her successor Chris Hipkins is embarking on another belt-tightening exercise on operational and capital spending that will squeeze that net debt lower still, in part to take pressure off interest rates and to stop house prices falling. It is now working in Auckland, where auction clearance rates rose in March.

The rich got much richer and the poor got more homeless and hungrier

Ardern, Robertson and Labour had an opportunity to build back better at the height of their powers in the wake of Covid by using the Crown’s squeaky clean balance sheet to borrow more than it did, but in the end fell back on the orthodoxy of prioritising support for land values and business owners. They did it by not borrowing much more and agreeing with the Reserve Bank (Te Pūtea Matua) to force mortgage rates down to 2%, to loosen lending rules and to create $55 billion through Quantitative Easing to use the wealth effect to rescue the economy.

The Government also handed $20 billion in cash to business owners, who were ultimately able to bank that public cash privately as surplus profits in their bank accounts. Meanwhile, land owners’ values rose by as much as $426 billion to $941 billion by the end of 2021 because of the deliberate wealth-effect pumping up of the economy.

That massively widened inequality and means the number of children living in motels, families stuck on public housing waiting lists and people forced to use food banks are now vastly higher than in late 2017 when Labour won power, even though household net worth rose 37% or $613 billion in that time to $2.25 trillion.

Also since late 2017, Government gross debt rose from 29.8% of GDP to 36.3% of GDP by the end of February this year. Its new net debt measure has risen from 5.9% of GDP to 18.9% of GDP and remains 11.1 percentage points of GDP or $42.2 billion below Labour’s new self-imposed debt ceiling of 30% of GDP. In net worth terms, the Government presided over a rise in its own reported net worth from $110.5 billion or 40.1% of GDP to $172.1 billion or 45.3% of GDP. That was largely due to land revaluations after the 2017-21 residential land value boom and an increase in the value of its electricity generator/retailers because they became more profitable.

The bottom line for public and private balance sheets

In summary, Stats NZ National Accounts data show Ardern’s Government chose a set of policies that:

  • increased the net wealth of land and asset-owning households2 (ie not renters but including landlords) by $613 billion to $2.25 trillion;

  • increased the net worth of housing landlords by $111 billion to $315 billion;

  • increased the equity in non-financial businesses (ie excluding banks) by $248 billion to $1.222 trillion;

  • increased the net worth of the Government itself by $61.6 billion to $246 billion, including a $35.3 billion increase in land values to $85 billion and a $4 billion increase in the value of the Government’s 51% shares in Meridian, Mercury and Genesis to $19.8 billion; and,

  • increased annual nominal GDP rose by $120 billion a year to $394 billion, while the population also rose from 4.9m to 5.2m.

That looks a fine financial and economic legacy until you take a closer look at the situations of those who did not and could not take part in that wealth creation: renters and future generations. Their wellbeing went backyards in terms of net worth now and actual future net worth, largely because the future liabilities of climate emissions credits and costs, future health costs, education and justice costs, and future lost productivity costs, are not accounted for in the Crown’s net worth statistics. Treasury does not measure such long-term costs, either because it deems it too hard, not possible, or has not been directed to do so.

Skimping on investment to pull wealth forward to voters now

Just as in a business that skimps on future investment will accumulate a large liability for deferred maintenance or an erosion of intangible assets such as brand value, the Government should see its net worth decline if it decides to increase its ‘dividends’ today in the form of low taxes (or even tax cuts) and reduces its investment in infrastructure and public assets such as health, education and productivity.

This reckoning of the last six years shows that the Government again pursued policies that made homeowners and business owners much wealthier now, effectively by not investing enough in public infrastructure for housing and transport in particular to catch up with both past under-investment and population growth. The burden of that under-investment in housing, public transport, health and education is falling on the young and poor of today and tomorrow, who will have to deal with the unaccounted-for costs of climate change, high child poverty and lost productivity gains linked to poorer public health and the effects of unaffordable rental housing. It is a case of robbing young Paul in the future to make old Peter now much richer.

In effect, Ardern’s Government did what the Governments over the last 35 years have done. They first lowered public debt and taxes as a share of GDP because they saw no need to keep taxing and spending so heavily to invest in an economy (in 1984) that was already ‘over-invested’ and over-indebted with Think Big projects and their debts. They retained that low debt and low tax stance (debt/gdp and tax/gdp to stay at or below 30% of GDP) from the mid-to-late 1990s onwards and then bought nominal GDP growth and re-election by sweating the existing public infrastructure to breaking point and juicing nominal GDP growth with un-debated population growth.

Parliamentary Exchange of the day

My longer reads and listens of the day

My diary for the week ahead

I’ll update the news on these through the day in the chat section of the app.

Today’s highlight is Jacinda Ardern’s valedictory in Parliament

In politics and Parliament:

  • Question Time begins at 2 pm;

  • The General Debate in Parliament is held from 3 pm;

  • Debate on member’s bills is held after 3 pm;

  • General Debate in Parliament from 3pm; and,

  • Former PM Jacinda Ardern will give her valedictory speech in Parliament at 5.30 pm.

In the economy:

  • Reserve Bank (Te Pūtea Matua) is scheduled to announce at 2pm the decision of its Monetary Policy Committee on the Official Cash Rate, with economists and financial markets broadly expecting a second-to-last 25 basis point hike to 5.0%;

  • RBA Governor Philip Lowe is scheduled to give a speech on Monetary Policy, Demand and Supply at the National Press Club in Canberra around 2.30 pm NZT

  • The RBA delivers its half-year Financial Stability Review at 1.30 pm NZT

Thursday’s highlight is that it’s the last day before a holiday

In politics and Parliament:

  • Parliamentary Question Time for Ministers begins at 2 pm NZT

In the economy:

  • ANZ publishes Commodity Price Index for March at 1 pm NZT

Friday’s highlight is that it’s a public holiday

In the economy:

  • US non-farm payrolls and hourly earnings data for March is due at 1.30 am Saturday morning, with economists expecting monthly jobs growth of 238,000 (down from 311,000) in February, and unemployment flat at 3.6%.

Substacks of the day

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Robert Reich
My course “Wealth and Poverty” starts right here this Friday
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The Craic

A fun thing

Ka kite ano


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Part of the reason for the lower-than-forecast net debt is that nominal GDP has risen quickly with inflation. Nominal GDP has risen from $275.5 billion in the year to June 2017 to a forecast 394.8 billion by the end of June 2023, up 43.3% in those six years.


That household net worth includes KiwiSaver & term deposits etc.

The Kākā by Bernard Hickey
The latest daily snapshot of the news, detail, insight and analysis on geo-politics, the global economy, business, markets and the local political economy for citizens and decision-makers of Aotearoa-NZ.