Bipartisan reform hopes fading even faster

National promises to repeal reworked RMA after five years of development; MBIE reports 110,000 families can't afford warm homes; 700 reports of bad housing in Greens survey

TL;DR: National has ended any remaining hopes of enduring Resource Management Act reform, adding to the immolation of its once-bipartisan approach with Labour to higher-density house building and a growing divergence over how, and even whether, to reduce climate emissions to zero by 2050.

National pledged yesterday to repeal the results of a five-year process of reforming the RMA, which at various points was something all four main Parliamentary parties had agreed was necessary and achievable. Now developers, councils, investors and hopeful first home buyers can no longer rely on the current Government’s talk of RMA reform enabling the solution of the housing and climate crises with lots more housing supply and climate-friendly transport options.

Now, everyone can bet on a lack of cross-agreement to solve the underlying issues of housing supply and transport reform. But they can also be sure of an unspoken but clearly bipartisan agreement to keep the economy running hot and pushing budgets back into surplus through fast population growth through cheaper imported temporary labour, but without enough infrastructure investment to go with it.

News elsewhere in our political economy here and overseas

• The Government announced an extra $128 million in funding for Universities over two years to help them cope with lower domestic enrolments, but it’s not clear if it will be enough to stop hundreds of redundancies that have already begun.

• The Government announced it had agreed to leave the Reserve Bank Monetary Policy Committee’s remit and legislation virtually unchanged after its five-yearly remit review.

• PM Chris Hipkins met China’s President Xi Jinping in the Great Hall of the People in Beijing last night and said he was pleased to “reaffirm our close economic relationship,” while President Xi described New Zealand as a “friend and partner," and said China wanted to “promote the steady and sustained growth of their comprehensive strategic partnership”.

Hope for bipartisanship on climate and housing fading fast

For a while over the last couple of years, it looked like the combined weight of our political and economic mainstreams might try to repeat the great achievements from the last time our political economy faced existential crises.

Alas, those brief hopes that National and Labour would combine to enable much freer housing development and significantly reduce climate emissions have now all but gone. This year the pressures of a tight MMP election campaign and two new leaders fighting for their lives have now killed those hopes.

It has been done before, albeit pre-MMP.

The two major parties worked together in the late 1980s and early 1990s to overcome the failings of a inflation-prone and hide-bound economy run almost singlehandedly by Robert Muldoon. It helped that both Labour and National were bonded by their loathing of Muldoon and justified belief the political economy needed both guard rails and buffers to stop one man over-riding environmental concerns and loading up an entire nation with debt he negotiated.

The economic catastrophes of 1984¹ and 1990² when New Zealand’s Government was essentially broke provided the crises that were not allowed to be wasted by first the Labour Government and then the National Government of the day. They agreed on major reforms that were not repealed. But they were also essentially doing what a good democracy should: find common ground and an agreed approach to dealing with agreed common problems.

Aotearoa’s political economy was not flexible nor diversified enough to deal with global economic shocks before those changes, thanks to its fixed exchange rate and then-high and short-term Government debt denominated in foreign currencies. So National and Labour essentially agreed between 1987 and 1993 to create three new foundational pieces of legislation that took the most powerful economic levers out of the hands of a Prime Minister or Finance Minister, especially when they were the same person, and made it very hard for any Government to borrow overseas to fund massive national development that over-rode local interests.

Those three foundational legs of our political economy were:

• The Reserve Bank (1989), which took the power to change interest rates out of the hands of politicians and mandated an independent official with responsibility to use interest rates to achieve low inflation;

• The Public Finance Act (1989), which prevented Governments from hiding spending or acting ‘imprudently’ to run big deficits for long or borrow heavily for long; and,

• The Resource Management Act (1991), which enabled local interests to block big developments being pushed through by the Government or others.

Those three Acts worked together to slay the inflation dragon, to reduce and domesticate Government debt and to provide the tools to stop substantial foreign-debt-funded public investment in infrastructure. They were essentially multi-generational and bipartisan Acts to beat inflation and rein in Government borrowing and investment. They still exist today, largely unfettered, albeit with plenty of tweaks.

So what about today’s challenges? Can they respond again?

But a growing bipartisan frustration over a lack of housing supply and an initial agreement to tackle climate change had created the conditions for a new bipartisan settlement.

The Zero Carbon Act was the first major bipartisan agreement, although that is now fraying at the edges with National deciding to ditch the He Waka Eke Noa process to bring farming into some form of emissions reduction system. The other major prospects were:

• the 2021 bipartisan ‘Townhouse Nation’ deal to enable major intensification of housing in our largest cities without the need for the resource consents required by the RMA that usually block such changes; and,

• possible RMA reform to reduce some of the veto powers held by existing interests.

National ditched Townhouse Nation and He Waka Eke Noa last month, and ditched RMA reform yesterday. If it wins on October 14, it will repeal Three Waters, the RMA, interest deductibility and the brightline test.

Quote of the day

‘We’re partners, not rivals’

"We will continue to see each other as partners instead of rivals." China’s President Xi Jinping quoted as saying by Chinese state broadcaster CCTV of China’s relations with New Zealand.

Ka kite ano

Bernard

1. Treasury and the Reserve Bank had to shut down foreign exchange markets in the days after the 1984 election when then PM Robert Muldoon refused to hand over the keys of Government to the incoming Labour Government unless they agreed not to devalue the New Zealand dollar. Facing the exhaustion of the nation’s foreign reserves, Muldoon’s caucus essentially revolted and forced him out of the ninth floor of the Beehive and allowing the necessary devaluation.

2. The then-state-owned BNZ was essentially insolvent after commercial property and other big business loans in the late 1980s went bad. The Government was forced to sell it to National Australia Bank and then decided on swingeing cuts in welfare and other spending, as well as start asset sales, to avoid a double-downgrade in New Zealand’s credit rating by Standard and Poor’s.