DON BRASH: THE PRIME MINISTER’S TASK WILL BE TRICKY

As I write, it is just three days after the election. At this stage, it seems likely that there will again be a National-led coalition Government of some kind, possibly supported by Opportunity by means of a Confidence and Supply agreement.

The exact shape of that Government is by no means clear. Indeed, it is not even clear that it will be led by Christopher Luxon who, right to the very end, seemed sincere in his belief that the best way of returning a National-led Government to power was to give two ticks to National in order to reduce the risk of too many “numpties” from coalition parties sitting around the Cabinet table. At very least that was insulting to the parties which National is inevitably going to need to form a Government, but it also suggested that Mr Luxon could not count because it was clear from an early date that National was likely to hold most of the 44 electorates it won in 2023 but most unlikely to attract a commensurate party vote; hence the logic of “strategic voting”.

But assuming for the sake of this commentary that Mr Luxon continues as Prime Minister, one of his key tasks will be choosing the Minister of Finance, the Minister of Foreign Affairs, and the Speaker, arguably the most important positions in the new Government.

The Minister of Finance in the outgoing Government was, of course, Nicola Willis but she is out of contention because she is a casualty of National’s very low party vote. There were two Associate Ministers of Finance in the outgoing Government, David Seymour of ACT and Shane Jones of NZ First.

In response to Mr Luxon’s assertion that the next Minister of Finance will be a National MP, David Seymour has told the Prime Minister that “everything’s negotiable Christopher”. He went on to argue that the Prime Minister’s insistence that the next Minister of Finance has to be from National was “no longer tenable… [The new Government] is not a National Government with two inconvenient bolt-ons; it is now a coalition”.

I would argue strongly that Seymour would be the ideal Minister of Finance if the Government is serious about getting on top of our increasingly ugly government debt while also taking more vigorous steps to increase our growth rate.

Net government debt was some $51 billion as recently as 2018, rose to $136 billion in 2024 as a result of sharply increased spending by the Labour Government, and rose further under the recent National-led Government to the point where it is expected to reach some $206 billion in the current fiscal year.

I have known Nicola Willis for a long time, and like her personally, but her boast on assuming the role of Minister of Finance that she would not be “doing a Ruth Richardson” means that public debt is still rising quite strongly. Yes, the Budget is projected to get back into surplus within a few more years, but projections have repeatedly been shown to be too optimistic.

The Treasury’s long-term projections suggest that, on current settings for NZ Super, public-sector debt will rise from a little over 40% of GDP currently to close to 200% of GDP by 2065. The challenge is not just the increasing cost of NZ Super unless the parameters of that scheme are modified for the fact that New Zealanders are living longer but also the related increasing cost of their health care.

So the next Minister of Finance must have the courage to spell out these uncomfortable facts both to his Cabinet colleagues and to the country at large.

I believe David Seymour could do that persuasively.

He has already announced support for a gradual increase in the age of eligibility for NZ Super, along with support for those who are unable to work beyond 65. He has also announced the need for streamlining the public sector, reducing the number of government departments from 39 to 19, reducing the number of ministers from 28 to 18, and giving each minister the right to directly employ the CEO of the department for which he or she is responsible (rather than having that CEO employed by the State Services Commission). Without commenting on the specifics of these proposals, they certainly reflect his recognition that we are currently on an unsustainable trajectory and many things need to change.

But how does the Prime Minister satisfy the ambition of the Leader of NZ First? Perhaps instead of David Seymour, Winston Peters should be Minister of Finance. After all, he did hold the position of Treasurer after the first MMP election in 1996.

But in my opinion it would not be desirable to appoint Mr Peters as Minister of Finance. Why not? Because NZ First has made too many commitments which are inconsistent with the urgent need to begin overdue fiscal consolidation. In particular, NZ First is on the record as opposing any change to the current parameters of NZ Super, arguing that no change is necessary if the economy grows more strongly. I wish that were true! Alas, it is not because NZ Super payments increase annually by the greater of the inflation rate or wages, so if the economy grows more strongly the cost of NZ Super rises with that growth. In other words, as currently designed it is not possible to make the cost of NZ Super fiscally sustainable by getting the economy to grow faster.

And while Mr Peters was indeed Treasurer for a couple of years after 1996, as I recall (and he was one of the Ministers to whom I was responsible when Governor of the Reserve Bank) he was very much involved in “big picture stuff” rather than somebody heavily involved in directing the Treasury or formulating detailed economic or financial policy – that was largely the responsibility of the Minister of Finance, Bill Birch.

Were I the Prime Minister, I would offer Winston Peters the position of Speaker. The role carries enormous prestige, is almost always rewarded with a knighthood, involves limited international travel (which may well be attractive to Mr Peters at this stage of his life) and would clear the way for a Confidence and Supply agreement with Opportunity (which has made it clear that it is totally opposed to Mr Peters as Minister of Foreign Affairs).

That leaves the important and high profile position of Minister of Foreign Affairs. Todd McClay is surely the obvious person for that role. He has done an excellent job as Minister of Trade and in that capacity has established excellent relationships with a wide range of relevant international leaders. He has the very substantial added advantage that he has not insulted our largest trading partner. I would be surprised if Qiulae Wong would refuse to sign a Confidence and Supply agreement with the Coalition were Todd McClay to be Minister of Foreign Affairs.