ROGER PARTRIDGE -The global centre-right’s self-inflicted collapse: A lesson from New Zealand

This essay is based on my comments as a panellist on “The plight of the global centre-right” at the Centre for Independent Studies’ Consilium conference in Australia in October. I wrote about New Zealand’s 7 November election-night result for the Australian Financial Review here.

In the decade after the 2008 global financial crisis, leaders of the centre-right parties that had dominated Western politics since 1945 began to lose their hold on their own voters, in country after country. In the space of fifteen months, Britain voted to leave Europe against the advice of its Conservative prime minister, and Donald Trump, an outsider who had never held public office, beat sixteen rivals on his way to the White House. Marine Le Pen then reached the run-off for the French presidency, while the centre-right’s candidate, for the first time, did not. And the Alternative für Deutschland entered the Bundestag as Angela Merkel’s Christian Democrats fell to their worst result since 1949.

New Zealand was the exception. Over the same decade, its government found a very receptive electorate for core centre-right reforms. From 2008, Prime Minister John Key led the National Party to three election wins in a row. Each time it won around 45 per cent of the vote or better. And when Key handed over to his finance minister, Bill English, the party still won over 44 per cent.

Under first past the post, that would have been a landslide. New Zealand’s proportional electoral system stopped a fourth term. New Zealand First, a populist party on 7 per cent, chose Labour and anointed Labour’s newly appointed leader, Jacinda Ardern, as prime minister.

In opposition, National fell to a quarter of the vote in the pandemic election of 2020. Christopher Luxon led it back into government in 2023 with 38 per cent. On 7 November, it won just 29 per cent, with fewer votes than Labour. It may still govern with its two partners, if their election-night majority survives the special votes.

Between them, these results make New Zealand a good place to test whether the centre-right’s collapse was its own doing. What did National do under Key and English that centre-right parties elsewhere did not? And what changed under Luxon?

Giving up the argument

To answer those questions, we need to go back nearly two decades to September 2008 when the American investment bank Lehman Brothers collapsed. Within weeks, Congress had voted $700 billion to rescue America’s banks. Britain’s government bought shares in three of its biggest. The banks that had made the bad bets were rescued. Many of the workers who lost their jobs in the recession that followed were not. In America, unemployment doubled, to one worker in ten.

The centre-left read the crash as proof that free markets had failed. In February 2009, Kevin Rudd, Australia’s Labor prime minister, wrote that neo-liberalism had been “revealed as little more than personal greed dressed up as an economic philosophy.” In 2011, Barack Obama said of the idea that prosperity would “trickle down to everyone else”: “It doesn’t work. It’s never worked.”

The centre-right went on arguing for lower taxes and less regulation. But it did not contest the charge that the crash had proved markets wrong. On that, it agreed. In September 2008, Nicolas Sarkozy told a rally in Toulon that “laissez-faire is finished.” That December George W. Bush said he had “abandoned free-market principles to save the free-market system.”

There was an answer to give. The case for markets was never a case for leaving them alone. It asked the state to set the rules and leave the running of the economy to firms and households. The crash showed what bad money, bad rules and reckless banks can do. It did not show that governments could run economies better than markets. And “trickle-down” was never a centre-right argument. Yet the centre-right let it stand as a description of its own policies.

Instead of making the case for markets, governments answered the crash with Keynesian stimulus on an epic scale, from Obama’s cash for clunkers to Rudd’s pink batts. Central banks printed money to buy bonds. The Bank of England’s study found that this had raised the prices of “a wide range of assets,” and that the top 5 per cent of households held 40 per cent of the financial assets in question. People who owned shares and houses did well. People who rented, or lived on their wages, did not.

Bailouts, cheap money and high house prices gave the populists one grievance. Record immigration in countries like Britain, Germany and Australia then gave them another. Newcomers arrived faster than homes, schools and clinics were built, and changed towns more quickly than many voters liked.

The British broadcaster Andrew Neil told this story at Consilium last year. For Britons on average earnings, he said, “real earnings have not risen since the Great Crash.” He blamed the established parties for Brexit: “Without the failures of the mainstream parties, I doubt Britain would have voted for Brexit in 2016.” Into the space they left, he said, came the populists, with “a heady brew of social conservatism and left-wing interventionist economic policies.” The economic half of that brew was the centre-left’s case against markets, taken over by the populist right.

The grievances were real. Pay had stalled in Britain, migration had run ahead of anything voters had been asked to approve, and no party could win by denying either. The centre-right still had a choice about how to answer them.

Yet much of the centre-right drew the tempting conclusion and started brewing the populist stuff itself. Theresa May promised a cap on energy prices. Scott Morrison brought in a bill to let the courts break up energy companies. Rishi Sunak imposed a windfall tax. Australia’s Liberals, routed in 2025, have since split twice with the Nationals while chasing One Nation’s voters. Malcolm Turnbull’s verdict was that “this constant move to the populist right is only building up One Nation.” The Liberals and Nationals together now poll eight points behind Pauline Hanson’s One Nation.

Neil is on weaker ground over the cure. The centre-right’s “happiest hunting ground,” he said, had been “a moderate social liberalism and classical liberal economics.” “But let me be blunt: it would be hard to think of a less voter-appealing brew in a contest with the Populist Right.”

Yet through the decade of Brexit and MAGA, New Zealand’s National Party governed on the principles Neil says cannot win. Under John Key and Bill English, it took 44.9 per cent of the vote in 2008, 47.3 per cent in 2011, 47.0 per cent in 2014 and 44.4 per cent in 2017.

What was different for New Zealand’s centre-right?

The easy explanation is geography. In February 2016, with Trump campaigning on his wall, I wrote that “if Donald Trump were seeking election in New Zealand, he’d have no need to promise a fence to keep out migrants. Nature has given us our own moat.” No boat carrying asylum seekers has ever reached New Zealand.

But the moat explains less of the difference than it seems to. Through the Key and English years, New Zealand took in record numbers of migrants and had some of the dearest housing in the world. Australia has a moat too, and stopped the boats in 2013.

Its Liberals have been trounced anyway. Nor are New Zealanders immune to the populist appeal. In an Ipsos survey last year, 51 per cent agreed that to fix the country it needs a strong leader willing to break the rules, about the same as Britons and Australians, and more than Americans.

The larger part of the answer is that Key and English did centre-right reform for real. In 2010, they raised GST from 12.5 to 15 per cent to pay for cutting the top rate of income tax from 38 to 33 per cent. They sold minority stakes in three power companies and Air New Zealand for $4.7 billion, and went on selling after two-thirds of those who voted in a 2013 referendum said no.

They overhauled welfare in a way that might have brought down another government. Sole parents had to look for part-time work once their youngest child turned five. The minister in charge, Paula Bennett, had raised her own daughter on a benefit after becoming a mother at 17. She sold the changes as “greater aspirations for New Zealanders and their children, achieved through work, not welfare.” In Germany, similar changes had helped end Gerhard Schröder’s chancellorship.

While most rich governments spent their way out of the crash, Key and English held spending back. In August 2010, English told the Australia and New Zealand School of Government why. The last decade, he said, had been one of “optimism that smart people using the massive resources of government could transform society. That experiment has run out of money and has little that is genuinely transformational to show for it.”

Debt still rose sharply to pay for the crash and the devastating Christchurch earthquakes, but the Key government took the books back to surplus within six years.

Nerve like that is not enough on its own, as Liz Truss found in 2022, when her unfunded tax cuts ended her premiership inside seven weeks. Key and English had the craft to go with theirs. Key left his ministers to make the case, then sold the results as common sense. His self-confidence proved infectious. English – who had sat through Ruth Richardson’s 1991 “mother of all budgets” as a new MP – made the numbers add up.

Australians noticed. Peter Hartcher of the Sydney Morning Herald wrote in 2014 that Key had “coaxed his country into swallowing the pills of reform.” That same year, the Menzies Research Centre, the think tank aligned with Australia’s Liberal Party, commissioned my colleague Oliver Hartwich to write Quiet Achievers: The New Zealand path to reform.

And voters felt the difference. They had stable government through the crash and the earthquakes, while Australia changed prime minister four times. On the OECD’s figures, average real wages in New Zealand rose by 9.5 per cent between 2008 and 2017. In Britain over the same years, they stalled.

Some of that was luck. In mid-2014, New Zealand’s terms of trade – the prices its exports fetched against what it paid for imports – reached their highest level since 1973. English, at least, did not waste the good years. Key had promised in 2008 to resign rather than raise the pension age. In 2017, with Key gone, English asked voters at the general election to accept a rise in the pension age from 65 to 67, a change Labour had lost two elections promising. Forty-four per cent of voters still backed National.

Key and English both had their blind spots. They brought in national standards in primary schools but left the 2007 school curriculum in place, under which New Zealand schoolchildren kept sliding down the international rankings, as Briar Lipson showed in New Zealand’s Education Delusion. They had the numbers to free up the planning laws and did not. The Auckland median house price nearly doubled, from $433,000 in 2008 to $850,000 in 2017. Nor did they guard the capability of the public service. By mid-2018, eight months after they left office, my think tank, The New Zealand Initiative, with 12 staff, had more economics PhDs than the Treasury, with nearly 500.

Luxon’s National Party

For all their blind spots, Key and English left their successors a party that knew what it stood for. But there is a sequel, and it is not so good. Ardern’s second term as prime minister went so badly that Labour rose five points in the polls when she unexpectedly resigned in January 2023. Even so, when National won the election that October, it did so with just 38 per cent of the vote. It has governed over the past three years with two smaller partners, the classical liberal ACT and the populist New Zealand First.

Luxon ran Air New Zealand before entering politics. He is a self-described addict of political biographies – and counts David Cameron and Angela Merkel among his heroes. Both were masters at winning elections. Yet neither left behind a party that knew what it stood for. Merkel’s Christian Democrats now trail the AfD in the polls. Cameron’s Conservatives took 23.7 per cent in 2024, their worst result.

Luxon’s National has had no clearer idea of what it stands for. On Treasury’s pre-election forecasts, New Zealand will run nine deficits in a row before it returns to surplus in 2028/29. On the IMF’s reckoning, its structural deficit has been among the larger in the advanced world. Public debt is ballooning. In March, Fitch put New Zealand’s AA+ rating on negative outlook, saying a substantial debt reduction was “becoming more difficult to envisage.” Moody’s followed in April.

Two of Luxon’s ministers have taken on what Key and English left undone. Erica Stanford has made schools teach reading through phonics, against fierce resistance. Chris Bishop has made affordable housing his cause. In 2024, he said house prices should fall, because they were “severely unaffordable by international standards.” He then carried two new laws, the Planning Act and the Natural Environment Act, through Parliament to replace the planning laws Key left alone. Luxon has been less sure. A year after Bishop spoke, Luxon said he wanted house prices to keep rising, if only by “modest” and “consistent” amounts.

Meanwhile, National sold no state assets, though the Infrastructure Commission’s own plan confirms the scale of the country’s infrastructure deficit. And Luxon and his finance minister, Nicola Willis, have waged a relentless populist campaign against big business – hardly a common feature of centre-right governments. His government drew up an informal list of banks, supermarkets, power companies and airports it said were failing consumers. Willis told businesses they were “on notice” and had the chief executive of the country’s largest dairy company “front up” over the price of butter.

The supermarket break-up agenda shows how far National has drifted. In September, it agreed to New Zealand First’s plan to split one of the country’s two supermarket chains, if the Commerce Commission approved. No court or regulator has found the chain to have broken the law. As I have argued elsewhere, for a party whose rule book lists “competitive enterprise” and “limited government” among its values, the policy shows a poor grasp of how competition works.

New Zealand First’s leader, Winston Peters, entered Parliament as a National Party MP in 1979 under Prime Minister Robert Muldoon. In June 1982, Muldoon’s National Government froze wages and prices. For the next two years, the state decided what sellers could charge. Margaret Thatcher’s Conservatives had already scrapped Britain’s price controls. The Labour government that beat Muldoon in 1984 lifted the freeze. Its finance minister, Roger Douglas, led the free-market reforms that followed.

Under Luxon, National is drinking Muldoon’s brew again.

National went into the campaign leading with “No new taxes,” a promise most centre-right voters might admire. But it was baldly negative – a promise not to do something rather than a picture of the country National wanted to build.

Nor do voters feel better off. Unemployment reached 5.7 per cent in the September quarter, the highest in 11 years, and inflation is nudging 4 per cent.

Most of the votes National lost appear to have gone to its two partners. ACT, which Roger Douglas founded in the 1990s to carry his reforms on, won 10.9 per cent on 7 November, up from 8.6 per cent in 2023. New Zealand First won 9.8 per cent, up from 6.1 per cent. Voters who wanted reform went to ACT, and those National had courted with New Zealand First’s policies went to the party that wrote them. Between them, the two partners gained two-thirds as many points as National lost. Labour, in opposition, gained only two and a half. So on the election-night count, the coalition still holds one seat more than it needs to govern, with special votes still to come.

The losses reached National’s front bench. Nicola Willis, the finance minister, is out of Parliament. So is the Speaker, Gerry Brownlee. Paul Goldsmith, who held justice and defence, is gone as well. Chris Bishop, who carried the planning laws through Parliament, has conceded Hutt South.

The way back

Two days after the election, Luke Malpass, associate editor of Wellington’s Post, wrote that Key’s “slow and steady” formula had “run its course” before Luxon took office, and that Luxon’s government “drew heavily on that era’s approach.” I read the record the other way. Key made reform sound slow and steady, but the GST switch, the asset sales and the welfare overhaul were nothing of the kind. New Zealand has now tried it both ways. Under Key and English, National did centre-right reform for real, explained it plainly, and voters felt it in their pay. It topped the poll four times. Under Luxon, it lost its nerve, and voters punished it.

The centre-right does not succeed by copying the populists or managing the decline. It succeeds by bold structural reforms that pay off in higher wages.

Britain’s Conservatives have just tried to restate that case. At their conference in Birmingham last month, Kemi Badenoch, who has led the party since its 2024 defeat, launched The Right Way. Its 95 pages of principles are modelled on The Right Approach, the document Thatcher’s Conservatives published in opposition in 1976. It concedes that the last Conservative government failed on immigration. “We promised lower immigration without a strategy for delivering it,” Badenoch writes in the foreword. The foreword also reads like a diagnosis of the whole decade: “Labour goes wrong when it follows its principles; we go wrong when we fail to follow ours.” Her party, down to 17 per cent in some polls last year, has this year pulled roughly level with Nigel Farage’s Reform UK.

Restating principles in opposition is the easy part. The hard part is acting on them when a party is afraid it will lose the next election. In both New Zealand and Britain, that test has come over pensions. Bill English met it when he asked New Zealanders to accept a pension age of 67. Badenoch faces it over the triple lock, a rule that David Cameron’s coalition government introduced in 2010. It raises the state pension every year by whichever is highest of earnings growth, inflation or 2.5 per cent.

At Labour’s conference in September, the British prime minister, Andy Burnham, said he would loosen the triple lock from 2030, and spend the savings on a national care service. “I accept I may pay a political price,” he said.

Even a Labour prime minister was willing to trim the triple lock, and to take the blame for it. A week later, Badenoch told Times Radio: “I say the triple lock is our policy and we’re keeping it.” Reform has promised to keep it too. Two days after she published The Right Way, Badenoch sided with Farage.

Four days before New Zealand voted, Americans gave their verdict on a centre-right party that a populist had taken over. Democrats won control of both houses of Congress. The party of free trade and balanced budgets had given Americans tariffs and borrowing. Americans, not foreigners, paid almost all of the tariffs. Trump’s tax law, the Congressional Budget Office reckons, will add $3.4 trillion to deficits over ten years. In AP’s survey of more than 100,000 voters, about two-thirds said Trump’s own policies had fuelled inflation.

If Luxon’s coalition survives the special votes, it faces the test Badenoch ducked. National went into the campaign promising to start work on raising the pension age within 100 days. It made the same promise in 2023, then dropped it when New Zealand First blocked it in the coalition talks. ACT backs the change. New Zealand First still opposes it. The rest of the work is set out in NZ Unbound, the report my colleague Bryce Wilkinson published four days before the election. Wilkinson would make big spending programmes and restrictive rules prove they are worth what they cost. A government that took that seriously would finish Bishop’s planning reforms, sell assets it does not need to pay for the roads, schools and hospitals it does, and drop the supermarket break-up.

Jean-Claude Juncker, the former president of the European Commission, once said of Europe’s leaders: “We all know what to do, but we don’t know how to get re-elected once we have done it.” Key and English did it, and were re-elected twice.

This essay is part of an ongoing series on liberalism, democracy and the international order. Related writing in Persuasion, Quadrant, Quillette and on Plain Thinking is collected here.