TCS Daily


No Tyranny of the Tiny Minority

By Charles Finny - September 20, 2005 12:00 AM

As in 1996, New Zealand's Mixed Member Proportional electoral system (borrowed from Germany), has delivered a period of a few weeks of uncertainty. We will not know which party has achieved the highest number of votes until all the special votes (including a large number of votes from New Zealanders living overseas) are counted. We won't know the final vote count for two weeks. And once that final result is known some form of coalition or support arrangement will have to be negotiated with the smaller parties. The most probable outcome is that Helen Clark's Labour Party will form the core of the next Government, but even Helen Clark is admitting that there is still some uncertainty over this outcome.

Despite the uncertainty, it's essential that the two largest parties do not overlook the fact that close to 90% of the New Zealand electorate demonstrated their general support for the country's current economic policy settings. The party seeking the most radical changes to these settings -- the Green Party -- was lucky to meet the 5% threshold set as a minimum for attaining representation in the new Parliament. The Green Party stood on a platform that opposed both free trade and major increases in Government investment in essential infrastructure such as roads. These two policy areas are critical for New Zealand's future.

Two other smaller parties advocate policies that are of concern to New Zealand's economy. The New Zealand First Party voted against New Zealand's free trade agreement with Thailand in the last Parliament and is expressing concerns about the current negotiations with China, Malaysia and ASEAN. The Maori Party likewise voted against the Thailand FTA.

The mathematics of the 17 September election result means that for a stable Government to be formed to see New Zealand through the next three years, some form of coalition or accommodation is going to be needed with at least one of these three smaller parties (maybe all). It is critical in therefore that the major parties -- Labour and National -- do not compromise on trade policy and investment in roads to achieve control of the Treasury benches. Such a compromise is very unlikely from Don Brash's National Party. But it is a slight risk from Labour.

For example, the Labour Party's election policy on international trade contained a troubling omission -- reference to the possibility of a free trade agreement with the United States. Media stories late last week suggested that this reference was omitted because Labour did not want to upset their possible coalition partner -- the Greens -- by including this concept.

Among the biggest challenges facing New Zealand over the next three years is going to be that of reducing the country's enormous current account deficit -- as a proportion of GDP it is bigger even than that currently being run by Australia or the United States. The only way we are going to reduce the gap between what we export and import is to grow our exports, and in particular our exports of higher value services and niche manufactured products. We will not be able to improve our export performance through the trade policies, discredited by every serious economist, promoted by some of our smaller parties in Parliament.

A further area of concern vis-à-vis the Green Party is New Zealand's policies on climate change, the Kyoto Protocol, and carbon taxes. New Zealand policy in this area needs urgent review, particularly as New Zealand's major economic partners -- Australia, United States, Japan, China and Korea (India has not yet achieved this status in its economic relationship with New Zealand) -- are pursuing a new model, one which some of us believe has a better chance of achieving meaningful results for the environment.

There is an old saying in politics -- that in a democracy the people get the Government they deserve. Let us hope that in New Zealand 95% of the people don't end up suffering the consequences of some policies which only 5% were prepared to vote for.

The author is CEO, Wellington Regional Chamber of Commerce.

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