Published in Quadrant (Sydney), 28 October 2026
In the April 2024 issue of Quadrant, I began a column with Enoch Powell’s observation that all political lives, unless cut off at a happy juncture, end in failure. New Zealand’s Labour Prime Minister Jacinda Ardern had recently proved the exception by leaving in time. The question was whether Christopher Luxon, a few months into the job, might prove another.
I ended that column by setting a test. His government’s legacy, I wrote, would rest on whether it laid the foundations for a prosperous, productive, resilient and fiscally responsible New Zealand.
With the New Zealand election on November 7, it is time to mark that test, at least for Luxon’s first term. The result is a mixed bag. Luxon’s coalition has achieved more than its critics would admit. But at the same time, it has failed to deliver on one of its central promises: to put the public finances in order.
When the coalition government was elected in 2023, the expectation was for a turnaround. After six years of Labour under Ardern and her short-lived successor Chris Hipkins, government spending and public debt had dramatically increased. Thus, Luxon’s National Party campaigned on getting the country “back on track” by cutting expenditure and shrinking the bloated public service. Voters gave National 38 per cent of the party vote and a mandate for repair. That was twelve points higher than three years earlier.
The new government’s initial speed was astonishing. Within 100 days, the coalition had scrapped the stalled Auckland light rail project, the Reserve Bank’s employment mandate, and a fantastically expensive pumped-hydro scheme at Lake Onslow. Out went Labour’s Fair Pay Agreements, an attempt to revive industry-wide pay bargaining. So did Three Waters, the plan that would have moved councils’ water assets into large regional bodies with Māori co-governance.
Labour’s replacement for the country’s planning law, passed only two months before the 2023 election, was also repealed. That was no great loss. Indeed, The New Zealand Initiative, like Federated Farmers and many others, regarded it as even worse than the law it was meant to replace.
That demolition job was the easy part, and it was complete within the first few months.
What followed was government by list. Every quarter, the Prime Minister published an action plan of deliverables and reported progress against it. The first pledge in the first quarterly plan, in April 2024, was to deliver a budget, which governments do every year anyway. Alongside the plans sat nine public targets for the state, from emergency department waiting times to school attendance.
Because the lists were public, ministers could be held to them. But everything on them had to be countable by the end of a quarter. On those things, the method largely worked. And frankly, it was a welcome change from the previous government, which was big on announcements and poor on delivery. Having lists for ministers to tick items off may not have been revolutionary, but it felt like it.
The government made serious progress in some big areas of policy reform. In education, it introduced structured literacy in classrooms, banned phones, and set about replacing a vague curriculum with a knowledge-rich one. Regular school attendance, one of the nine targets, rose from 47 per cent in 2023 to 64 per cent this year. That said, it will take a school generation for these reforms to take hold.
It also made progress on housing. Approvals for new homes rose 21 per cent in the year to July; house prices have been flat for three years, and in 2025 rents and deposits became more affordable. Households in emergency housing (often motel rooms paid for by the state) are down 85 per cent from their baseline.
At the end of the term, Parliament replaced the old Resource Management Act (the planning and environmental law since 1991). Two new statutes fold more than 100 planning documents into sixteen regional plans. Councils can no longer refuse a building because someone thinks it is ugly.
Crime is another success. Serious youth offending is down by a quarter. There are also about 37,000 fewer victims of violent crime.
Ministers also reopened offshore oil and gas exploration and committed to an import terminal for liquefied natural gas, although no contract has been signed yet. And in the final days of Parliament, the government passed the free trade agreement with India that National had promised in 2023, even though Winston Peters’s New Zealand First, its own coalition partner, voted against it.
New Zealand is also a better place to do business. Yes, the overseas investment rules were only partly liberalised, and farmland and housing remain tightly restricted, but low-risk foreign investments should now be approved within fifteen working days. The new Regulatory Standards Act requires governments to state whether new laws respect principles such as the rule of law and property rights. In employment law, the notoriously complex Holidays Act will give way to a simpler regime from 2028, alongside a clearer test for who counts as a contractor.
So serious policy change was achieved in diverse areas in a relatively short time despite the backdrop against which all of this happened. In 2023, the coalition took over an economy sliding into recession. It then had to deal with Trump’s tariffs and, this year, with the oil shock when the Strait of Hormuz closed. Certainly, there have been easier times to be in government than the mid-2020s.
Yet it is hard to give the government a glowing mark, because it failed to manage the government’s finances and reform the public service. That failure weighs heavily not only because it affects areas that will shape New Zealand’s future, but also because it runs counter to National’s 2023 election commitments, making it hard to explain why the government has not made real progress.
In April 2024, I argued in these pages that fiscal consolidation required two things: cutting government spending as a share of GDP, and bringing discipline back to how money is spent. Two and a half years later, neither has genuinely happened.
Central government spending fell slightly to 32.1 per cent last year, from 33 per cent of GDP in 2023-24, even as health and welfare costs rose. But that is still about three percentage points higher than the 29.4 per cent the Labour government planned for 2019-20 in its so-called “Wellbeing Budget”.
Luxon and Finance Minister Nicola Willis repeatedly promised a return to surplus, but kept pushing out its arrival. Indeed, in December 2024 the government introduced a whole new deficit measure called OBEGALx. By excluding the results of the state accident insurer (ACC) from the deficit, the new measure brought the promised surplus closer. Willis argued that ACC’s long-term insurance results should not drive short-term tax and spending decisions. Fair enough, but there is no arguing that ACC’s results are part of the government’s accounts.
In any case, none of this fiddling materially affected the underlying story, as Treasury’s pre-election update on September 29 made clear. It forecasts a deficit of NZ$6.8 billion this year, with a surplus coming only in 2028-29, two years later than National promised in 2023. The Secretary to the Treasury, Iain Rennie, called the fiscal position “largely a tax story”. Spending, meanwhile, rises once again, to 32.2 per cent of GDP, mainly because of the government’s last two budgets. And all of this rests on some economic assumptions that look optimistic, to say the least.
Even more ironically, the forecasts show tax revenue jumping by a full point of GDP despite National campaigning against bracket creep in 2023. Yet bracket creep accounts for about a third of the rise in revenue, as a share of GDP, that Treasury expects by 2030-31 because the 2024 income tax thresholds were never indexed. This sits awkwardly with National’s “no new taxes” pledge in this year’s election. National is trying to have it both ways: claiming to have delivered tax relief in 2024 by adjusting the tax thresholds for the first time in more than a decade, while relying on the same bracket creep mechanism to close the budget deficit over the coming years.
To be fair, the Finance Minister points to savings of NZ$12 billion to $13 billion a year from her three budgets over this term. Without them, she says, this year’s deficit would exceed $18 billion. That is good—except, by her own account, much of the money saved was simply spent elsewhere, on health, schooling and crime. That may be money well spent, yet it means that these savings are not savings: they are money moved from one part of the budget to another.
Willis could point to another achievement of sorts. If everything goes according to plan, from next year new borrowing will no longer finance day-to-day spending but fund investment. But while that sounds good, it does not change the overall picture. Treasury does not expect debt as a share of GDP to fall below today’s level until 2030-31, and in dollar terms it keeps rising.
And that is before considering the longer term. Treasury projections show spending outpacing revenue for decades as the population ages, so unless policy changes substantially, debt will eventually rise again.
It is all part of a pattern underlined by National’s economic plan for this year’s election. Its core promise is to bring spending to below 30 per cent of GDP. Treasury forecasts do not get there until 2030-31, in the term after next. Never mind that National stated this spending goal at the 2023 election: if you voted National then, you are being asked to vote for the same promise twice.
An important part of the failure to fix the books sooner is the failure to reform the public service. It was the part of the government’s promise that most resembled a corporate turnaround plan, and led critics to label it a coalition of austerity. The public sector union warned that the state was being savaged, but was it?
The public service peaked at 65,700 full-time equivalent staff in December 2023 and shed roughly 3,000 by June 2025. But by March 2026 it was back to 64,500. When Jacinda Ardern became Prime Minister in 2017, the figure was 47,000, so, in the grand scheme of things, the coalition’s cuts were cosmetic.
Some of the regrowth was deliberate—Corrections hired 400 staff for a prison population at record highs—but not all of it. The government set savings in dollars rather than heads and this year excused thirteen agencies.
The problem lies in the machinery of government. Ministers do not appoint the chief executives who run departments and decide staffing; the Public Service Commissioner does. And nothing stopped departments from cutting in one year and rehiring in the next. The Ministry of Education, for example, shed 552 positions in the year to June 2025, only to rehire 341 in the following nine months. The coalition did nothing to change that.
So, the government made no progress on public service reform. Instead, it set a new target of 55,000 public servants by mid-2029. Cuts of $2.4 billion and 8,700 jobs are meant to reach it over the next term.
The strangest aspect is that the government acted as if it had inherited from Labour a well-run state with no cash-flow concerns when the opposite was true: many areas of public policy were failing, the public service was a mess, and public finances were in disrepair. It required a tough turnaround. Yet despite talking about it endlessly in opposition, it never arrived.
Restructuring a state takes longer than a term. It creates losers who cannot be ticked off in a quarterly report. But the government’s reluctance to tackle state reform meant it drifted from budget to budget and eventually into the manifesto for the next election.
Even when the government started to tackle hard reforms, it did not finish the job. Take planning. Parliament passed the framework for a new system, but the promised property rights appear only in draft national rules that are not yet government policy. Whoever holds the portfolio after the election will decide what a landowner may build. The next minister can rewrite the rules without going back to Parliament.
Superannuation, New Zealand’s universal state pension scheme, stayed off the list altogether. By 2030-31, according to Rennie, some 28 per cent of taxes will go to pensions and interest. Yet because of New Zealand First’s resistance to change, the eligibility age remains untouched at sixty-five. National has signalled it will again campaign to raise the age to sixty-seven, but it knows that as long as it relies on Winston Peters’s vote, it will not be able to change it.
Nor has National always resisted populist temptations. The most striking example is its promise to pursue the break-up of Foodstuffs, one half of New Zealand’s supermarket duopoly. One would have expected such a policy from Labour rather than from the party of business. Apparently, at least five National MPs have complained about it to ACT leader David Seymour. (Australians will recall that Peter Dutton promised similar powers to break up supermarkets before losing last year’s election.)
Then there was the Treaty Principles Bill, ACT’s attempt to define the principles of the Treaty of Waitangi in law. National and New Zealand First had agreed to support it to select committee as part of their coalition deals. Whatever one makes of its substance, it turned into a distraction that consumed months of political energy and provoked one of the largest protest marches in New Zealand’s history. In April 2025, Parliament finally voted it down by 112 votes to eleven.
Governments survive recessions and reform when voters believe the pain is buying something. But the Luxon government cannot easily point to tangible achievements that voters can already feel. Structural reforms such as those in education or planning will take longer to bear fruit, but in the meantime, voters are more focused on issues such as the cost of living.
Back in 2023, the National-led coalition asked for a licence to implement a turnaround. On the fiscal numbers, it cannot show what that licence bought. The government, elected to end the drift in public finance and the size of the state, has presided over something close to the status quo.
Both of New Zealand’s post-war one-term governments were Labour, dismissed in 1960 and 1975. National has never lost office after a single term. The polls say this election could be the first time.
This does not mean the coalition has failed altogether; it has genuine policy achievements under its belt, especially in education. And one hopes these reforms will outlast this coalition, whoever governs next.
Yet measured against what National promised in 2023, the coalition wasted its mandate to fix the books and the public service. Three years of being called austere have bought it precious little: a public service headcount barely smaller than the one it inherited, no surplus, and debt still rising.
Which brings me back to my 2024 column, in which I suggested there were two ways to escape Powell’s rule that all political lives end in failure. One was to leave early, as Ardern did; the other was to lay foundations that outlast you.
Luxon has not left office early and is fighting for another term. Yet to avoid ending his political life in failure, he will need to use a second term, should he get one, to lay much stronger foundations for fiscal recovery and better-functioning machinery of government.
