The Annual Report: Winston Peters says tax cuts failed to grow the economy

Wednesday, 27 November 2024

The Annual Report is first-year stock take of this Government, analysing everything from policy to decision-making, as well one-on-one interviews with the party leaders. Deputy Prime Minister and NZ First leader spoke to Thomas Manch.

Deputy Prime Minister Winston Peters says the Government’s tax cuts failed to improve the economy, but instead masked its problems.

“It's had, how shall I say, no material or beneficial effect in terms of growth in the economy,” Peters told The Post an interview for the Annual Report series.

National’s “tax relief” policy - named so because it was a mixture of tax bracket changes, childcare subsidies and family tax credits - was pitched as needed cost of living relief, rather than a part of an overall growth strategy.

But Peters’ friendly fire directed at the National Party’s hallmark policy a year into Government is part of a time-worn message the political veteran enjoys returning to, no matter the coalition partner: I told you so.

And along with it Peters tells The Post that Prime Minister Christopher Luxon is struggling, but not in a bad way; that spending cuts have been successful but now investment is needed; and, that he’s planning an 18-month election campaign for when he relinquishes the deputy prime minister job in May.

“We never agreed with the tax cuts, and the reason for that is, not only did we think that we couldn't afford them, but I think that the public was never going to see how bad the economy was whilst we were giving them tax cuts,” he says.

Peters says he foresaw the dark economic conditions for what they were, where National and ACT did not. He made a show of it a month out from election day at a town hall event in Paraparaumu, saying the tax cuts should not proceed.

“The set of economic forecasts and figures that were given … were inaccurate. They were wrong. The economy was in a much worse state than that,” Peters says.

“We said so in that 2023 campaign, but others in the coalition did not say that and, as I might say, we’ve all been caught out in that context - and so 2025 is now going to be a year where we’ve got to turn these set of figures around … and get some growth in the economy as fast as possible.”

Growth can be obtained with the “right plans”, Peters says.

Cutting done, investment needed

The Government’s biggest challenge for the coming year is finding economic growth, Peters says. And that requires answering the “blatantly obvious” question asked by international investors: “Why New Zealand?”

“When we answer that, and for the right projects, we'll turn the economy around.”

The desire for foreign capital is something of a departure from its historic position for economic nationalist NZ First, which, for example, bashes the “Ned Kelly” Australian banks for claimed rorting of New Zealand.

But there’s not enough money in the economy, Peters says. So in seeking to answer this question, he has spent much of the year travelling the world as foreign minister “trying to make up the vacuum of inactivity post-Covid”.

He has visited 38 countries, including six countries twice-over and most of the Pacific and South east Asia, and met with 54 foreign counterparts, and 46 diplomats posted to Wellington.

“We're offshore, for example, trying to get trading relationships built up rapidly, looking for foreign money to come to New Zealand. We're working in tandem with Judith Collins, Todd McClay, and the prime minister, we've gone on the most extensive selling program of any Government ever in this country's history. And we need to,” he says.

But Peters is quick to dispel any suggestion -- including from ACT leader David Seymour, in an interview to be published on Thursday -- that he has therefore been absent from Parliament. Travelling has been done when Parliament was on recess, at weekends, and at night.

“It's been a very exhausting experience. As a party, I think we've done extraordinary well to hold our own, and we've got a whole lot of things we going to be ticking off, as we are, as we speak, all the way to Christmas.”

He says it’s too early to say which areas the Government has failed to succeed in so far.

But where the Government has succeeded, he says, is in cutting wasteful spending. Unlike coalition partner ACT, which wants to more spending cuts, Peters says it is now time for the Government to spend wisely.

“I confess that there was a whole lot of wasted expenditure. I mean, billions of dollars of wasted expenditure in this country that has been dealt to very successfully, in my view.

“However, the problem is … if you don’t replace it with sound expenditure for growth, infrastructure benefits going for 50 or 60, even 100 years and added value, then you’re going to buy yourself a recession - and recession is what we’ve got.”

What this means for the coming Budget is “a great question”.

Asked whether delivering investment will be an uphill battle, he says: “I hope not”.

“An austerity budget is not going to be what New Zealand needs at this point in time, we're at a circumstance where our exports in some countries like United States are looking very, very good. They're still looking very good at China. But we're not doing enough.

“It's quite extraordinary how New Zealand has sort of, in some ways, lost past mojo some time ago. None of that is insurmountable.”

Luxon a ‘details’ PM

Rediscovering New Zealand’s “mojo” is a phrase also favoured by Luxon.

Peters has worked with many prime ministers: Jim Bolger, Jenny Shipley, Helen Clark, and Jacinda Ardern.

He says Luxon differs from most prime minister because he is “more over detail”, and he is “not difficult to work with”.

“That's a huge plus in our game, being not difficult to work with is a massive credit.”

However, he says Luxon is struggling in the job, before quickly clarifying.

'Now, when I say struggling - not in a bad way. But when you're so new to politics, you're occupying the top job, it is foreseeable to take a little while to bed yourself in and that's where he is.

“I understand that, and I can't understand the mainstream media's treatment of him, because whether I was on his side or not on his side, or not working with him, I think somebody's entitled to some sort of honeymoon, and his honeymoon lasted one second.”

Peters avoids providing a similar assessment about his other coalition partner, Seymour.

“Well, I don't go to the arrangements and coalitions to try and make friends,” he says.

“People getting on [while] making massive failures is not a good idea. I'd rather they had a lot of, well, you know, strong debate and argument to get successful ideas, than friendship and bon homie while the economy fails.

“We have sound presentations of our sides of things in Cabinet.”

Hitting campaign trail come May

While Peters disregards the political commentators, who have suggested relinquishing the deputy prime minister position will allow him more latitude to campaign come 2026, he also proves they have a point. Come May, he will be in campaign mode.

“You are right, it frees me up to do this, to hit the ground running around this country, and hard, for 18 months before the 2026 election.

“We know that New Zealand First's vote is going to be critical in 2026 … to bed in the change from the woke, racist agenda that we inherited.”

Already Peters has launched a campaign policy that seeks to answer the investment question, pitching at the NZ First party conference a $100 billion “Future Fund” to capture overseas capital for national infrastructure.

He says NZ First remains the “handbrake” on bad ideas. But there’s a new twist to this old line. Peters adds his party is also a “supercharger for good ideas”.

Throw into the mix familiar themes for NZ First: belief in flag, rule of law, democracy, and freedom.

“As you will have observed in recent elections around the world, politics is about ordinary people, and New Zealand First has never taken our eye off them,” he says.

“It's about middle New Zealand, so much of their interests have been sidelined by the political parties in recent years. Our job is to keep our end of the bargain to ordinary people, make sure that the Government's focus never ceased to be upon them.”

Peters says his team has developed its strategy and he won’t be giving anything away but the timing of the campaign.

“I’ve got 18 months to hit the road and go for it.”