- National, ACT NZ and NZ sign agreement to form government for the first time
- The Government will return to the central bank its mandate of single inflation targeting
- The government plans to reduce the use of indigenous language and affirmative action
WELLINGTON (Reuters) – New Zealand’s National Party sealed a deal on a new three-party coalition government on Friday, after protracted negotiations over ministerial roles and policies including indigenous rights, tax cuts and changes to the central bank .
The centre-right Nationals, led by incoming Prime Minister Christopher Luxon, return to power alongside the populist New Zealand First party and the libertarian ACT New Zealand after six years of government led by the left-wing Labor Party.
“We believe in this country, we are ambitious and we know that with the right leadership, the right policies and the right direction, together New Zealanders can make this an even better country,” Luxon said in a speech before the formal signing of the agreement in the Parlament.
The coalition agreement outlines plans to roll back the use of the Māori language, review affirmative action policies and assess how the country’s founding treaty document is interpreted in legislation. However, a controversial proposal to hold a referendum on the interpretation of the document, the Treaty of Waitangi, will not happen.
New Zealand’s outgoing Labor Prime Minister Chris Hipkins said the policy changes were going to set back progress on Māori issues.
“This is certainly a setback of three or four decades,” he said.
Luxon, 53, said the government will also amend the Reserve Bank of New Zealand Act 2021 to remove the dual mandate on inflation and employment, to focus monetary policy solely on price stability.
ANZ economists said in a note that the proposed changes to the monetary policy framework “may be seen as aggressive” at the margins, but other announcements do not appear to be a game-changer for macroeconomic policy setting.
There are also plans to repeal the ban on offshore oil and gas exploration and the ban on cigarette sales to future generations introduced by the previous Labor government, according to coalition documents.
The new government will cut personal income taxes, following a campaign policy used to appeal to middle-income voters struggling with the rising cost of living.
However, plans to open up New Zealand’s property market to foreign buyers and tax these purchases to pay for the tax cuts have been shelved.
“Offering tax relief is just one part of the Government’s plan to rebuild the economy. “The Government will reduce the cost of living, reduce unnecessary spending and drive economic growth to increase opportunity and prosperity for all New Zealanders,” Luxon said.
The parties said they planned to “rewrite the Weapons Law” without giving further details, and would undertake a review of the weapons registry that was introduced after a gunman killed 51 Muslim worshipers in 2019. They also agreed to train no fewer than 500 new police officers.
Parties on the political right have gained popularity over the past year and frustration has grown with the ruling Labor Party. The charismatic former prime minister Jacinda Ardern became a darling of progressive politics globally, but domestically, anger had built up against strict COVID restrictions and rising costs of living. Ardern resigned in January.
Luxon, the former chief executive of the national airline, only entered parliament in 2020 and became leader of the National Party in late 2021.
The new coalition cabinet, which will be sworn in on Monday, is a mix of veteran politicians and new leaders.
The role of deputy prime minister, a key point in coalition negotiations, will be split between NZ First leader Winston Peters and ACT leader David Seymour.
National Party deputy leader Nicola Willis will be finance minister and Peters will be foreign minister, the parties said.
Peters, a colorful, populist figure in his seventies, will take on the role of foreign minister for the third time after serving in that role in Ardern’s Labor-led government in 2017 and under Labor Prime Minister Helen Clark in 2005.
“Foreign affairs do matter to this country…all relationships do matter to this country,” Peters said at a joint news conference in the capital, Wellington, after the announcement.
“We expect the Chinese government to treat us the same, regardless of our size,” he said when asked how he plans to deal with China’s growing influence in the region. “Size doesn’t matter, respect does.”
Reporting by Lucy Craymer and Lewis Jackson; written by Praveen Menon; editing by Diane Craft and Lincoln Feast
Our standards: the Thomson Reuters Trust Principles.