New Zealand's economic situation is changing for the worse, as the general crisis of world capitalism is unravelling and China's growth is slowing down affecting the whole of the Pacific and Austrialia in particular. Austerity policies are being carried out by the National Party-led government, undermining the political support for the right wing and creating the conditions for an intensification of the class struggle in the period ahead. This perspectives document should be viewed as an addendum to the 2014 document, as the general processes outlined in the previous document are apparent in the present situation.



The New Zealand economy is still showing signs of weak growth of about 3% GDP per year in 2014. As previously explained the majority of the economic growth is a result of re-building earthquake ravaged Christchurch, property bubbles in both Auckland and Christchurch and economic growth not based on the productive sectors of the economy.

However, the economic fortunes for New Zealand are intrinsically linked to the fate of the Chinese and Australian economies. The Chinese economy is now stagnating and the Chinese ruling elite are using Keynesian policies to keep the economy growing as demand for goods and services in the advanced countries is moderating as a consequence of capitalist austerity and subsequent deflationary pressures.

The consequences of the slow down in the Chinese economy have had a profound negative effect on the Australian economy, with the export of minerals to China turning from boom to bust literally overnight. The Australian government has set out on a path of austerity as a result. This is a recipe for sharp class conflict as Australian workers will have no option but to struggle in order to maintain the social wage gains of the past and their living standards. This will have revolutionary implications not only for Australia but the region as a whole.

Australia is no longer the lucky country and is now mired in the organic crisis of capitalism that is engulfing the planet. For New Zealand workers this economic downturn has cut off the perceived escape route to prosperity, since they were able to gain good employment and conditions as guest workers in Australia. The number of New Zealanders emigrating to Australia has fallen to record lows, with a large number of expats returning. Additionally, the number of Australian workers, who have automatic rights to residency here, leaving for New Zealand is increasing. In the past emigration to Australia tempered the class struggle in New Zealand. With this no longer being the case the class struggle in New Zealand will begin to pick up tempo as there is no longer a perceived escape route from the problems faced by workers.

The effect of the Chinese economic slow down here is on commodity prices, in particular dairy prices that have collapsed by nearly half. This will knock up to NZ$8 billion out of the New Zealand economy. The Fonterra payout of $4.50 per kilogramme of milk solids is not enough to meet the costs of farm inputs. This means very uncertain times for dairy farmers. Already in rural New Zealand the effects of this are already being felt as farmers wallets remain tightly shut!

The recent Reserve Bank Financial Stability Report of May 2015 highlighted the above economic woes stacking up against New Zealand.

”Auckland’s median house price is 60 percent above its 2008 level, and house prices in Auckland have been rising rapidly since late last year. This reflects ongoing supply constraints and increased demand, driven by record net immigration, low interest rates and increasing investor activity. Prices in the Auckland region have become very stretched, increasing the risk of financial instability from a sharp correction in prices.

“A second area of risk for the financial system relates to the dairy sector, which is experiencing a sharp fall in incomes due to lower international prices. Many highly leveraged farms are facing negative cash-flows, and the risks will become more pronounced if low milk prices persist beyond the current season.

“The third key risk arises from the current very easy global financial conditions. Low interest rates are encouraging investors into riskier assets in the search for yield. Prices of both financial and real assets are becoming overextended in many markets. There is an increasing risk that the current benign conditions unwind in a disorderly fashion, disrupting the cost and availability of funding for the New Zealand financial system.”

As can be deduced far from last year's rock star economy, the effects of the impasse of capitalism are beginning to be adversely felt in New Zealand. We only have to look across the Tasman to see what is in store - and like Australia – New Zealand can expect years of capitalist austerity ahead.

National Party

The recent re-election of a third-term National-led government has carried off where the last National-led government left off. Already we have seen anti-worker legislation passed that removes the workers' right to tea breaks, as well as allowing employers to legally walk away from good faith collective bargaining with employers declaring that negotiations are over. This is an attempt to further undermine trade unions, in particular the public sector where union density is high when compared to the private sector. It will no doubt be used to undermine public sector collective agreements that are about to be initiated. In the private sector, South African owned Postie have removed tea breaks from workers on individual agreements. Other retailers tried to follow this lead but were forced to retreat, for now, with public opinion backing First union. Further counter reforms are on the agenda and no doubt the National Party is buoyed by the fact of its large majority by MMP voting system standards and the cowered nature of union leaders who have little confidence in their members. The reality is the other way round with workers having little confidence in their union leadership!

The National Party is beginning to unravel in government and there is the beginning of the right-wing press questioning John Key's authority with the recent reports of him repeatedly pulling a waitress's ponytails!

The biggest shock to the Nats was the loss of the Northland electorate in the recent by-election to Winston Peters, New Zealand First. Winston Peters captured the mood of disenchantment, with the government neglect of rural New Zealand, with his populist demagogic and old style campaigning. He was helped by the National Party candidate who was a parvenu political lightweight. It has to be understood that National have held the seat since it was created and more interestingly it is the first time since 1985, when Labour lost Timaru, that a ruling government party has lost a by-election.

The by-election saw the National Party panic with pork barrel politics coming to the fore. Winston Peters’ victory was sealed when the Labour Party stood aside its candidate and asked labour voters to vote tactically. This led to a significant swing to New Zealand First and overturn a 9,000 National majority into a significant NZ First majority.

The by-election showed how out of touch the Nats were with their rural petit bourgeois base of support. It further showed the growing discontent and anger that had been building as people feel rightly neglected by government, and not surprisingly, are not benefiting from the rock star economy. The National Party put the defeat down to Northland letting off steam and failed to understand that voters have seen through their economic rhetoric as it bears no resemblance to their reality.

This by-election result was a political earthquake and expresses the growing disquiet building up in society that found an avenue to express itself. This is a turning point with respect to National's fortunes in government.

New Zealand First are targeting similar rural electorates and it can be anticipated that they may pick up these seats as the government popularity fails.

The recent budget saw further cuts in public services in real terms as well as having to introduce a capital gains tax. The capital gains tax is a measure supposed to gently bring down the Auckland property market balloon. It is a panic measure and will not be effective. The reality is that the Auckland property bubble is more likely to go bang than gently deflate!

A new international airline passenger levy to fund increased biosecurity and customs costs was also introduced. The problem of biosecurity incursions such as PSA and Queensland fruit fly are as a consequence of public spending cuts. Primary industries were demanding improvements to the service as potentially introduced pests and diseases threaten their profitability. Rather than raising income tax an unpopular levy was introduced. This levy was a big surprise for the tourism industry as the Minister of Tourism, John Key, had failed to discuss it with them!

There were further cuts to Kiwisaver with the immediate cut to the $1000 kick start for new Kiwisaver enrolments. The government pension scheme is a poor scheme by advanced country standards but it is better than nothing. The scheme has been consistently undermined since the National Party came to power. Kiwisaver funds are managed by private insurance companies, invested in stocks and bonds, and not guaranteed by government. With the state of the world economy the possibility of this unravelling is increasing. Such a scenario will put tremendous pressure on the National Party. There are illusions in the eyes of the masses with regard to this scheme's security and such a scenario will provoke the masses into action who will demand their money back.

The prestige of the National Party has been dented as they have not restored the national finances to be running on a surplus by their set deadline, which was meant to be the current budget. This and other events are putting strain on the National Party. We can expect factions in the party to start positioning to replace John Key as leader. This is a reflection of the growing crisis in the economy and dissatisfaction emerging in the electorates from all shades of political opinion.

John Key tried to convince the public that the new capital gains tax was not such a tax but it was a property tax and that the airport passenger levy was not a new tax at all. Their manifesto gave no indication of the need of introducing such new taxes and had promised no increases in income tax, that generally pays for such services. Such doublespeak is straight out of Orwell's 1984. This budget is a continuation of the previous ones which further undermines workers living standards. As for National claim with regard to compassionate conservatism, it is a complete joke as living standards for workers are at best stagnant or declining. The dollar crumbs for families on state benefits is just that: a crumb.

Labour Party

The Labour Party suffered another humiliating defeat in the general election. The general election was another low turnout with many labour voters staying at home. This is not surprising when the LP manifesto said it would raise the age of superannuation entitlement from 65 to 67!

The newly elected Labour leader, Andrew Little, is a typical ex-trade union leader and labour right-winger. The Labour Party leadership have abandoned, for now, the idea of increasing the age of superannuation and the capital gains tax. This is ironic when the National Party leaders, who said they would not introduce such a tax, have done so under the economic pressure of the housing bubble in Auckland!

The real problem for labour is that the present leadership have enormous illusions in capitalism. They believe that they can grant meaningful reforms in the death agony of capitalism. Such a view beggars belief and reflects the leadership of yesterday hoping for a return of post-war prosperity. This is a utopian position. If this was a possibility the capitalists would be attempting to buy social peace at this moment by granting reforms. In fact the capitalists are stoking up the flames of class struggle as they attempt to undermine workers' pay and conditions and cut the social wages in an attempt to maintain their profitability. This is a general trend and is the only way to maintain capitalism and its profit system in its death agony.

The Labour Party leadership will come under increasing pressure to move to the left from advanced workers. Membership is at a record high as the new democratic leadership process has drawn ex-members and new layers into the party. The leftward shift in the rank and file is expressed through the campaign for further party democracy, which the right wing of the party will attempt to manoeuvre and neutralise into such things as meaningless policy forums and such like.

The point is that the present leadership will be found wanting and replaced as left currents develop further in the party over time.

Unions and Youth

Unite's successful campaign against zero-hour contracts in the fast food industry shows in a limited way the potential of future workers' struggles. The unionists taking militant action were overwhelmingly young and are not tainted with the pessimism of the current leadership. Militant action points the way forward and shows how to beat the bosses. Unite had public sympathy on its side and under pressure the government has been forced to announce amendments to the ERA to curb zero-hour contracts. This is the first note of the overture as far as the growing class struggle is concerned.

The current CTU leadership are pessimistic with the recent counter reforms passed in parliament and are worried about the future of unions. What the Unite dispute shows is that the future lies in militant trade unionism to defend members pay and conditions. Under the pressure of events rank and file unionists, in particular youth will transform and democratise the unions into fighting militant unions and have a perspective towards socialism. This is where the ideas of Marxism will find fertile ground.

Like the rest of the world, New Zealand has entered an extremely turbulent period of sharpening class struggle with sudden and sharp turns in the situation. This is an ideal period to build the genuine forces of Marxism and build the revolutionary party. Forward to a socialist New Zealand and a socialist world!

May 2015