Luxon stokes his policy bonfire

2026-02-20 - 17:06

Comment: This was a week of u-turns, of policies put on hold – the first sparks of that famous pre-election ritual, the policy bonfire. The driest kindling tossed onto the heap this week was doubtlessly the Government’s reversal on housing intensification in Auckland. This is an area where Prime Minister Christopher Luxon feels far more comfortable walking backwards than forwards. In the lead-up to the 2023 election, Luxon crashed the bipartisan housing policy worked out between National and Labour in 2021, promising to make the Medium Density Residential Standards optional for councils. As a compromise, Housing Minister Chris Bishop – who has styled himself as a pro-intensification crusader, a Yimby (Yes In My Backyard) in a nation of Nimbies – managed to ensure that, where councils opt out of the standards, their new plans must still allow for the same amount of overall housing. It might be greenfields development instead of high-rises in existing suburbs, but at least homes would get built. In Auckland, that meant the new plan still had to allow for the same two million homes as the old version. That is, two million total – about a 1.4 million increase on the existing 600,000 homes in the supercity. The two million figure wasn’t a target, it was merely an upper limit, but it became the target of fierce backlash from Auckland suburbanites, terrified of having more neighbours. National MPs began to feel the heat and the Act Party seized the opportunity, positioning itself as the coalition member most opposed to the intensification changes. And so, at the start of an election year where many National backbenchers are hoping to keep their jobs by holding onto Auckland seats wrested from Labour in 2023, the backdown. Bishop announced Thursday the Government would legislate to lower that two million home cap to 1.6 million – the midpoint between the current cap and the 1.2 million in the council’s old, Nimby-era plan. This is pure politics. Little else about the intensification policy will change, meaning the outcomes may well be indistinguishable from what they would have been under the two million threshold. But if prospective National voters were angry at the big number, the Government has moved to reassure them by making it a smaller number. It is not, however, the week’s only backdown. Justice Minister Paul Goldsmith confirmed the legislation to hold a referendum on extending the Parliamentary term to four years would not be progressed before the election, meaning no referendum will accompany the 2026 polls. A four-year term has long been a topic of conversation in Wellington, but rarely a priority for governments. Goldsmith said the Government wanted to prioritise other legislation (although he conceded the bill he introduced on Tuesday, to confirm English is an official language of New Zealand, was not a priority either). More than that, however, the Government wants to run a tight campaign. Distractions like the four-year term issue could distract from its core economic message. Particularly when the polls show either major party is likely to have to rely on their two minor party allies to form a government, National doesn’t want to spook voters who may be lukewarm on Act or NZ First from supporting it because they worry about four years of David Seymour and Winston Peters pulling the reins again. Finally, Luxon also confirmed the proposed ban on paywave surcharges is on hold. Legislation was introduced rapidly last year, with hopes it would be in place by Christmas. Instead, the bill was excoriated in public feedback to the minister and in the select committee. Retail representatives, economists and others said any ban on surcharges would only see businesses raise prices across the board. The legislation wouldn’t have changed the fees banks charge to retailers to process transactions, so businesses would still need to pass on the costs somehow. On Wednesday, Luxon said the Government was taking a “breather” on the proposal. “We just want to make sure we understand all of the implications before we push the final button on it,” he said. Peters and Seymour both rubbished the policy, with Peters saying it was “going nowhere” and Seymour saying “our small business can’t afford that, and that’s why the conversations carry on”. The political logic here is trickier to perceive. The surcharge ban was always intended to be a vote-winner, one of those policies that looks like a cost-of-living win even if, as suggested by the retail industry, it would make no difference to prices. Perhaps the nuance of the issue has cut through the Government’s rhetoric on axing surcharges. Or perhaps this is just Luxon giving in to his coalition partners. Either way, it is yet one more policy added to the bonfire. Nor is it likely to be the last. The Government’s proposal to fund a $1 billion-plus gas import terminal through a levy on electricity – raising power bills by $15 to $30 a year – has stumbled, with Seymour suggesting this week that he’d be open to a different source of revenue. As the Government prepares for what is almost certain to be an extremely tight election, Luxon will be looking to drop ballast wherever he can. Any policy which counters his overall economic message is at risk. There are risks, however, to stoking too large a bonfire. Chris Hipkins’ enormous policy shifts after becoming Labour leader in 2023 were an effort to distinguish himself from the previous, then-increasingly unpopular leadership. For some policies, that may have worked. But the overall impression created was that Hipkins stood for nothing beyond what the polls and focus groups said would win him the election. Voters have a hard time accepting a Government would spend two years putting together a policy only to scrap it in the months before election day. Too big a blaze and the questions arise: Why did you do all this in the first place? And how do we know that, this time, you’ll do what you’re promising?