If anything, economists were too generous to the Government.

While economists picked a 0.3-0.4% decline, headline GDP collapsed a shocking 0.9% in just the June quarter, putting us down 0.6% for the year.

In real terms, the economy is smaller than when Luxon took office.

But despite a record 73,400 New Zealanders leaving the country in the last year and a birthrate well below replacement, immigration – mainly from India, China and the Philippines – has increased the population, hiding how bad things are.

On the real GDP-per-capita measure the Government wants to be judged by, we’re down 1.1% in just one quarter. Since June 2023, it’s down 3.9%.

Luxon can’t blame Covid, the wars in Ukraine and the Middle East or US President Donald Trump’s tariffs for the GDP crash.

Almost every country followed the same ruinous fiscal policies during Covid as the Ardern regime, and are affected by wars and new tariffs.

Yet all New Zealand’s major trading partners grew reasonably well since Trump’s Liberation Day on April 2. Among the countries we compare ourselves with, New Zealand is now at the bottom of the economics class. +Read more

The Cabinet must decide today how to deal with the Cook Islands crisis.

Make no mistake: Cook Islands Prime Minister Mark Brown’s dealings with China are clearly about secession from the realm of New Zealand. That is not in New Zealand’s interests, any more than Taranaki suddenly signing treaties with Australia or deciding it wanted to be part of New South Wales would be.

Brown’s moves with China are clearly outside his legal obligations to New Zealand, which has clear and recognised rights with respect to the Cook Islands’ foreign policy and national defence under our 2001 Joint Centenary Declaration. Moreover, Cook Islanders, including Brown, are New Zealand citizens, with the rights and responsibilities that come with that.

New Zealand asserting its authority over Brown’s renegade government would not be a foreign invasion of the Cook Islands, like, say, the United States taking military action against Canada, Mexico, Greenland or Panama.

It would be more like Denmark taking action against a rogue Prime Minister of Greenland dealing secretly and illegally with a great power in violation of its agreements with Copenhagen.

It is no good Brown claiming his Comprehensive Strategic Partnership and other agreements he is about to sign with China are not about foreign affairs or defence, but about economic development.

With China, there is little if any difference.

Most alarmingly, suggestions that Brown’s agreements with China might include it building a new sea-port or other major infrastructure for the Cook Islands recall Beijing’s similarly claimed charity towards Sri Lanka. The “port” it built in Colombo now more resembles a Chinese naval base, designed to check India to its south.

According to New Zealand’s last major defence review, in 2023 under Labour: “A primary Defence goal will be to prevent states that do not share New Zealand’s interests and values from establishing or normalising a military or paramilitary presence in our region. Such a development would fundamentally alter the regional strategic balance, threaten the freedom of action of New Zealand and our security partners, and undermine regional stability.”

That surely remains the National-Act-NZ First Government’s position. The Cabinet must act in some way before China can claim to have an interest in what happens in the Cook Islands. +Read more

Is it too much to ask Te Pāti Māori to at least act with the same integrity as Sinn Féin, the political wing of the Irish republican movement?

Like Te Pāti Māori (TPM) in Aotearoa, Sinn Féin rejects the Crown’s sovereignty over Northern Ireland and, before 1937, over the rest of Ireland.

Since it first won seats in the UK Parliament in 1917, it has refused to take them up, or the associated pay and perks.

From 1917 until today, those elected as Sinn Féin MPs have had the integrity to recognise that they couldn’t swear allegiance to a King they don’t believe is sovereign, take his pay and perks, or participate in his Parliament.

TPM denies that the chiefs of the various hapu ceded sovereignty to Queen Victoria, at least in Te Tiriti o Waitangi, which the English common law says should be preferred in the event of textual ambiguity.

They’re probably right, even if the majority of New Zealanders disagree.

But even most of those who agree with TPM on that point, including Labour leader Chris Hipkins, insist that King Charles is nevertheless sovereign now.

That’s probably right too, since you need not be far-left to agree with Mao Zedong that, ultimately, all political power comes from the barrel of a gun.

But TPM rejects all of this. It says Māori sovereignty is inalienable. It’s not the sort of thing that the chiefs could have ceded in 1840, nor could it have since been taken away.

The original Māori Party’s founders, Dame Tariana Turia and Sir Pita Sharples, probably wouldn’t have disagreed with TPM co-leaders Debbie Ngarewa-Packer and Rawiri Waititi on the true constitutional position. Nevertheless, they were prepared to live with ambiguity around deep questions of sovereignty in order to make economic, social, cultural and constitutional progress as they saw it.

That included forming a Government with National and Act, both of which certainly believe Māori ceded sovereignty in 1840. Their legacy includes Parliament adopting more elements of tikanga Māori while also respecting tikanga Pākehā, consistent with the idea of partnership between hapū and the Crown.

Ngarewa-Packer and Waititi appear less committed to balancing tikanga Māori and tikanga Pākehā in our Parliament, and letting its rules, conventions and traditions evolve. +Read more

Over 20 years, under three Prime Ministers, Foreign Minister Winston Peters has successfully rebuilt New Zealand’s security relationship with the United States. Whether that endures depends on New Zealand taxpayers funding the associated costs. At over $5 billion extra a year, that seems improbable. Like other economically struggling Pacific states, fiscal policy alone risks forcing us into full dependence on China.

Old-time diplomats say relations with Washington reached their nadir in the weeks after the 2003 US invasion of Iraq. The US accepted Prime Minister Helen Clark’s decision not to participate, which was consistent with most of its Nato allies. What enraged George W Bush’s Administration was Clark suggesting just days after the invasion began that it wasn’t going to plan.

After Peters became Foreign Minister in 2005, he did a superb job rebuilding relations with Bush’s Secretary of State, Condoleezza Rice, leading two years later to Bush, Vice-President Dick Cheney and Rice receiving Clark in the Oval Office, the highest-level line-up to meet a New Zealand leader since the nuclear ships dispute.

After his return as Foreign Minister in 2017 for Prime Minister Dame Jacinda Ardern, Peters accelerated his previous work.

His 2018 “Pacific Partnerships” speech at Washington’s Georgetown University recalled the US, Australia and New Zealand fighting together to liberate the Pacific from Japan, as well as in Korea, Vietnam, Iraq and Afghanistan.

Critics of Ardern’s, [Chris] Hipkins’ and [Christopher] Luxon’s realignment – including Clark and [John] Key – worry about the impact on our relationship with China, arguing we should try to continue the delicate balancing act they managed. Others doubt that is realistic as China continues to de-liberalise domestically and build closer relationships with Russia, Iran and North Korea.

Yet, if we’re not careful, the decision may be taken out of our hands, with us risking upsetting China only to be chucked out of the IP4-Nato club anyway.

In 2014, Nato agreed each of its members should spend at least 2% of their GDP on defence by 2024. In his first term as US President, Donald Trump linked that commitment to maintaining the US security guarantee. More coarsely, candidate Trump said last February that Russia could do “whatever the hell they want” to Nato members not honouring the spending commitment.

Nato is itself now considering raising the guideline to 3% of GDP. Trump reportedly plans to demand 5%, more than the US’s own spending of 3.4%, interpreted as pressure to lock in 3%.

Nato’s and Trump’s demands will inevitably extend to the IP4. Of the 36 Nato and IP4 countries, New Zealand’s defence spending is by far the lowest, at a little over 1% of GDP.

Just to maintain our current 1% of GDP, Finance Minister Nicola Willis needs to increase defence spending by around $800m a year by 2027/28. +Read more

Finance Minister Nicola Willis had some good fiscal news this week with reports only 249 families are receiving the full value of Christopher Luxon’s tax package. That will save some tens of millions of dollars to spend elsewhere or – fingers crossed – reduce the deficit.

But almost everything else is more terrible than ever.

International events, the tax cuts and the Government’s failure to seriously cut spending or increase revenue mean the National-Act-NZ First Government is borrowing at a faster rate than Labour in 2023, the Taxpayers’ Union highlighted this week. Government debt grows by over $1 million an hour.

These numbers don’t yet include the Government’s commitment to double defence spending based on its 2025 Defence Capability Plan and the expectations of our Australian ally and Nato and Indo-Pacific Four friends that we invest at least 2% of GDP in defence.

That expectation will rise to at least 3% of GDP when Nato reveals its new target in June. Assuming some GDP growth, that would cost Willis about $10b more per year.

Luckily, Nato’s methodology allows flexibility in spending the money.

It says at least 20% should go into major new equipment, which we’ll meet by buying new helicopters, troop planes and frigates.

For operational spending, it includes land, maritime and air forces, but also spending on police, coast guards and so forth, if they’re trained in military tactics and could realistically support a military force abroad.

Also included are meteorological services, research and development, stockpiling equipment for emergencies, developing military-capable airfields and military pensions.

That invites Willis and Defence Minister Judith Collins to think creatively about how they might spend the extra $10b a year to keep Australia and Nato happy, on top of the demands of New Zealand’s existing Defence Capability Plan.

As Economic Growth Minister, Willis might see merit in greater investment in local defence-industry players, like Tauranga’s successful Syos Aerospace or RocketLab, whose American division has just won a US$46b US Air Force contract.

As Social Investment Minister, Willis could consider whether New Zealand should follow European Union countries in introducing compulsory or even universal military service – the difference being that “compulsory” means everyone being eligible for a draft while “universal” means everyone actually participating.

At least since Sir John Key’s Burnside speech 18 years ago – that Willis wrote – and Dame Jacinda Ardern’s worries about child poverty, New Zealand policymakers have claimed concern about a vast and growing underclass living unhappy lives, while costing taxpayers a fortune, committing crime and hampering economic growth.

If New Zealand really plans to spend billions more on defence, why not invest it in universal military training, not as an ambulance at the bottom of the cliff like boot camps, but as a fence at the top? +Read more