New Zealand’s Inconclusive Election Is the Last Thing the Country Needs

New Zealand’s election last week has resulted in an inconclusive outcome. Although the left-leaning Labour Party got a slightly higher percentage of the popular vote than the conservative, currently ruling National Party, the latter won several more seats as of the latest counting. However, National and its allies do not yet have enough seats to form a government, as all votes have not been counted. While a National-led coalition remains the most likely scenario, it is still far from assured, with official results to be released on November 27. So far, neither the Labour nor the National leaders have claimed victory. It is possible no government will be formed before December.

New Zealand’s vote-counting takes considerable time due to what are called special votes—those from overseas, or from New Zealanders voting in an electoral district outside their own. (Unlike in the United States, New Zealanders can vote anywhere in the country, and then their votes are sent back to their home constituency.) Roughly four hundred thousand special votes are still uncounted.

The narrowness of the election, the possibility of a shift in seats based on the special votes, and early attempts at coalition-building are dragging out the ultimate results of the election. Special votes in the past have tended to favor Labour and its allies, so there is a chance that there will be sufficient votes for Labour to form a left-leaning coalition and take power, but it is unlikely.

No matter who takes power, they will have a weak government. This is the last thing New Zealand needs now. Although the country is often thought of by outsiders as some kind of idyll, with its stunning scenery made famous by the Lord of the Rings films, and its supposedly (but not actually) highly progressive welfare policies, in reality it faces severe social and economic problems, some of which have no obvious answer.

Voting in the New Zealand election appeared in many ways to follow a trend seen in nearly every other developed democracy over the past year. As in places such as Germany, where the main center-left and center-right parties are getting an ever smaller share of the vote, New Zealand’s center is also failing to hold as the electorate grows frustrated with policy gridlock.

Indeed, it appears that seven parties will be represented in the next Parliament. The two traditionally largest parties, National and Labour, received their lowest combined vote share since the current system was introduced in New Zealand thirty years ago.

The fragmentation is magnified by the Mixed Member Proportional (MMP) system, under which voters cast one vote for a party and another for a candidate in their electorate, or constituency. MMP can be a good system in terms of inclusivity of marginalized groups and getting a wide range of views represented in government.

But to enter Parliament in New Zealand, a party has to win just 5 percent of the popular vote or just one electorate seat. Winning one electorate seat is the equivalent of winning one parliamentary seat in, say, Britain. This is a low bar for entry.

Combined with growing public dissatisfaction with the major parties, New Zealand could wind up with more and more parties in Parliament following future elections. One could imagine this leading to a situation akin to some moments in the history of Israel, where coalitions have had to include many small, often single-issue parties. In Israel, such unwieldy coalitions have at times made it nearly impossible to pass major legislation, and given the power to topple governments to small groups.

New Zealand could also face worsening policy paralysis. It already faces a brutal combination of economic challenges, all made worse by the Iran war and its effects on global energy markets. The cost of living in New Zealand is high, due to its isolation from the rest of the world, import dependence, and expensive house construction.

The Iran war has exacerbated the cost-of-living problem, with diesel prices rising at one point by more than 70 percent, higher fuel costs eating into household budgets, and inflation on the rise. Growth remains sluggish, projected at less than 1.5 percent for this year. (The United States is projected to grow by 2.4 percent in 2026, and grew by a sizzling 3.4 percent in the third quarter of the year.)

At the same time, average wages and GDP per capita in New Zealand are low for a member of the Organization for Economic Cooperation and Development (OECD), a group of the world’s rich economies. Its GDP per capita is below the OECD average, and that ranking has declined over time. In the 1970s, New Zealand was one of the richer OECD states; now it is among the poorer ones. And contrary to the idea of New Zealand being a redistributive social welfare state akin to, say, Norway or Australia, and a place of political equality, in reality it uses fewer redistributive policies than even the United States, and is one of the most economically unequal members of the OECD. In addition, in the most recent election, a tiny minority of the richest New Zealanders accounted for a massive percentage of campaign spending.

The country’s isolation and small size have created a brain drain of its most talented minds (including former Prime Minister Jacinda Ardern), mostly to Australia. Some sixty thousand New Zealanders left the country last year alone, out of a total population of about 5.3 million. The brain drain is stifling domestic innovation and limiting New Zealand’s ability to move beyond core growth areas such as agriculture and tourism. 

Add in political paralysis, and this supposed paradise seems more and more like a country with an unclear future: no obvious remedies for its economic challenges, no ability to change its geographic isolation, a world in which not only Australia but also wealthy states in Asia such as China, Singapore, and South Korea are increasingly trying to snap up global talent, including from New Zealand, and a political system that does not allow for bold policy shifts. It could be time for New Zealand to rethink its political system and make major adjustments to it, lest its supposed idyll continue to fade economically, to the point that it resembles far poorer democracies, like Greece, than former peers like Australia.