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New Zealand’s prime minister has warned against a return to the “sugar rush economics” under Jacinda Ardern-era Labour, saying the economy would be plunged into higher levels of debt, inflation and unemployment.
Speaking at his home in Auckland, Christopher Luxon told the FT that elections in November would test voters’ resolve to stick with his centre-right National Party government’s economic repair plan.
He said the country’s finances were “in bad shape” when he was elected in 2023.
“We’ve had to make the tough decision and say, look, we’re coming off the sugar-rush economics that’s caused so much pain and suffering,” he said, arguing that Labour had abandoned fiscal discipline during the pandemic.
Luxon blamed higher spending under Ardern for driving up inflation, necessitating rapid interest rate rises that tipped the country into recession. Labour has argued that inflation — which rose as high as 7.3 per cent — was a reflection of global economic trends.
“What we learnt through their Covid response was that actually just getting the cash bazooka out and firing cash around might have given a lot of short-term gain, but it created a lot of long-term pain,” he said.
Luxon has slashed government spending, including thousands of public-sector jobs, and repealed a number of signature Ardern-era policies including a “burp tax” on agricultural emissions and a moratorium on oil and gas exploration. Planning laws on mining and infrastructure have been relaxed.
“It’s been a tough and challenging time as we’ve had to dig ourselves out of that hole and repair, but [New Zealanders] understand that the financial discipline and having the adults in the room running the show has been actually very good to set New Zealand up for the long term,” he said.
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Luxon faces a tough battle to avoid his government being the first since 1975 to last for only one term. He survived a no-confidence motion in April.
This year his National Party fell behind Labour, now led by Ardern’s successor Chris Hipkins, but recent polls suggest his coalition, which includes two smaller rightwing parties, may be returned with a slender majority.
Danyl McLauchlan, a Wellington-based academic, said the National Party had to overcome a sense of “broken promises” among New Zealanders grappling with a cost-of-living crisis. He said the government’s optimistic long-term vision risked becoming “detached from reality” if the economy deteriorated.
New Zealand’s GDP grew 0.8 per cent in the year to March, but the economy has struggled to achieve consistent growth and slipped into contraction during Luxon’s term.
Unemployment was 5.3 per cent in March, the latest month of official data, while underemployment was 12.9 per cent. Both figures are the highest since September 2020. Net debt, which stands at NZ$182bn (US$104bn), is forecast to continue rising as a percentage of GDP until 2028.
Last week the central bank raised interest rates for the first time in three years but said that there were signs that the economy had started to rebound on the back of stronger exports, tourism and consumer confidence.
Barbara Edmonds, Labour’s finance minister, said the rate rise undermined government claims of a turnaround.
“National promised to fix the cost of living, but two-and-a-half years on, their record is higher costs and higher unemployment,” she said.
Luxon, a former Air New Zealand chief executive who has held senior roles at Unilever, has cast himself as a “CEO of government”, arguing that the global rise of populism reflects poor performance by leaders.
“Polarisation around the world is a function of governments failing to deliver,” he said. “I’m interested in outcomes and delivery.”
He has set a goal of doubling New Zealand’s exports by 2032 by increasing demand for agricultural produce and stimulating investment in high-growth companies in the space and technology sectors.
He said the country was on track to hit that aim thanks to trade deals with the UK, EU, United Arab Emirates and India, whose Prime Minister Narendra Modi last week made the first visit by an Indian leader to New Zealand in 40 years.
Luxon also pointed to his government’s response to the energy crisis triggered by the war in Iran, which left New Zealand vulnerable due to its reliance on imported fuel.
New Zealand opted against cutting the fuel excise — a measure taken by Australia as well as by Ardern during the pandemic — which he said would have risked stoking inflation and undoing fiscal repair.
He compared that move to Ardern’s 2018 ban on oil and gas exploration, which he argued triggered an energy crisis in 2024, when New Zealand had to import Indonesian coal.
“It’s lovely having bumper stickers about oil and gas being banned but actually lower-middle-income New Zealanders lost their jobs as a consequence of that policy,” he said.
Data visualisation by Martin Stabe
