It's all in the numbers for politics 2013

Numbers and matters numerical will dominate politics over 2013 to an ever-larger extent than usual.

Start the year with the calculus involved in Labour’s new electoral college: from February any leadership change will be determined by 40% of caucus vote, 40% membership vote and 20% union vote.

This need not be destabilising over the medium to long term but it will almost definitely be so in the short term. Any new voting system takes a while for people to adjust to, and the first round or two inevitably suffer from that instinctive human desire to test the limits of any new toy. This ‘what’s this button do?’ syndrome is as prevalent among political operatives as it is among children and computer users and there are inevitable scabs on knees and viruses as a result. For reference in the political sphere, examine closely New Zealand’s first MMP election in 1996, and the first few leadership changes in UK Conservative and Labour parties after they gave their members greater voting powers.

If Labour’s members were content with their caucus and leadership this would not matter so much. But Labour members so manifestly are unhappy: the 2012 conference was a screech of rage aimed at its MP.

So there’s a lot of counting going on over the summer break, with leader David Shearer trying to shore up his support against a possible challenge by New Lynn MP David Cunliffe, and Mr Cunliffe - and other possibilities, such as deputy Grant Robertson or former

Numbers number two will be the census, held in March. The political import of this will not emerge until later in the year, but when it does it will be profound.

Every census leads to a redrawing of electoral boundaries, and population movements mean at least two or three more seats. AT least one of these will be a new Maori electorate.

The pivotal role of the Maori Party in the last two elections – and its apparent slow implosion now founding leader Tariana Turia is retiring and co-leader Pita Sharples is slowing down – mean these seats are crucial.

Turnout may be abysmally low – only about a third on the roll in the Maori seats vote, compared to about 60% in the general seats – but the seven, soon-to-be eight or nine Maori seats are likely to determine the next government, as they did in 1914, 1928, 1946, 1996, 2008 and 2011 elections.

Labour, which used to hold a lock on those seats, lost them under Helen Clark’s leadership and it desperately wants them back.

There will be at least one other seat in the Auckland hinterland, which will necessitate a redrawing of the political boundaries on the edge of the city. Depending where they are drawn, this could trigger selection battles for both the main parties: Labour’s in west Auckland, where renegade ex-MP John Tamihere is making a pitch and where there is a long tradition of bloody and public selection rows.

National’s battles are  - usually – conducted in more genteel and discreet if no-less-deadly a fashion, and the party may have one or two stoushes looming among Auckland hinterland MPs.

The other numbers which will dominate the year will be economic and fiscal ones.  The plan to return to surplus by 2014-15 is still, after the pre-Christmas Half Yearly Economic and Fiscal Update, in one piece – but only just.

A surplus of $66 million is, in government terms, a bit like a business projecting a profit of about $10 in a couple of years time.

Unfortunately the surplus target has become a political rather than an economic goal:  most economists do not think it is attainable and, as NBR ONLINE reported nearly a year ago, also view it as perhaps not necessarily desirable: from an economic point of view it might be better to push the surplus target back a year. This is something the ratings agencies have stated they are quite comfortable with: in fact Standard and Poors told NBR ONLINE the week before the Budget 2012 it could live with a surplus delay to 2017.

Having the government books in surplus is a good thing, but it is not the only thing. One of the occupational hazards of finance ministers is to focus too much on the fiscal position, to the detriment of the wider economy.

The current government is not quite at that point: there is much activism in the economic development area, much more than with the last National-led government in the 1990s, but it has yet to bear fruit.

In the meantime, the government’s fiscal stance is having a contractionary impact on the economy and  - if it is to meet its surplus target – this will increase between now and 2015.

The politics of that are tough: every last bit of tax revenue is being squeezed out of the existing policy settings, with the pre-Christmas announcement of a petrol and road user price hikes being only the most high profile example. Others include a wave of technical changes to existing tax rules – such as tweaks to treatment of lease inducements and of GST on hire purchase arrangements for property transactions and the like.

These changes are generally justified on the grounds of making tax rules more consistent and coherence, but it is noticeable the consistency and coherence is generally “fiscally positive” –v that is, it garners more, rather than less, tax revenue.

The high profile political battle the coming year will be over the delayed mixed ownership model (MOM) share issue.

Up to 49% of state owned enterprise Mighty River Power will be floated earlier in the year – natural disasters and the Supreme Court of New Zealand permitting. A further float – probably Meridian Energy – will come later in the year.

The numbers here will be watched closely: what the shares go for, whether the government garners as much capital from the float as expected, and to what extent New Zealand ‘Mum and Dad’ investors are prepared to diversify their portfolios into this sort of share ownership.

The economic rationale for the share float has always been strongest on the grounds of diversification and the deepening of New Zealand’s capital markets – having rediscovered the attractions of savings over the past few years, New Zealanders have few relatively sold mature industries to invest in, and gradual share floats of government owned firms is a good way of widening and deepening the choice.

This is, after all, the approach adopted very successfully by Singapore back in the 1980s.

The political risk though is twofold: one is that the shares will not sell for as much as expected and the government does not reach its $5-7 billion target range for the whole share float.

The bigger risk the opposite: the shares will sell for too high a price – and that price then falls on the NZX. 

It is not too difficult to see this happening:  share ownership is not a one-way bet and if there is too much hype and excitement a round the floats this may well happen.

They are unlikely to fall disastrously, in a commercial sense – but any substantial drop will have political consequences.