If she is serious about balancing the books, and restoring Pay Equity, Labour’s finance spokesperson, Barbara Edmonds, cannot avoid imposing austerity on her party’s own voters

By Chris Trotter*

Labour could win in 2026, but the fiscal and monetary conservatism of its finance spokesperson makes victory increasingly unlikely. Barbara Edmonds promise to “balance the books” hasn’t just handed over Labour’s hopes of electoral victory to Fortune as hostages, it’s sold them into slavery.

Edmonds argues that policy-making is all about the choices politicians make – which is indisputable. What she neglected to tell her party on Saturday, 29 November, however, is that the choices she has already made will, should Labour be successful in re-claiming the Treasury benches, leave the new government committed to a programme of swingeing austerity. Not that New Zealanders have much cause to worry, Edmonds’ policy choices have almost certainly ruled out the possibility of there being one.

Labour’s enemies have only to inform the electorate of Edmonds’ impossible economic arithmetic. Taken together, Labour’s commitment to restoring the Pay Equity claims extinguished under urgency by the National-Act-NZ First Coalition ($13 billion) coupled with the party’s commitment to footing the bill for meeting New Zealand’s climate change obligations ($2 billion to $5 billion) mean that, before it does anything else, an incoming Labour-led government would need to find “savings” amounting to (at the very least) $15 billion.

That would be a very tall order: even if the incoming Labour-led government was committed to lifting the rates of existing taxes and introducing a comprehensive array of new ones, which it most emphatically is not.

Just listen to Edmonds’ perverse boasts about the one new tax she is committed to introducing, Labour’s thin and fiscally anaemic Capital Gains Tax:

“In my first Budget as Finance Minister, I will introduce a simple capital gains tax on profits made from investment and commercial property. It is part of my plan to reward productive investment that grows the economy, not just the housing market. And because I am so determined to grow the economy, the tax will be targeted. The family home is exempt. Farms are exempt. KiwiSaver, shares, business assets, inheritances, and personal belongings – are all exempt. “Did you hear that, Christopher Luxon? They. Are. Exempt.” 

It is difficult to imagine a more abject surrender note to the defenders of neoliberal economic orthodoxy, but Edmonds manages it by reaching for the oldest and most hackneyed analogy of conservative finance ministers – comparing the management of a complex modern economy with the management of a household. But this is exactly what Edmonds does:

“As a mother of eight I know what it means to manage responsibly and make every dollar count. Taxpayers’ money should be spent with the same care. When I was growing up, every cent mattered. While we raised our young family on one income, every cent mattered. When I was a tax lawyer working with small businesses, every cent mattered. That’s the approach I will take as Minister of Finance. Getting the economy growing and balancing the books means we can’t say yes to everything – and I make no apology for that.”

Professor Richard J. Murphy, one of the world’s more vociferous promoters of “Modern Monetary Theory” (MMT) responds to the household analogy like this:

“[W]hen the state spends, what it puts into the economy becomes somebody else’s income, but that in turn then provides a second person with income, and on, and on, and every single time that happens, tax is paid.  So, if the government cuts its expenditure, it also cuts its income, and households don’t do that. So, governments and households are fundamentally different.”

Would Barbara Edmonds cut back on the amount of food, clothes and energy she purchased for her kids if she owned her own bank and could create her own money? Of course she wouldn’t! She’d do what the New Zealand state did when its citizens were threatened by Covid: create enough money to keep them safe and see them through. And yet, like every reactionary finance minister in history, this is precisely what she is promising NOT to do. Primly reassuring Labour’s AGM that:

“Responsibility must always come first. My job will be to make the hard, careful choices that grow the economy and give businesses and families the stability they need to plan. We won’t fix everything overnight, but as Finance Minister I will deliver the stability we need to build the future our country deserves. Responsibility, hard and careful choices, stability.”

The ridiculous assumption here is that Labour will be given the time needed to finally bring home the bacon. But this is a vain hope, especially when the extraordinary lack of courage and imagination in Edmonds’ economic policies makes any return on the voters’ electoral investment in the centre-left unlikely to be realised in anything under a decade.

Does the Labour leadership really believe that the voters are going to give Labour that long? Are they really that confident that the loyalty of working-class wage-earners will not be  tested beyond breaking-point by the spectacle of New Zealand’s welfare state wasting away on life-support while teachers, nurses, and other pay equity claimants suck $13 billion out of the economy?

It would seem that they are. So confident, in fact, that any Labour member, or MP, unwilling to accept Edmonds’ “responsible” microeconomics is now most unlikely to rise further within the party’s ranks. According to the NZ Herald’s political editor, Thomas Coughlan, such fiscal and monetary mavericks now “feel marginalised within Labour – and people on both sides of the debate agree they are right to feel that way.”

Labour’s trade union affiliates may have lined-up on the stage behind newly-elected Council of Trade Unions president, Sandra Grey, but all such straggly gestures of solidarity are rendered moot in the light of Edmonds’ reactionary economics.

Inspired though she so obviously has been by the democratic-socialist victory of Zohran Mamdani in New York, if Grey believes her challenge to “give workers a reason to vote for you. We need not only a change of government, we need a change in the economic, industrial and social order […..] We need to be courageous”, is going to fall on anything other than deaf ears then, clearly, she has not been paying attention.

The New Zealand Labour Party of 2025 draws its inspiration not from the USA but from the United Kingdom. Barbara Edmonds, like Sir Keir Starmer’s equally timorous Chancellor of the Exchequer, Rachel Reeves, is not seeking to manage her nation’s economy in the name of the people, but for the benefit of the markets.

Unlike Reeves, however, Edmonds does not have to keep one eye on the responses of her party’s left-wing MPs. In any shape or form recognisable to the New Zealand socialists who led Labour to victory in 1935, there are none.

*Chris Trotter has been writing and commenting professionally about New Zealand politics for more than 30 years. He writes a weekly column for interest.co.nz. His work may also be found at http://bowalleyroad.blogspot.com.