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(Image: Archi Banal)
(Image: Archi Banal)

PoliticsNovember 27, 2022

What happens when MPs ‘entrench’ legislation, and why does it matter?

(Image: Archi Banal)
(Image: Archi Banal)

A newly added provision to the three waters bill is a potentially momentous change to how law is made, explains Andrew Geddis.

On Wednesday night last week, something very unusual happened while parliament was busy making law. MPs from the Green and Labour parties banded together to make it much more difficult for a part of the government’s controversial “three waters” policy to ever be changed, or even removed altogether. Should future MPs want to smooth the way towards privatising the government’s new bodies for managing our water resources, they’ll have to get 60% support in parliament to do so.

That is unusual because, in the normal course of things, today’s MPs undertake their law-making job knowing that tomorrow’s MPs are free to come along and undo whatever they decide. That’s a key part of our constitutional set up. We make our parliament “supreme” in the sense that a bare majority of its MPs can enact any law they want on any subject they want. However, we temper that power somewhat by saying that a future bare majority of MPs, perhaps elected by future voters, can revisit any of those laws and change them to reflect what they now think best.

This approach is rooted in ongoing democratic accountability. Electing MPs entrusts them with overall law-making power, which we then evaluate at subsequent election. If we disapprove of how that power has been used, we can pick another lot of MPs, who can use their law-making powers to fix things up. Should the majority viewpoint change, then the law can easily change along with it. Parliament’s law-making power is vast, but it is always contingent.

The debating chamber at parliament. Photo: Parliament.nz

Now, the keen eyed will have spotted the “normal course of things” wriggle room in the above account. For there is one part of the laws of Aotearoa New Zealand where this simple – even simplistic – account does not apply.

Back in 1956, MPs banded together and agreed to “entrench” a handful of legislative provisions that govern how our elections are to work. Things like the voting age, the length of the parliamentary term, the method of voting, and how electorates are drawn up all need more than a bare majority of MPs to change. Instead, altering these provisions requires either a super majority of at least 75% of all MPs (90 or more in our current 120-member parliament), or support from a majority of voters at a referendum.

Tim Shiels and I have discussed at some length how and why this happened. For those lacking the appetite for a 10,000-word academic article, basically it was a political deal to stop MPs from any party being tempted to game these electoral rules in ways that might help them stay in power. Because, if our system of parliamentary supremacy over the law depends on MPs being freely and fairly elected by the voters, you want to make sure that our elections are free and the rules under which they get elected are fair!

This particular entrenchment provision has been scrupulously abided by in the subsequent 66 years. The current debate over the voting age in the wake of the Supreme Court’s declaration of inconsistency reflects this fact. With National and Act publicly against any amendment, it is universally accepted that this law simply cannot change (for now, anyway). Even if all the 76 MPs from Labour, the Greens and Te Pāti Māori combined to support lowering the voting age for parliamentary elections, that still falls short of the required 90 MP threshold.

Indeed, our Supreme Court has hinted that the entrenchment provision imposes a formal legal constraint on parliament’s law-making powers. Should a bare parliamentary majority ever try to change one of the entrenched provisions, the courts very likely would refuse to recognise that purported amendment as being “law”.

Green Party MP Eugenie Sage, who proposed the amendment (Photo: Radio NZ – Phil Smith)

Which brings us back to last Wednesday night’s parliamentary events. During the committee stage debate over one of the bills to put in place the government’s three waters reforms, Green MP Eugenie Sage proposed (and the house then adopted) an amendment to entrench the protections against privatising any of the newly created “water services entities”. Basically, the support of 60% of MPs (or a majority vote at a referendum) will now be needed before any future parliament could change the law to remove or dilute these protections.

Why does this matter? Well, first note the 60% threshold for future change. That number doesn’t reflect a principled decision on the appropriate level of parliamentary support for change. It just happens to be the current number of MPs from the Green and Labour Parties who were prepared to support Sage’s amendment. Because, parliament’s rules say that an entrenchment provision in a bill must be supported by at least the same number of MPs as it requires for future amendments. Had 70% of MPs supported including the entrenchment provision, the threshold would have been set at this level.

Second, and perhaps more important, note what this entrenchment protection applies to. Certainly, future ownership of water matters. Whether it lies in public or private hands is a really important question of policy. However, it is still just a question of policy.

It’s different from the provisions entrenched in the Electoral Act, which go to core matters regarding the fairness of the process that chooses who governs the country. We can’t really trust a bare majority of MPs, elected as they are and so eager to win and keep political power, to make rules here. Or, at least, there will always be the suspicion that any rules they make will reflect that bare majority’s personal, partisan interests instead of their best considered view of the right thing to do.

Is that then really the case with ownership of water service entities? Let us imagine that in some future world a bare majority of MPs hold the policy view that private entities can better manage and run these services. You may think that’s a stupid policy. You may even think it a potentially disastrous one. But it’s still a policy view much like someone might hold on (say) the right level of income tax, or the fairest way to deal with climate change, or the restrictions that should apply to public authorities when taking private property.

Why, then, should we say that future MPs can only act to make it easier to privatise water where a super-majority of 60% of them want to do so? What makes this one particular policy issue of such importance that it requires a different, much harder parliamentary law-making process than any other?

The point being, what happened on Wednesday was a potentially momentous broadening out of an existing wrinkle in our system of parliamentary governance. Since 1956, our law has said that some key bits of our electoral system are so at risk of partisan gaming that we can’t trust a bare majority of MPs to decide them. Now, the amended three waters legislation also says that there is a basic policy issue that is so overwhelmingly important as to justify today’s MPs placing handcuffs on tomorrow’s MPs when dealing with it.

If that is indeed the case, what other sorts of issues might a supermajority of MPs think rise to that level? And, in this brave new world, what happens to our system of parliamentary law-making, based as it is on the assumption that the view of the current majority is always subject to revision by the future’s?

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Image Tina Tiller
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PoliticsNovember 25, 2022

WTF is a recession?

Image Tina Tiller
Image Tina Tiller

A global recession is predicted for 2023, but what does that mean and how will it affect Aotearoa?

This was first published in November 2022. On June 15, 2023, GDP data released for the first three months of 2023 showed a second quarter of negative economic growth and that New Zealand did dip into recession.

Over the last few decades New Zealand has experienced several recessions. There was a relatively brief one in 2020 as the economy reacted to the shock of the pandemic, but the last enduring recession was in 2008. An entire generation – anyone under 30 – hasn’t really ever experienced a recession. The Spinoff didn’t even exist in 2008. Facebook was a mere two years on from calling itself The Facebook. People still rented DVDs. Our current prime minister was first elected an MP towards the end of 2008 and our one of youngest MPs, Chlöe Swarbrick was 14 years old. 

The Reserve Bank is now forecasting that New Zealand will enter recession from mid-next year and that it may last for four quarters – a whole year.

What is a recession?

Technically a recession is when there are consecutive quarters of shrinking growth in the economy. Growth is measured using Gross Domestic Product or GDP, which is the total value of the goods and services produced in a country. It’s the widely accepted metric we use to measure the health of our economy. GDP announcements are made each quarter (every three months) by Statistics NZ. In 2020 we had two quarters (six months) of negative growth, which met the definition of a recession, but growth recovered in the following quarter. No two recessions are alike in their causes or impacts but we can cast back to 2008 to get a sense of what a recession looks like. 

What caused the 2008/2009 recession?

New Zealand experienced six quarters of recession in 2008 and 2009 prompted by the Global Financial Crisis (GFC). That means what we made and sold got less and less for almost two years. There were a swirl of contributing factors to the GFC but it was largely the result of the subprime mortgage crisis in the US and the debt crisis in Europe. Essentially a big speculative housing and debt bubble burst. In New Zealand, our banks remained stable but not all our financial institutions were immune. South Canterbury Finance, Hanover Finance and Bridgecorp Holdings collapsed, meaning many ordinary people who had invested in them lost their life savings. In total, between 2006 and 2012, 67 finance companies collapsed in New Zealand. It’s estimated between 150,000 – 200,000 people lost $3b as a result. There has been a large amount of reform since then to ensure that doesn’t happen again.

What happened?

Between April 2007 and April 2011 the real house price, adjusted for inflation, fell by 15.3% in New Zealand. The unemployment rate grew from 3.7% in December 2007 to 6.1% in December 2008. Younger people found it hard to get jobs. The number of working age people receiving an unemployment benefit grew from 18,000 in June 2008 to 62,000 by the end of June 2010. 

When we’re in a recession, people shop less, travel less and generally save more than usual – this is something Reserve Bank governor Adrian Orr explicitly asked us to do on Wednesday. The effect of that is that businesses lay off staff, and stop investing – which tends to feed on itself, as those laid off simply can’t spend as much as they used to.

Prime Minister Helen Clark on the 2008 election campaign trail (Photo: Sandra Mu/Getty Images)

Did it have a political impact?

Asking voters who could be trusted to lead the country through an economic crisis became a plank of the final days of the 2008 election campaign. “It’s time for strong and proven leadership” in an economic crisis became a key message for Labour. The electorate decided John Key and the National party were better placed to manage the country through, ending nine years of Labour government. New Zealanders don’t tend to give any government more than three terms in power but recessions and economic crises can prove to be a useful impetus for change. The forecast recession will inevitably have a bearing on next year’s election.

What about its real-world impact?

The recession of 2008/2009 had profound impacts on all kinds of businesses. The wind got knocked out of travel and tourism businesses for a while. The construction and property sector slumped. During the first quarter of 2009, car sales were down 40% from a year earlier. One in five used-car dealers closed down. In nine months, 100 hospitality businesses closed. Christmas parties in 2008 were often a BYO or DIY affair. 

McDonald’s had a great year in 2009

Some business categories thrive in recessions. We ate a lot of McDonalds in 2009, with the company having one of their best years in New Zealand. The fancy “Angus” burger was introduced to add some gourmet stylings to our growing appetite for cheaper food. Small cosmetics like lipsticks sold well, as did men’s underwear. Electric toothbrush companies were all smiles as people shelled out a little to avoid spending a lot on trips to the dentist.

If you worked in the performing arts, there was a lot of talk of “recession-proof” programming. People still needed cheering up right? But what did they want to see? Harking back to the cabaret of post-WW1 Weimar Republic Germany, The Sexy Recession Cabaret debuted in Auckland in 2009, starring a rotating cast of people like Keisha Castle-Hughes, Jennifer Ward-Lealand and Michael Hurst. People also turned to free activities. During the first two months of 2009, contraceptive sales grew 10%. 

The cause of the forecast recession in 2023 is not financial system collapse but inflation, and the measures being taken to fight it. It’s being deliberately engineered by the Reserve Bank.

The Reserve Bank has deliberately engineered this?!

Yes. Essentially the economy is running very hot. Inflation is proving hard to beat and one of primary mandates of the Reserve Bank is to keep the rate of inflation between 1-3%. Inflation is simply the term used to describe the rise of prices for goods and services. It means money loses its value, resulting in consequences like a higher cost of living. It’s usually the result of too much money being available to purchase too few goods and services, or because demand in the economy is outpacing supply. 

The Reserve Bank is using the rather blunt tool of lifting the Official Cash Rate (OCR) to try and cool spending. Increasing the OCR lifts home loan interest rates. That adds interest repayment costs to households which the Reserve Bank hopes will reduce household spending. People spend less and businesses have to drop their prices to stay competitive, which should hopefully see inflation drop. There is some talk that if we don’t get this situation under control, we could end up with stagflation.

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Anna Rawhiti-Connell
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Stag-what?

A portmanteau of the words stagnant and inflation, it refers to the situation where the economy is struggling to grow and, at the same time, there is high inflation and high unemployment. It creates a paradoxical situation that isn’t supposed to happen with economies. It’s a stubborn stain that requires more than a light spritz of stain remover. Essentially you want to try and kill stagflation with fire. 

Sounds bad…

It’s not a super relaxing scenario, no. The impact of the forecast recession will disproportionately affect those already struggling with the cost of living and those who’ve bought houses in the last couple of years – when interest rates were admittedly extremely low but prices were high. There is some good-ish news in that this forecast recession is expected to be shallow. We have high levels of employment and are described by boffins as “well-placed” to weather what happens next year. But every recession is different – the only thing certain is that it will be painful.


For more on the economy, follow Bernard Hickey’s When the Facts Change on Apple Podcasts, Spotify or your favourite podcast provider.

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