Implications of the ‘politics of anger’!Medium Term Forecasts!

Political Outlook"

FortheHugoGroup,July2016

Two key global themes"

•  Agrowing‘poli:csofanger’indevelopedeconomies

•  Thedigi:sa:onofeverything

The ‘politics of anger’"•  Alurchtona:onalism,protec:onismandisola:onismin

developedeconomies

•  Tradeliberalisa:onnolongeracceptedinprincipleasafundamental‘good’

•  Immigra:onahot-buGonissue,stokingacceptanceofracist/separa:stagendas

•  Richvspoor-incomeinequalitydemandsananswer

Brexit and Trumpism"

TrumpandBrexitvoters

Globalelites/the‘1%’Developing

worldpopula>ons

Elites gap linked to income inequality"

Influence inverted"

The Brexit vote "

Interpreting Brexit"•  Referendaarepoli:caldynamite(askJohnKey)•  Reinforcesthepowerofoldervotersinanageingsociety•  TherearebigproblemswiththewaytheEUworks•  Butdemocracyworks

–  Ablowfor‘theliGleguy’–  Abloodiednoseforthe‘elites’

•  Ablurringofacceptedversionsof‘leR’and‘right’–  An:-globalisa:onleRelitesupportedEUmembership–  Atoddswithworkingclasscons:tuency–  Conserva:ve‘right’alsospliton‘in’or‘out’–  Corbyn’sdefiance–aUKversionofSanders’srefusaltoquit

•  AharbingerfortheUSpresiden:alelec:on?

Global political/policy implications"•  Vola:leelectoraloutcomesincrease•  Freemovementofpeoplebecomesmoredifficult,butislikely

tobepreserved•  Tradeliberalisa:onbecomesmuchmoredifficulttoextend

–  TPPmustbeindoubtnow–  RCEPlikelytoremainstalled(esp.byIndia)–  Bi-lateraltradeagreementsmorelikelytosucceed

•  Incomeinequalitydemandsapoli:calanswer

How to respond?"•  Emergingratherthanclear•  Areturntomercan:lismoverprinciple?

–  Well-suitedtoEMpolicymentality–  Longtermlowergrowth–  PressureonforEUbreak-upasstatesseektotakebackmonetary,

fiscalandborderpolicycontrol•  Cross-bordertaxreform•  Incomeandwealthtaxreform

–  UniversalBasicIncome?•  Execu:ve(andgovernance?)payregula:on•  Vo:ngsystemreform?

–  HowwouldtheUK,USandAustraliavoteiftheyhadhadMMP?

‘Responsible nationalism’ – isolationism in drag?"

“Thepoli:calchallengeinmanycountriesgoingforwardistodevelopa‘responsiblena>onalism’.

“Itisclearthatthereisahungeronthepartofelectorates,ifnottheDavossetwithincountries,forapproachestopolicythatprivilegelocalinterestsandlocalpeopleovermorecosmopolitanconcerns.

“Channelingthishungerconstruc:velyratherthandestruc:velyisthechallengeforthenextdecade.

“Wenowknowthatneitherdenyingthehunger,norexplainingthatitisbasedonfallacy,isaviablestrategy.”

–  LarrySummers,June24,WashingtonPost

Digitisation of everything"•  InternetofThingsbecomesubiquitouswithinadecade•  AIbecomesincreasinglyreal/advancesveryfast•  Automa:onofexis:ngjobscreatessocialstrain

–  Espforolderworkers•  NZisbehindthecurve,butcatchingup

–  E.g.,Aucklandtrafficmanagementwillinclude‘sensing’vehicletechwithin5years

•  But–amorebalancedarrayofthreatsandopportuni:es

Threats"•  Truism–speedofdigitalchangeis3,000xfasterthanchangein

theIndustrialRevolu:on–  Evenifhalf-true,thatimpliesahugesocietalchallenge

•  Tradi:onally‘skilled’but‘rou:ne’jobsthreatened–  Lowskill/lowproduc:vity/lowwageservicejobsreplaceexis:nghigher

paidoccupa:ons/careerpaths–  Poten:alforwideningofcurrentincomegap

•  Educa:onandskills–  Howwellcanweequipourselvesandourchildrenforthisfuture?

•  Poli:calar:cula:on–  Whowillspeakmostcoherentlyaboutthewaytomeetthischallenge?

Opportunities"•  Bigdataasanaidtosolvingmajorproblems,e.g.,

–  Climatechange–  Crime–  Trafficconges:on/mobility(driverlesscars)

•  Greaterconvenience–  Dealingwithgovtagenciesandserviceproviders–  BeGertargetedretailexperiences–  Householdmanagement–  Mul:plechannelsforpersonalcommunica:on–  Massiveincreaseinmediaconsump:on

•  Costsaredrivendownrelentlessly

NZ POLITICS!

NZ – political medium term overview "•  Strong-ishgrowth

–  Fuelledbypoli:callychallenginglevelsofimmigra:onratherthanproduc:vitygains

•  Respectable,improvingfiscalposi:on•  Lowgovtdebt,butveryhighhouseholddebt•  S:llvulnerabletoglobalshocks,butpoli:callystableand

peaceful•  Growinginequalityerodessocialcohesion•  Housingaffordabilityremainsanintractableproblem

Inequality in NZ"

Lowest income households spend 40%+ of income on housing "

NZ is not alone, but …"

NZ housing costs are high relative to income"

Anger vs hope"•  Inequalityplayingoutinhousingaffordabilityand

homelessnessdebate•  Butelsewhere,theeconomyisperformingrela:velywell•  Inwardmigra:onispartlycausedbyNZlookingaGrac:ve

comparedtoalterna:ves•  ‘Angry’narra:vesnotplayingwelltoamajorityofNzers

Political party responses"•  Na:onal:adeptresponsivecapacity/risk-averse

–  Billiondollarhousinginfrastructurefund–  Raisingbenefitsforthefirst:mesince1973–  Paddlinghard,ratherthangenngahead–  Sofar,immunetoglobalpoli:calwobbles-worried

•  Labour:strugglingforrelevance/authen:city–  Winningonsomehousingissues–  Talking,notyetac:ng,onfutureofwork–  Muddledontrade–  S:lltalkingtoitself–100yearscelebra:onslikelytomakethis

painfullyclear–morecons:tu:onalchange?

Political party responses"•  Greens:tornbetweensingleissuesandfullpolicyplaoorm–  E.g.,strongonwater–  Butstrugglingforcut-throughelsewhere

•  NZFirst:bangingthesamedrum–hardtoignore–  Immigra:onbad–  ForeigninvestmentandTPPbad–  Mostintunewiththeangryvote;hopingtoprofitfromBrexitand

Trumpism•  Maori:seekingbi-par:sanacceptability

–  Andasurpriseresult

Current state of party polling"

The Labour-Green MOU"

OneNewsColmarBruntonpoll,June22016

Minor parties"

•  UnitedFuture–vulnerable–  IfGreensstoodaside,Labourcouldtaketheseat–  Counthisoneseatout–Natsarefocused,though

•  ACT–countDavidSeymourin–  Atjust1.26%,Actcouldhave2MPs–but…

•  Maori–willholdWaiariki–  Ambi:ouscandidateselec:onplans–  Expect2seats,maybemore?

•  NocomebacksforManaorConserva:ves

Govt combinations"

•  Nats/NZFirst–  RequiresKeyandPeterstofindanaccommoda:on–  S:llthemostlikelyoutcomeatthis:me

•  Nats/Maori/Act–  RequiresMaoritopollaround4.5%(6seats)

•  Labour/Greens/NZFirst–  RequiresuncomfortablechoicesbyLabour

•  Labour/Greens/Maori–  RequiresMaoritopollstrongly