Covid-19 biggest hurdle for New Zealand's Ardern after 'tectonic' election

Jacinda Ardern's landslide election win gives her a mandate for the transformational change she has been promising New Zealand for three years, but the Covid-19 pandemic may limit what she can actually do.

The prime minister's signature achievement in all but eliminating the new coronavirus from the Pacific island nation through strict lockdowns propelled her to victory on Saturday. But this approach may also hinder the recovery New Zealanders are hoping for and the progressive policies Ardern champions.

The general election was "tectonic," and with this mandate, Ardern "needs to deliver", said Richard Shaw, professor of politics at Massey University.

Up early on Sunday, hours after delivering the biggest win in half a century for her centre-left Labour Party, Ardern was dealing with the pandemic again as a new infection sprang up, ending a two-week coronavirus-free run.

New Zealand had been free of community cases for more than 100 days until new infections emerged in Auckland in August.

The new case is unlikely to spread further, health officials said, but it highlighted the risk the nation of 5 million faces as it pours its efforts into keeping the raging pandemic off its shores.

Economic Constraints

Ardern has assigned NZ$62 billion ($41 billion) to Covid-19 recovery this year, most of it on wage subsidies to avoid massive job losses. She deployed business loans and rent freezes, and eased some tax requirements.

But with no plans for major tax reform and revenue shrinking from tourism and immigration, two of New Zealand's top money generators, there are questions over how the government can achieve its social and economic goals.

"There is not a huge pot of money available outside of the Covid response," said Brad Olsen, senior economist at Wellington-based economic consultancy firm Infometrics.

For latest updates on Coronavirus outbreak, click here

"So you do wonder what issues have to take priority and how they can achieve transformational change while also ramping up the Covid-19 response," he said.

With net core crown debt forecast at NZ$201 billion ($133 billion), or 55% of gross domestic product by 2024 - up from less than 20% before the pandemic - Ardern's borrowing options are shrinking.

New Zealand governments of all stripes have traditionally sought to keep debt below 20% of GDP.

Ardern, 40, trailing in opinion polls as late as February, saw Labour's support shoot up as New Zealanders rallied behind her "go hard, go early" approach to Covid-19.

But her lockdowns crippled the tourism-centred economy and hobbled her efforts to tackle child poverty, homelessness, inequality and climate change. Unemployment is expected to double to about 8% in the next two years.

Promise and Concern

Voters do not want the government to cut spending, Olsen said.

Ardern wants to build affordable housing, raise minimum wages and spur thousands of jobs in environment-friendly projects.

On issues like child poverty and homelessness, where New Zealand is one of the worst performers among developed nations, Ardern has launched schemes like free school lunches and support for buying first homes.

Also read: End of reign for New Zealand kingmaker Winston Peters

She argued it was impossible to meet these targets in her first three-year term, asking voters for a full mandate to bring meaningful change.

"After this result we have the mandate to accelerate our response and our recovery, and tomorrow we start," she promised voters on Saturday night.

Ardern's critics have questioned her ability to tackle the economic crisis.

"I feel very concerned for my country," opposition National Party leader Judith Collins said on Sunday, vowing to keep pressing Ardern on economic issues.

Collins had argued the centre-right National was better placed to take New Zealand through this financial crisis.

Ardern's biggest success has been to draw New Zealanders closer with her brand of compassionate leadership at a time of deep uncertainty, in contrast to political leaders around the world who were seen polarising and dividing.

She struck a similar tone with supporters after the vote, saying that in an increasingly polarised world, New Zealand was showing it was united.

"Elections aren't always great at bringing people together, but they also don't need to tear one another apart,” she said.