No Taxation Without Representation: The CCO Accountability Gap

Article #460

Last weekend we marked King's Birthday - the official birthday of a man none of us voted for, none of us can remove, and most of us will never meet. The monarchy survives on charm, inertia, and a constitutional bargain held for centuries: the King reigns on the condition he does not rule.

The same cannot be said of our Council-Controlled Organisations. In three weeks' time, that contrast becomes expensive.

Last October, New Zealanders voted in 42 simultaneous referendums on Māori wards. 24 councils voted to remove them and 18 to keep them. Nationally, more than 542,000 voters supported retaining Māori wards against around 468,000 who opposed them. Whatever your view, the principle was clear: how local democratic representation is structured is important enough for voters to decide directly.

Now apply the same lens to CCOs. These organisations sit at the intersection of three conditions that create a serious accountability vacuum:

1. They run monopolies or near-monopolies - no competitor can offer cheaper water, public transport, or port services.

2. Their boards are appointed, not elected. Voters do not choose the directors, and the councillors who appoint them do not manage them day-to-day.

3. Directors are almost impossible to remove when ratepayers are unhappy. CCOs continue unchanged no matter who wins council elections. The democratic feedback loop never closes.

No market discipline. No democratic discipline. Ratepayers pay regardless.

Fuel price hikes annoy us because they flow into the cost of everything. But fuel still operates in a competitive market: you can switch brands, go electric, take the bus, or drive less. Water has no such substitute. You cannot switch providers, install a cheaper pipe, or easily opt out. If fuel prices trouble you, water should give you nightmares - because the entity setting the price answers to no one you can vote out.

If "no taxation without representation" means anything in 2026, any body with the power to compel payment must answer to those who pay. That principle is the foundation of legitimate government.

On 1 July, IAWAI - Flowing Waters Ltd takes over water and wastewater services across Hamilton City and Waikato District. Owned 50:50 by the two councils and in partnership with Waikato-Tainui, its board is appointed by a nine-member Forum: three Hamilton representatives, three Waikato District representatives, and three Waikato-Tainui representatives - all with equal voting rights. Ratepayers will be legally required to buy from an entity whose governance includes voices no voter ever elected.

The Auditor-General warned in 2022 of "a serious diminution in accountability to the public for a critical service". The structural problem remains.

This week, Local Government Minister Simon Watts announced an amendment to the Local Government Act 2002 to restrict voting at council committee meetings to elected councillors only. "Councillors are directly accountable to voters for their decisions," he said. "That's not democratic, so we're fixing it." A welcome principle - but the reform applies only to council committees. The new water CCOs going live in three weeks sit outside the Local Government Act, governed instead under Local Water Done Well. The Forums that select their boards - the very arrangements that breach Watts' own principle - will keep their voting rights intact.

If it is not democratic at council level, it cannot be democratic at the water entity level either.

This is not just a water issue. The same governance model applies to Auckland Transport, port companies, and other major CCOs.

In Wellington, Tiaki Wai - also launching on 1 July - has confirmed a $645,000 CEO salary (more than the Prime Minister) and doubled director fees to $60,000, while households face average bills of $2,418 this year, potentially rising to $6,831 by 2036. Mayor Andrew Little called the salaries "generous". The Commerce Commission is now scrutinising pricing - proof that the only meaningful check is regulatory, not democratic.

The model is heading to Hawke's Bay. From 1 July 2027, water services for Hastings, Napier, and Central Hawke's Bay will transfer to a new joint CCO.

Two practical reforms would close the gap.

First, CCO directors should be either directly elected by ratepayers or appointed exclusively from sitting councillors. Either option creates a direct line of sight from voter to board. The former is more democratic; the latter is cheaper and integrates CCO governance into existing council accountability.

Second, directorships should be term-limited to the electoral cycle. A change in council should automatically refresh CCO boards. At present, voters can throw out a council only to discover the bodies actually running their water, transport, and ports remain untouched.

Critics will object that elected or councillor-appointed directors would be parochial and unqualified. Perhaps. But the current system produces unaccountable parochialism dressed up as professional governance. The ability to vote them out is worth more than the illusion of expertise from people who answer to no one.

We tolerate an unelected sovereign because he sets no rates, signs no major contracts, and cannot raise the price of your shower. He is a constitutional ornament. Our CCO directors are not.

New Zealanders take representation seriously – so why is there exception for organisations that can send us bills we cannot refuse?

No taxation without representation. It is not a slogan. It is the bargain.

Watts has now agreed with the principle - for councils. In three weeks, water entities operating on the very arrangements he has just rejected go live in Wellington and the Waikato. Hawke's Bay follows a year later. Either the democratic principle applies everywhere, or it applies nowhere.

The King, at least, had the decency to stay out of it.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

SOURCES

• Maori ward referendums (Oct 2025): RNZ; final national tally per Wikipedia (Keep 542,134 / Remove 467,923 / margin 74,211).

• IAWAI - Flowing Waters Ltd (Hamilton/Waikato water CCO, operational 1 July 2026): Hamilton City Council governance page.

• Local Water Done Well overview: Bell Gully briefing.

• Auditor-General, "Submission on the Water Services Entities Bill" (8 August 2022): oag.parliament.nz.

• Local Government Act amendment announcement (Hon Simon Watts, 2 June 2026): Stuff; press release reproduced at Mirage News, "Council Voting Limited To Elected Officials".

• Tiaki Wai pay and pricing (April-May 2026): NZ Taxpayers' Union release; NZ Herald, "New Wellington water entity Tiaki Wai defends salary spend for top officials" (13 April 2026); NZ Herald, "Tiaki Wai opens books, warns of higher costs to households" (24 March 2026); RNZ, "Mounting confusion over new water bills looming for Wellington region residents" (22 May 2026).

• Hawke's Bay joint water CCO (operational 1 July 2027): Napier City Council news release.

Budget 2026: A better story, if you believe the assumptions

Article #459

For decades I have written about the Budget from the outside. This year, I was fortunate enough to be there in person – in the lockup, with the Treasury’s forecasts and supplementary documents in front of me before the Minister rose to speak. There is value in having the source material itself, rather than seeing headlines that come after. What follows is my read.

The Budget Economic and Fiscal Update released on 28 May tells a more reassuring story than the Half Year Update did back in December.¹ Deficits narrow earlier. The cyclically adjusted OBEGALx, the operating-balance measure favoured by Finance Minister Nicola Willis as it strips ACC’s volatile revenue and expenses out of the historical OBEGAL, returns to surplus in 2028/29; a full year sooner than previously forecast.² Tax revenue holds up better than feared. And on the Treasury’s fiscal-balance measure, which tracks the actual cash impact of government on the economy, policy keeps supporting demand through 2026/27 before tightening from 2027/28 onwards.³

On the surface it is a better-than-expected set of numbers. As always, the trouble is what sits underneath them.

The forecasts assume real GDP growth lifts from 1.2% this year to a peak of 3.2% by 2028. This would be a sharp acceleration after three years of contraction or near-zero growth.⁴ They assume unemployment peaks at 5.5% and then drifts back down to 4.3%, and that net migration recovers towards its long-run average having run at barely a quarter of that recently. Each assumption is plausible on its own. The sticking point is that the recovery needs most of them to arrive together, and roughly on schedule.

Inflation is the assumption that should give readers the most pause. In these forecasts, it takes a less-than-linear, lurching path: CPI surges to 4.0% this year, driven in part by higher fuel prices flowing from offshore conflict, before the forecast has it dropping abruptly to 1.6% in 2027, then settling around 2%.⁵ That near-halving in twelve months is a heroic call. It looks more heroic still when you separate out domestic, non-tradeable inflation, the prices generated here at home, in services, rates and rents – which Stats NZ measured at 3.5% in the year to March, with electricity up 12.5% and council rates up 8.8%.⁵

Ask any local who has just opened a new rates letter, renewed an insurance policy, or braced for yet another ramp-up in winter power prices. The cost-of-living squeeze people are actually feeling is not the tidy headline figure the forecast leans on. And a great deal does rest on that figure, because inflation feeds wage expectations, interest costs and the tax take all at once. If domestic prices prove stickier than assumed, the path back to surplus gets harder.

The forecasts also assume the Government will deliver on ambitious savings tracks at Health New Zealand, Kāinga Ora and the Ministry of Social Development – all organisations that have run material operating deficits.⁶ Every line of the recovery requires for something to land more or less perfectly. The Treasury’s own statement of specific fiscal risks runs to dozens of substantial items; a catalogue of expensive surprises waiting to happen.⁶

Meanwhile, the wave of cost coming our way is neither theoretical nor distant. It is here now.

Defence capability needs roughly $6 billion in new funding over the next two Budgets just to deliver the existing plan. The Health Infrastructure Plan identifies more than $20 billion over the next decade. The school property pipeline signals a significant uplift. Treaty relativity payments and pay equity settlements remain live cross-portfolio risks.⁶

Nowhere is the pressure clearer New Zealand Superannuation. NZ Super payments are forecast to climb from $24.7 billion in 2025/26 to $31.2 billion by 2029/30, an average increase of about $1.6 billion every year. This is the single largest driver of core Crown expense growth, with roughly half of that uplift simply more people turning 65.⁹ Against that backdrop, the decision to recommence contributions to the Super Fund is genuinely welcome – but light on detail for what is, on any honest reading, the largest looming fiscal pressure of the next two decades.

That’s the sobering side. There is a more encouraging side too, and parts of it land particularly well for our Hawke’s Bay region.

The tax package is sensibly targeted rather than flashy. Lifting the Foreign Investment Fund de minimis threshold from $50,000 to $100,000 of shareholdings is a solid, practical move. Combined with allowing the revenue account method for unlisted shares held by any New Zealand resident, it removes a barrier to migration for skilled people and cuts compliance costs for ordinary investors – who should never have been tangled in rules built for complex international structures.⁷ The accompanying changes to charities and not-for-profit settings, including a $100,000 annual cap on individuals’ rebate claims, tidy up a system that had drifted from its purpose.⁷

But, not everything in the package is so easily defended. One such outlier is the Emerging Managers’ Programme, a scheme backing first-time and emerging fund managers who invest in startup companies, with the aim of helping those funds build capacity, scale and a track record.⁸ No, you’re not reading that wrong: the Crown is effectively backing unproven managers who are backing unproven companies, stacking emerging-manager risk on top of early-stage venture risk. The mind boggles slightly.

There is somewhat of a rationale behind it – New Zealand’s venture ecosystem is thin, exits like Xero and Rocket Lab show what is possible, and the next generation of managers has to come from somewhere. But it sits oddly in a Budget otherwise sold on discipline and rebuilding buffers, and it will be worth watching closely how the guardrails are drawn.

Closer to home, the Budget delivers tangible benefits to Hawke’s Bay. Cash-strapped, debt-laden councils such as Hastings stand to benefit from changes giving them a share of consents value, a scaling mechanism that better matches revenue to the growth that creates the work. Funds have been earmarked for design and enabling works at Hawke’s Bay Hospital, alongside the wider Regional Hospital Redevelopment Programme.⁶ There’s also a $400 million reserve fund for state highway resilience projects aimed at keeping critical routes open during severe weather – something Hawke’s Bay residents understand the importance of more than most. Cyclone Gabrielle is not yet three and a half years behind us, and the Treasury itself rates comparable events as reasonably possible, at least once every four years, within the forecast period.⁶

The bottom line? This is a Budget Update that asks New Zealanders to take a fair amount on faith: that growth returns on cue, that inflation halves to target while domestic prices still bite, that savings targets are met, and that the events outside the Government’s control stay kind to us. The genuine wins for investors, charities, regional councils, hospital patients and motorists on vulnerable routes, deserve acknowledgement.

The risks deserve to be taken just as seriously.

The Treasury has done its job. It has shown us the figures and, in the supplementary information, told us plainly what could go wrong. The question is whether the rest of us are reading both halves of the document, so there aren’t surprises down the road if certain elements don’t stick the landing.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

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REFERENCES

[1] The Treasury (2026). Half Year Economic and Fiscal Update 2025. Wellington: New Zealand Government, 16 December 2025.

[2] The Treasury (2026). Budget Economic and Fiscal Update 2026: Supplementary Information: Underlying Fiscal Performance (Cyclically-adjusted and Structural Balance Indicators), B.3, pp. 47–49. Wellington: New Zealand Government, 28 May 2026.

[3] The Treasury (2026). Budget Economic and Fiscal Update 2026: Supplementary Information: Fiscal Stance (Fiscal Balance and Total Fiscal Impulse Indicators), B.3, pp. 42–46.

[4] The Treasury (2026). Budget Economic and Fiscal Update 2026. Wellington: New Zealand Government, 28 May 2026; see also ‘Budget 2026: 10 things you need to know’, NZ Herald, 28 May 2026.

[5] The Treasury (2026). Budget Economic and Fiscal Update 2026: Supplementary Information: Detailed Economic Forecast Information, Table 2 (CPI) and Table 6 (Labour Market Indicators), B.3, pp. 33, 37; non-tradeable inflation of 3.5% from Stats NZ (2026), Consumers Price Index: March 2026 quarter, 21 April 2026.

[6] The Treasury (2026). Budget Economic and Fiscal Update 2026: Supplementary Information: Unchanged Specific Fiscal Risks and Contingent Liabilities, B.3, pp. 6–30.

[7] The Treasury (2026). Budget Economic and Fiscal Update 2026 — Supplementary Information: Tax Policy Changes, B.3, pp. 39–40; and Inland Revenue / The Treasury (2026), 2026 Tax Expenditure Statement, 28 May 2026.

[8] The Treasury (2026). Summary of Initiatives in Budget 2026, B.19, p. 9: Emerging Managers’ Programme. Wellington: New Zealand Government, 28 May 2026.

[9] The Treasury (2026). Budget Economic and Fiscal Update 2026, Fiscal Outlook — drivers of New Zealand Superannuation expense growth. Wellington: New Zealand Government, 28 May 2026.

Death and Taxes

Article #458

This Thursday, Nicola Willis will deliver Budget 2026. The headlines will be familiar: tight control of spending, focus on health, education, defence and law and order, a return to surplus.[1] To her credit, the Finance Minister has shown discipline.

On Tuesday, in her pre-Budget speech to Business North Harbour, she announced 8,700 public service job cuts over the next three years, $2.4 billion in savings, the merger of agencies, and AI as “a basic expectation” across government systems.[2] The public service had grown from roughly 48,000 in 2017 to over 63,000 by the end of 2024, a 33 percent expansion in six years against largely flat productivity growth. Trimming it back toward 1 percent of population is overdue.

The harder question is timing. The coalition has been in office for two and a half years. The electoral mandate was fresh in late 2023. Decisions of this magnitude, with this kind of political cost, are easier early in a term and almost impossible to deliver in election year without the optics looking opportunistic. The reforms should have been made then.

That delay matters because the bond market is a fickle lover when a country is carrying heavy debt and producing little productivity growth. Fitch has placed New Zealand’s AA+ rating on negative outlook, citing rising challenges in reducing debt after years of delayed fiscal consolidation; debt to GDP is projected to reach 56 percent by 2027.[3] The 10-year government bond yield is sitting near 4.7 percent. Every basis point on that yield translates into real money in interest costs. Markets are watching, and they are no longer giving New Zealand the benefit of the doubt.

This is the fiscal context in which the campaign begins.

Budget Day on the 28th is not really the main event. It is the starting gun for the election campaign that ends on 7 November. And the backdrop against which that campaign will be fought is grim.

The NZX 50 touched fresh lows this week. The Gross Index, which includes reinvested dividends, has delivered a total return of around 3 percent over the past five years.[4] That is less than 1 percent per year in nominal terms. Strip out dividends, and the price-only index is in negative territory. Once you factor in cumulative inflation of around 20 percent, New Zealand investors have gone backwards by close to 17 percent in real purchasing power. No other major Western bourse can claim that distinction. The S&P 500 has roughly doubled. The ASX 200 is up around a third. The FTSE, long the laggard of major markets, has still delivered around 30 percent. Even the Nikkei, dormant for two decades, has delivered roughly 70 percent.

This matters because when the stock market is not creating wealth, politicians look for ways to redistribute existing wealth. That is the genuine political logic of the moment, and it is amplified by the mechanics of MMP. Labour cannot govern alone. To form a government, it will need the Greens and almost certainly Te Pāti Māori. Whatever Labour campaigns on, the coalition partners will demand more.

Labour has confirmed it will campaign on a capital gains tax targeted at residential and commercial property, with revenue ringfenced for free GP visits.[5] The Greens have gone further, proposing a 2.5 percent annual wealth tax on net assets above $2 million, and a 33 percent inheritance tax on lifetime gifts and estates above a $1 million threshold.[6] Te Pāti Māori has signalled wealth taxes as a coalition bottom line.[7] Fitch has reportedly been briefed on tax measures beyond what Labour has publicly disclosed.[8]

The Greens’ inheritance tax proposal is the one to pay closest attention to. It is, in everything but name, the return of estate duty. And it is worth remembering, on the eve of a Budget that opens an election year, why New Zealand abandoned that tax in 1992.

Estate duty was sold as a tool of equity. In practice, it became a destroyer of family legacies. By the early 1970s, rates had climbed as high as 40 percent, with thresholds catching far more than just the wealthy.[9] For families whose wealth was tied up in illiquid assets, the death of a patriarch or matriarch triggered financial catastrophe.

The Hawke’s Bay orcharding sector provides stark examples. Local orchardists who had spent decades developing pipfruit operations found their estates assessed at development values rather than agricultural income values. Families faced duty bills exceeding several years of profit. The choice was bleak: sell blocks to developers, or take on crippling loans.[10] Many spent thirty years or more servicing that debt, an entire generation lost to a single tax assessment. A block of land that had taken a grandfather forty years to develop into productive orchard could be lost to an unexpected death and an Inland Revenue assessment within eighteen months.

The Waikato dairy sector tells the same story. Multi-generational farms were forced to sell down herds and land to meet duty bills. The remaining operations often lacked the scale needed to remain viable, and some families saw their children leave farming altogether.[11] It was not incompetence that ended these legacies. It was a tax code that demanded immediate liquidity from operations that simply do not generate it.

Rural service businesses, the stock and station agents, transport firms, processing contractors, faced the same pressure. Many took on outside investors to meet duty bills, and those investors eventually engineered buyouts. The consolidation of New Zealand’s agricultural service sector during the 1980s owed much to estate duty’s destabilising effect.[12]

Defenders argued at the time, and will argue again, that proper planning could avoid these outcomes. Two things are worth saying about that. First, the planning itself was a deadweight cost. Families spent thousands on lawyers and accountants navigating frequently changing rules rather than reinvesting in their enterprises.[13] Second, deaths do not arrive on schedule.

What does prudence look like in practice? It looks like reviewing trust structures that may have been set up two decades ago under different rules. It looks like understanding which assets sit where, who owns what, and what the liquidity profile of an estate actually is on any given day. It looks like considering whether life insurance has a role to play in funding potential tax liabilities. It looks like beginning the conversations between generations that families instinctively defer.

The lesson from estate duty is not that all tax is bad. It is that taxes on illiquid family assets transfer productive wealth from those who built it to whoever has the ready cash to buy at distress prices. That is not redistribution. It is destruction. And it is being proposed at a moment when fewer families have the financial cushion to weather it, against a stock market that has produced no real wealth for half a decade.

Thursday’s Budget will not settle this debate. It opens it. Families with farm, orchard, or business assets ought to be reviewing their structures now, seeking wise counsel from advisers who understand both the tax architecture and the fiduciary weight of decisions made under pressure. None of this argues for selling out of New Zealand equities at the lows: capitulation at the bottom is the parallel mistake, the same wealth destruction by another route. The answer is diversification and counsel, not retreat. The families who recovered from estate duty were almost always those who took advice early. The ones who lost everything were those who waited until the tax was already in force.

History rhymes. It does not, thankfully, repeat. But only if we are paying attention.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

REFERENCES

[1] The Treasury, Budget 2026, 28 May 2026, treasury.govt.nz/publications/budgets/budget-2026

[2] NZ Herald, Nicola Willis’ public service cuts to save $2.4b, 8700 jobs to go, 19 May 2026; 1News, Thousands of public service jobs to go, major Govt shake-up announced, 19 May 2026

[3] Fitch Ratings, New Zealand AA+ outlook revised to negative, March 2026; Trading Economics, New Zealand 10-Year Government Bond Yield

[4] S&P/NZX 50 Gross Index, 5-year return data to 20 May 2026, NZX and Yahoo Finance

[5] NZ Herald, Labour’s capital gains tax: Chris Hipkins celebrates ‘progressive’ policy, 28 October 2025

[6] Become Wealth, Wealth Tax NZ: What It Means and Who Would Pay, April 2026; Green Party Alternative Budget 2025

[7] RNZ, Te Pāti Māori proposes suite of changes in new tax policies

[8] Scoop News, Fitch Report Exposes Labour’s Secret Tax Agenda, 29 April 2026

[9] Inland Revenue Department, Annual Report 1975 (Wellington: Government Printer, 1976), 23-25

[10] P.J. Skellerup, “Estate Duty and the New Zealand Horticultural Sector,” NZ Journal of Agricultural Economics 3, no. 2 (1979): 45-52

[11] Ministry of Agriculture and Fisheries, Agricultural Statistics 1980 (Wellington: Government Printer, 1981), 67-89

[12] R.M. Sandrey and S.R. Reynolds, “Structural Change in New Zealand Agriculture 1972-1987,” Review of Marketing and Agricultural Economics 58, no. 1 (1990): 15-28

[13] NZ Law Society, Submission on Estate and Gift Duties Amendment Bill (Wellington: NZLS, 1983), 8-12

Air New Zealand: The Worst of Both Worlds

Article #452

Fifty percent government-owned, operating like a budget carrier, charging premium prices, Air New Zealand occupies the most uncomfortable position in aviation. It’s neither fish nor fowl: not quite private, not quite public, delivering neither the efficiency of true competition nor the service standards of genuine public ownership.¹

Welcome to the warm embrace of collectivism. It’s getting warmer, and not in a good way.

The Flightless National Carrier

The symbolism writes itself. Air New Zealand, like the kiwi, has become a flightless bird, grounded by contradictions, unable to soar because it refuses to commit. Government ownership was supposed to protect the national interest. Instead, it has created an airline that enjoys privileges without facing consequences: government contracts, preferential treatment, implicit bailout guarantees, all without the full discipline of the market or the scrutiny of complete public accountability.¹

When things go wrong, taxpayers are on the hook. When things go right, shareholders collect the dividends.

New Zealanders know this intimately: the airline received NZ$2.3 billion in Crown support during COVID-19.² The structural trap was set long before the current crisis.

The World is on Fire. Air NZ has a Newsletter.

On 8 April 2026, CEO Nikhil Ravishankar sent customers a carefully worded email. “Kia ora Nick,” it began warmly. He wanted to update customers on jet fuel prices. Fuel had surged from around US$85–90 a barrel to above US$200, effectively doubling Air New Zealand’s daily fuel bill from NZ$4 million to NZ$8.5 million. Schedule cuts for May and June were confirmed. More were promised to be “deliberate and carefully considered.”³

Warm. Reassuring. Human, even, which is ironic, given what you encounter when you actually try to contact the airline.

This crisis is not Air New Zealand’s alone. Iran’s effective closure of the Strait of Hormuz, through which over 20% of global seaborne jet fuel normally flows, has sent shockwaves through the entire industry.⁴ More than 14,000 flights globally have been cancelled since late February 2026.⁵

Ryanair’s Michael O’Leary has predicted summer cancellations of 5–10% across Europe.⁶ United Airlines’ CEO Scott Kirby has warned his carrier’s fuel bill could double to US$20 billion.⁷ Lufthansa’s CEO has assigned teams to contingency planning.⁸ SAS has cancelled over 1,000 flights in April alone.⁹ Energy analysts at Kpler warn that even if the Strait reopened tomorrow, prices would not fall quickly: production has been taken offline, and the market hangover could last well into 2027.¹⁰

The difference between Air New Zealand and those carriers is structural. Most are pure private enterprises; they face consequences. Air New Zealand faces a shareholder with a printing press.

The Numbers are Brutal

Forsyth Barr’s March 2026 report is stark: Air New Zealand could book a net loss of $226 million in FY2026, and $148 million in FY2027 if fuel costs remain elevated.¹¹ Macquarie analysts warn that capacity cuts will fall primarily on domestic and Tasman routes.¹² The share price has reflected the outlook, trading near its 52-week low at $0.48, down sharply from $0.64.¹³

The airline has already trimmed near-term capacity by 5%, with more reductions almost certain.

Watch for the Capital Raise

Here is what the CEO’s warm email does not say: if losses of this magnitude materialise over two financial years, Air New Zealand will need to raise capital. When it does, the New Zealand government, as 50.1% shareholder, faces an unavoidable choice. Participate, and write another substantial cheque from the public purse to protect its stake. Or decline, dilute, and begin the slow retreat from an ownership position it has held for decades.

Either outcome implicates taxpayers. Either outcome exposes the central absurdity of the current arrangement. Budget 2026… hold your breath.

Chatbots and Contempt

Try contacting Air New Zealand’s customer service, and you will discover the true face of modern collectivist enterprise: woeful service, declining standards, and a corporate structure that treats human interaction as an inconvenience to be automated away.

You are more likely to engage with a chatbot than a human, and the human, when you eventually find one, operates like a chatbot anyway—scripted, bounded, unable to resolve anything of substance. The airline’s answer to its service failures is not better people or better training, but better systems for apologising for the absence of both.

The Hospital Pass

That’s what recommending Air New Zealand has become, and nowhere is the gap between price and product more vivid than in business class, where Air New Zealand’s structural contradictions are most expensive to observe firsthand.

The airline’s new Business Premier cabin, rolling out across its Boeing 787 fleet through 2026, retains a herringbone configuration. Passengers sit angled toward the aisle rather than toward the window, the opposite of the reverse herringbone suites now standard on Qatar Airways, Singapore Airlines and Cathay Pacific.¹⁴ Standard Business Premier seats come equipped with a sliding privacy screen. Not a door: a screen.

A door costs extra. Specifically, NZ$820 (approximately US$487) extra on long-haul.¹⁵ There are four of them on the entire retrofitted aircraft.¹⁶ Aviation analysts reviewing the product have described the standard offering as “fairly underwhelming” compared to what the competition offers.¹⁷

You’d book Qantas if you could, but with Emirates disrupted by Iranian airspace closures, rerouting flights away from Gulf hubs, alternatives from New Zealand are thinner than they have been in years.¹⁸

Choose

New Zealand deserves better than this muddled middle ground. Our national carrier should be either a source of genuine pride (fully public, properly accountable, serving citizens) or a true competitor, privately owned and driven to excel.

Full public ownership means genuine accountability: real service obligations, routes chosen for public benefit, consequences for failure. Full privatisation means real competition, no bailouts, market discipline for a product that currently charges a premium for the privilege of facing a stranger across a narrow aisle.

What we have instead is the comfortable middle ground that serves nobody.

Make a choice. Commit to something. Because right now, our national carrier charges like Singapore Airlines, seats you in a layout from 2005, asks NZ$820 extra for a door, deploys a chatbot when you complain, and may shortly be asking the government for more money.

That’s not the warm embrace of collectivism. That’s the slow squeeze.

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

The Centurion’s Warning: Superannuation at 65—comforting politics, hard maths

Article #450

Nine years ago, I wrote about Roman Centurions. The New Zealand Economics Forum last month proved I wasn’t being dramatic enough.

When I wrote my very first Canny View in September 2017, I told the story of Roman Emperor Augustus and his military pension scheme, the Aerarium militare. Augustus faced a problem that will sound familiar: Romans were living longer, the pension fund was catastrophically underfunded, and someone had to pay for it.

His solutions were creative, if not entirely honest. Keep raising taxes. Extend the military service requirements, again and again. And when the pension rolls got too heavy? Launch another campaign! Rome always found another frontier war conveniently thinned the numbers — the Germans, the Dacians, the Parthians. It was just fiscal procrastination dressed up as military glory.

I wrote then: what is happening today is no different to those Roman times. At the end of the day, someone has to pay for it.¹

The Road to Rome’s Problems

The Aerarium militare is one of history’s most instructive fiscal cautionary tales. Augustus established it in 6 AD, seeding it with 170 million sesterces of his own money — a sum so large he had to make it a personal gift to avoid a Senate revolt over new taxes. When that proved insufficient, he pushed through a 5% inheritance tax and a 1% sales tax on goods sold at auction to keep the fund solvent. When Tiberius later tried to abolish the sales tax, his generals warned him that there was no other way to pay veterans. So, the tax stayed.

Each time the fund came under pressure, the response was the same: extend the service requirement. Augustus raised it from 16 years to 20, then up to 25. Soldiers who had signed up expecting to retire at 16 years found the goalposts moved, repeatedly, for fiscal reasons. Sound familiar?

Some historians trace a significant part of Rome’s eventual decline to the Senate later cutting pension payments altogether. With less incentive to serve, Roman citizens stopped enlisting. The ranks filled with barbarian mercenaries. Cohesion and discipline collapsed. The pension problem eventually helped unravel the army that held the Empire together.

New Zealand introduced its own old-age pension in 1898 — one of the first countries in the world to do so, under Richard Seddon’s Liberal government. It would be received at age 65, when male life expectancy was just 56. Like the Aerarium, it was never designed to be paid to most people. It was a safety net for the few who beat the odds. The pension that most New Zealanders now expect to receive for 20-plus years of retirement was conceived for people who, statistically, were unlikely to reach it at all.

Shifting Demographics Add Up to a Problem

Back in 2017, when I wrote that first article, over 15% of New Zealand’s population was aged 65 or older. Today, we’re past 16% and heading towards 20–21% within the next decade.⁵ We’ve gone from around 750,000 receiving NZ Super then, to over 912,000 today.⁶ Crucially, the working-age population supporting them is shrinking proportionally.

It’s not a sudden crisis of compassion, but rather a mathematical problem. The ratio of workers to retirees is deteriorating. Empires fall not from external threats but from internal fiscal contradictions — and we are living that reality now.

What’s Changed Since 2017?

In 2017, Bill English had just opened the door to raising the retirement age to 67 from 2037. Jacinda Ardern promptly pledged to repeal it and declared she’d resign before raising the retirement age. Labour won, the policy was scrapped, and the age stayed at 65. It hasn’t shifted since.

Movement comes only at the margins. Residence requirements for NZ Super are increasing from 10 to 20 years, phased through to 2042.⁷ Superannuation will consume 18.6% of tax revenue by 2029, up from 16.6% in 2023.³ But the fundamental policy lever — the eligibility age — remains politically untouchable. Augustus would understand completely.

What Treasury Said in Hamilton

At February’s New Zealand Economics Forum in Hamilton, Treasury Secretary Iain Rennie warned that ageing is already materially lifting expenditure and will continue to do so throughout the next decade, outpacing revenue growth. Without policy changes, New Zealand’s debt trajectory will become unsustainable.²

The number of people receiving superannuation will grow from 928,000 today to over 1,084,000 by 2029/30. That’s roughly the entire population of Tauranga added to the pension rolls in just under five years, costing a cool $7.7 billion more per year – equivalent to 22% of all projected tax revenue growth over that period.² Rennie was clear this isn’t a problem for future governments alone: “They are part of the chill headwinds confronting the government now.”²

Treasury’s longer-term projections show that without policy changes, government debt could reach unsustainable levels by the 2060s. This would be driven primarily by superannuation and healthcare costs for our ageing population.⁴ Every year of inaction makes the eventual adjustments more severe. That’s Treasury’s own modelling, not an opinion.

The Age Question Nobody Wants to Answer

At the same forum, a panel of economists and former politicians concluded that New Zealand can’t afford superannuation at 65… or even 67. Some suggested eligibility may need to rise as high as 72 or 73 to be viable long-term.²

Back to our Roman friends: Augustus didn’t want to cut centurion pensions either, as it was politically impossible. Instead, he extended service requirements, raised taxes, and launched another Parthian campaign. Each short-term fix made the structural problem worse. Eventually, the promises became mathematically impossible to honour, and the system failed.

We are not Augustus. We have better data, better institutions, and better options. What we seem to lack is the political will to use them.

What Actually Needs to Happen

Raising the age alone won’t fix this. The Forum panel agreed on that much.²

The deeper issue is savings and productivity. There is no credible path to lifting New Zealand’s productivity without matching Australia’s savings rate.² That means taking KiwiSaver seriously: Not as a nice-to-have, but as the foundation of our retirement system.

With 3.4 million New Zealanders enrolled — 90% of the workforce — KiwiSaver has been a genuine success. But 1.6 million members were making no contributions as of March 2025, either out of the workforce or on contribution holidays.⁴ It’s a structural gap we keep patching rather than fixing.

Compulsory contributions, properly locked in until retirement, would be a meaningful start. Paired with a gradual, signalled increase in eligibility age — giving people decades to plan — and we begin to look less like Augustus clutching at straws, and more like a country with a plan.

If you’re under 50, don’t rely solely on NZ Super. Your KiwiSaver balance isn’t a supplement anymore. It’s becoming the primary pillar of your retirement income – treat it accordingly.

The 450th Edition Lesson

In my first article, I concluded that failing to act would be irresponsible and place an extremely unfair burden on younger generations.¹ Nine years later, that’s exactly what we’ve done.

New Zealand is in a stronger position than most comparable countries. But public debt is at its highest point in 30 years, and the cost curve is steepening. The window for gradual, manageable change is narrowing.

The Romans had options. They could have reformed early, adjusted gradually, and built a sustainable system. Instead, they extended, delayed, promised — until the promises became impossible to honour and the system helped collapse the army that held everything together.

We still have choices; they didn’t. But as Treasury made clear last month, that won’t be true forever. And conversation without action is just more Parthian campaigning.

The Centurions learnt too late that empires don’t honour promises they can’t afford. We can avoid that mistake. But only if we start now.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References

¹ Stewart, N. (2017, September 16). Like Romans, fall on our sword and raise retirement age. Stewart Group. https://www.stewartgroup.co.nz/we-love-to-write/2017/9/16/like-romans-fall-on-our-sword-and-raise-retirement-age

² New Zealand Economics Forum 2026 (February 2026). Treasury presentations on fiscal sustainability and superannuation costs.

³ New Zealand Treasury. (2025). Budget Economic and Fiscal Update 2025. https://www.treasury.govt.nz/publications/efu/budget-economic-and-fiscal-update-2025

⁴ New Zealand Treasury. (2025). He Tirohanga Mokopuna 2025 – Long-term Fiscal Statement. https://www.treasury.govt.nz/publications/ltfp/he-tirohanga-mokopuna-2025

⁵ Stats NZ. (2024). Population estimates and projections. https://www.stats.govt.nz

⁶ Ministry of Social Development. (2025). New Zealand Superannuation recipient data.

⁷ Work and Income. (2024). Change to residence criteria for NZ Super and Veteran’s Pension. https://workandincome.govt.nz/eligibility/seniors/nz-super-and-veterans-pension-residency-changes-2024.html

$3 at the Pump — Crisis, Panic, or a Lesson We Refused to Learn?

Article #449

The average price of unleaded 91 jumped 14 NZD cents over a single weekend — and suddenly, commentators are reaching for the kind of language we last heard during COVID. Back then, we fought over toilet paper. Today, the panic commodity is petrol.

Let us first take a breath and assess.

The cause: Iran’s effective closure of the Strait of Hormuz (which handles about a quarter of the world’s seaborne oil trade). This of course follows retaliatory strikes after a US and Israeli attack on Iran in late February. [1]

The effect: Global oil prices have surged past US $100 per barrel, with Brent and WTI hitting around US$110 to US$114 at the height of the crisis. That pain is not contained to the petrol forecourt. It is flowing into every corner of our economy simultaneously, because energy is embedded in the cost of producing virtually everything. [1]

The most visible casualty so far is Air New Zealand, another unfortunately familiar occurrence. Our majority state-owned carrier has cancelled approximately 1,100 flights through early May, impacting around 44,000 passengers. In USD, jet fuel spiked from around $85 per barrel before the conflict to between $150 and $200, with the refinery crack spread (the margin between crude oil and refined jet fuel) blowing out from $22 to as high as $115 per barrel. That’s a structural blow to an airline already recording losses, and it has suspended its full-year earnings guidance entirely because the numbers no longer make sense. [2–5]

Finance Minister Nicola Willis has cited New Zealand's 50 days of fuel supply as a form of reassurance, but the public must read the fine print carefully. That figure includes fuel still sitting on tankers at sea, in transit from the very region in crisis. The fuel physically on New Zealand soil is closer to 28–33 days, depending on the product. [6]

More concerning still, that onshore storage is heavily concentrated around the former Marsden Point site in the north. That means regional centres and the entire South Island operate effectively on just-in-time supply and sit at the end of an extra coastal-shipping leg that adds its own layer of vulnerability. If supply were completely cut off today, New Zealand could sustain itself for roughly a month. [6,7]

That is not 50 days — and it should reframe the conversation entirely.

Muldoon-era carless days, last deployed between July 1979 and May 1980, are being discussed as a last resort. The mere fact we’re having this conversation in 2026 should give everyone pause. [8]

This is where a Canny View requires plain speaking.

Energy is not a lifestyle choice. It is the oxygen of economic activity. Every business—whether moving freight, running a dairy farm, manufacturing product, or providing professional services—consumes energy somewhere in its cost structure. When that cost surges sharply and suddenly, the business faces exactly three options:

1. Pass the increase to the customer.

2. Absorb it through productivity gains and efficiency.

3. Close their doors.

There is no fourth option. This is precisely why energy price shocks are so broadly inflationary. They don’t strike one sector. They strike all sectors at once.

For shareholders and business owners, the message is clear. A viable business must pay its bills, pay its staff, and generate sufficient return to keep capital engaged. When a major uncontrollable cost input (like energy) doubles overnight, that margin compresses fast.

The businesses weathering this shock best are those that made deliberate investments in energy resilience during the quieter years. Fleet operators who transitioned to hybrid or electric vehicles, alongside conventional petrol and diesel workhorses, are finding their total fuel bill meaningfully lower today. Those with suitable rooftops or landholdings who installed solar are generating their own daytime electricity, reducing grid dependency when traditional energy costs are most volatile.

Neither investment requires ideological conviction, only the basic financial discipline of stress-testing a cost structure and acting before the stress arrives.

Resilience is built in calm weather, not in a storm.

Now to the harder conversation — one that goes well beyond oil.

New Zealand's coal reserves exceed 15 billion tonnes, spread across Waikato, Taranaki, the West Coast, Otago and Southland. Our West Coast bituminous coal is internationally prized for its exceptionally low sulphur, low ash, and low phosphorus content — a premium quality product valued by the global steel industry. Yet Genesis Energy's Huntly Power Station sources most of its coal from Indonesia, with imports surging 311% in 2024 as domestic gas supply fell faster than expected. [9–11]

We export quality. We import what we need to keep the lights on. It’s a paradox, not a viable strategy.

The same logic applies offshore. Geological surveys estimate a 90% probability that New Zealand holds undiscovered oil reserves of at least 1.9 billion barrels, with a 50%  probability that the figure reaches 6.5 billion barrels. We are not a Saudi Arabia. But we are far from a barren rock. [12]

Which brings us to the captain's calls demanding accountability — plural, because there were more than one.

In 2018, then-Prime Minister Jacinda Ardern unilaterally banned all new offshore oil and gas exploration permits—no parliamentary vote, no Select Committee process, no national conversation. One announcement. Then, under the same Ardern government, New Zealand's only oil refinery at Marsden Point was closed and permanently decommissioned in 2022. The owner has since confirmed there is no prospect of restarting it; it would take billions of dollars and years of work to rebuild what took decades to establish. Associate Energy Minister Shane Jones described the closure as having fatally wounded New Zealand's fuel security. It’s difficult to argue otherwise this week. [13,14]

An uncomfortable but instructive parallel comes to mind. During Stalin's forced collectivisation in Ukraine in the early 1930s, a nation sitting atop some of the world's most productive agricultural land experienced a devastating famine while grain continued to be exported across its borders. The resources existed, and the policy choices negated them.

New Zealand is not Ukraine, and this is not the Holodomor, but the underlying dynamic—voluntarily denying access to domestic resources while importing vulnerability from abroad—is a pattern worth acknowledging.

A nation surrounded by grain, starving. A nation surrounded by hydrocarbons, panicking at the pump.

Muldoon would be baffled. His Think Big programme in the early 1980s was explicitly designed to convert New Zealand's own natural gas into synthetic fuels, fertiliser and methanol, and reduce oil import dependency following the 1973 energy shock. Think Big was expensive and its outcomes were mixed. But the underlying instinct — that a small, geographically isolated nation at the bottom of the world needs to take energy sovereignty seriously — wasn’t wrong. [15]

Domestic production does not fully insulate a small open economy from global prices. But it reduces the foreign exchange drain of pure import dependency, supports local employment, generates royalties and tax revenue for the Crown, and critically – reduces exposure to the shipping disruptions and geopolitical shocks we are living through right now. In times of crisis, a country with some domestic production and refining capacity is materially more resilient than one with neither.

The toilet paper panic of 2020 passed, and we learned almost nothing from it. Let us use this one differently: we need to have the serious, unsentimental conversation about energy sovereignty that we should have started long before Ardern's captain's call made it more urgent than it ever needed to be. We’ve missed the boat on energy resilience, and the storm has arrived; all we can do now is fortify ourselves to better weather the next one.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References

1. NZ Herald, Petrol prices expected to hit at least $3 a litre in some places, March 2026

2. Flight Global, Fuel price volatility prompts Air New Zealand to suspend earnings guidance, March 2026

3. Global Banking & Finance Review, Air New Zealand cut flights, fuel price surge wreaks havoc, March 2026

4. AeroTime, Air NZ to cut 1,100 flights amid soaring fuel prices, March 2026

5. NZX Announcement, Air New Zealand suspends FY2026 guidance, March 2026

6. RNZ, How much fuel does NZ have — and what happens if we run out?, March 2026

7. Infonews, NZ Fuel Situation — South Island Vulnerabilities, March 2026

8. NZ Herald, Carless days are no solution to an oil shock (Liam Dann), March 2026

9. Wikipedia, Coal in New Zealand, citing USGS and MBIE data

10. USGS Fact Sheet 2004-3089, New Zealand Coal Resources

11. Ministry of Business, Innovation & Employment, Energy in New Zealand 2025 — Coal

12. New Zealand Parliament, The Next Oil Shock?, citing Institute of Geological and Nuclear Sciences 2009

13. NZ Herald, First look: Inside Northland's Marsden Point oil refinery post-shutdown, November 2024

14. NZ Herald, Inquiry into reopening New Zealand's only oil refinery, March 2024

15. Wikipedia, Think Big, New Zealand Third National Government economic strategy

Hōne Heke: New Zealand's First Tax Rebel

Article # 448

It’s been 181 years since Hōne Heke and Te Ruki Kawiti's warriors stormed Maiki Hill above Kororāreka, felled the British flagstaff for the fourth and final time, in what we now call the Flagstaff War.[1] If you ask most New Zealanders why Heke chopped down that pole, you'll get vague answers about sovereignty or anti-colonial protest. Some might mention it as a symbolic rejection of British authority. Others recall it as an act of defiance, full stop.

What's conveniently forgotten, or perhaps deliberately obscured, is this: Hōne Heke was protesting taxes.

Hōne Heke, The History Collection - Alamy

In 1841, the new colonial government introduced customs duties on tea, sugar, flour, grain, spirits, tobacco, and other foreign goods.[2] These tariffs hit Māori trade in the north particularly hard, fundamentally altering the economic landscape that had made the Bay of Islands the centre of New Zealand's early colonial economy.

Kororāreka had been a thriving trading hub. While described by some as the "hellhole of the Pacific", it was undeniably prosperous. Māori merchants and rangatira like Heke had built sophisticated, profitable businesses supplying visiting ships with provisions, engaging in trade with overseas merchants, and extracting fees from vessels using the harbour. It was commercial enterprise at scale.

Then came the Crown's taxes. Suddenly, the Treaty he'd signed in good faith at Waitangi in 1840 was being followed by higher prices, reduced economic opportunity, and decisions made in Auckland without meaningful consultation (let alone consent). The government was taking a cut of every transaction, strangling the very trade that had made the Bay of Islands so prosperous.

Every ship that entered the harbour now paid customs duties to the Crown instead of port fees to local chiefs. Every bag of flour, every barrel of tobacco, every luxury good imported carried a government tax that drove up prices and reduced trade volumes. The economic sovereignty Māori chiefs believed they'd retained under the Treaty was being systematically dismantled, one tariff at a time.

Heke saw what was happening and he wasn't having it. He'd studied the American Revolution, contemporary accounts confirm this, and understood exactly what "taxation without representation" meant. He even flew the American flag during his rebellion, a detail often airbrushed out of modern retellings because it complicates the narrative. It's hard to cast Heke as simply anti-European when he's explicitly invoking American revolutionary principles and symbols.[2]

The flagstaff itself was deeply symbolic, but not in the way most people think. Yes, it represented Crown authority. But more practically, it represented the customs regime. Ships entering the harbour saw that flag and knew they'd be paying duties. It was a constant visual reminder of who now controlled the commerce of the Bay.

When Te Haratua cut it down on 8 July 1844 under Heke's orders, it was a statement: these taxes are not legitimate.[1] The Crown re-erected it. Heke personally chopped it down on 10 January 1845, wielding the axe himself. They put it up again, this time with iron cladding for protection, convinced that surely this would stop the attacks. Heke cut it down anyway on 19 January; the iron made it harder, but not impossible.

And finally, on 11 March 1845, Heke and Kawiti's forces overran the hill in a coordinated assault, killed the defenders, and felled that flagstaff one last time before sacking the town in outright economic warfare.[1]

Was it just about taxes? Of course not. Historians rightly point to the complex power dynamics within Ngāpuhi following the death of Hongi Hika in 1828, Heke's rivalry with Tāmati Wāka Nene for the paramount chieftainship, the loss of direct income from port fees, and broader questions about rangatiratanga versus sovereignty.[3] Heke was also frustrated by the capital's move from the Bay of Islands to Auckland, which had already damaged the region's economic prospects before the customs duties compounded the injury.

History is never monocausal. But the tax grievance was real, significant, and extensively documented in contemporary accounts. The Taxpayers' Union recently highlighted this often-ignored aspect of our history, noting that after Heke's rebellion, the government abolished customs duties in the Bay of Islands and declared it a free port.[2] Bad taxes were repealed because someone was willing to stand up and say "this isn't fair", and back it up with action. The policy change came too late to prevent war, but arrived nonetheless.

Some modern interpreters find this story uncomfortable as it shows a Māori rangatira fighting for economic freedom and against government overreach. It doesn't fit neatly into the box of noble savage resisting colonisation, nor does it suit the narrative of Māori as natural collectivists unconcerned with commerce, profit, and individual enterprise.

Heke was a businessman. A successful one. He understood trade, supply and demand, competitive advantage, and market dynamics. He recognised that excessive taxation kills economic activity and punishes productive enterprise. He saw government imposing costs without delivering corresponding benefits to those being taxed. And he fought back using the tools available to him in 1840s New Zealand.

Too often, Heke is reduced to a caricature; the man who chopped down the flagpole. This airbrushing of history to fit modern narratives does his character and mana a profound disservice. He was a principled, strategic thinker who would be puzzled, perhaps even insulted, by how shallow his legacy has become in popular memory. Reducing him to a one-dimensional figure of resistance obscures the sophisticated economic and political reasoning behind his actions.

The problem he identified hasn't gone away. If anything, it's getting worse. New Zealand's Tax Freedom Day, the date each year when we theoretically stop working for the government and start working for ourselves, has been creeping steadily later. In 2019, it fell on 9 May.[4] By 2021, it had slipped to 11 May.[5] The 2022-2023 period saw it jump dramatically to 20 May,[6] before settling at 16 May in 2025.[7]

That's seven days later in just six years. We're now working 136 days into the year, more than a third of it, just to pay the tax bill before we earn a single dollar for ourselves. Put another way, if you started work on 1 January, you wouldn't start earning money you could actually keep until mid-May.

The trend is troubling. Government's share of the economy keeps growing, driven by bracket creep (where inflation pushes people into higher tax brackets without any real increase in purchasing power), council rates rising over 10 percent annually for three consecutive years, and ever-expanding government spending that refuses to shrink even when politicians promise restraint.[7,8]

Despite tax cuts announced with great fanfare, despite redundancies in the public sector making headlines, and despite endless talk of fiscal discipline, New Zealanders paid nearly 5 percent more in total tax in 2025 than the year before.[8] Core Crown expenses rose from $139 billion to an estimated $144.6 billion. Welfare spending has ballooned from $26.6 billion pre-COVID to $47.8 billion in 2025; that’s nearly double in just five years.[7]

Local government deserves scrutiny too. Council rates have increased by more than 10 percent for three straight years, adding days to our collective tax burden.[7,8] While central government debates tax brackets and income tax rates, local councils have been quietly and relentlessly increasing their take.

Today, we might not resort to chopping down flagpoles (the IRD would take a dim view, and the penalties would be rather more than a military campaign in the bush). But Heke had it right: governments that tax without meaningful consent, that impose burdens without corresponding benefits, that take without giving value in return, these governments deserve to be challenged.

New Zealand has a long tradition of healthy scepticism toward authority and bureaucratic overreach. We question power. We push back against unreasonable demands. We expect government to justify what it takes from us. Perhaps we inherited some of that attitude from Heke, certainly his spirit lives on every time a New Zealander questions a rates rise or challenges a new tax.

His methods were blunt. The Flagstaff War brought death and destruction to the Bay of Islands. People died defending and attacking that pole. Towns were burned. The social fabric was torn. Violence is a terrible way to resolve policy disputes, and we've developed better mechanisms for democratic accountability since 1845.

But strip away the violence and look at his core complaint: unjust taxation forcing up prices, reducing opportunity, and transferring wealth from productive enterprise to government coffers without adequate justification or benefit. Does that sound familiar? It should. It's the same complaint we hear today, just expressed in different forums with different tools.

When you hear politicians talking about the "cost-of-living crisis," remember it was a cost-of-living crisis driven by customs duties on basic goods that sparked Heke's rebellion. When businesses complain about regulatory burden and compliance costs, remember Heke's merchants struggling with the Crown's new tariff regime.

When you question whether you're getting value for your tax dollar, especially when Tax Freedom Day keeps sliding later into the year, when rates keep rising, when spending keeps growing, you're asking the same question Heke asked in 1844.

We have elections, select committees, submissions processes, ratepayer advocacy groups. We have the Taxpayers' Union keeping score. We have media scrutiny and public debate. These are better tools than axes and muskets, and we should be grateful for them.

But fundamentally, we’re asking the same questions: when does taxation cross the line from legitimate funding of essential government services to unjust extraction? When does the government's share of the economy become so large that it hinders rather than helps our collective prosperity? At what point do we say "enough"?

This week, 181 years after that final flagstaff fell, perhaps we should remember Hōne Heke not just as the man who chopped down a pole, but as New Zealand's first tax rebel; a rangatira who understood that economic dignity, self-determination, and common sense matter more than government revenue. A businessman who recognised that prosperity comes from productive enterprise, not from government spending. A leader who knew that consent matters, that representation matters, that value for money matters.

That's a legacy worth celebrating. And it's a reminder worth heeding as Tax Freedom Day continues its unwelcome creep deeper into the year.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References

[1] New Zealand History, "The Flagstaff War," nzhistory.govt.nz

[2] New Zealand Taxpayers' Union, "Waitangi Day 2026," taxpayers.org.nz

[3] Academic historical analysis of the Northern War, various sources

[4] Baker Tilly Staples Rodway, "Tax Freedom Day 2019," May 2019

[5] Baker Tilly Staples Rodway, "How Tax Freedom Day, on 11 May, affects you," May 2021

[6] Baker Tilly Staples Rodway, "Tax Freedom Day 2024," May 2024

[7] Baker Tilly Staples Rodway, "Tax Freedom Day 2025," May 2025

[8] RNZ, "Taxpayers forking out almost 5% more than last year," 15 May 2025

Two Years of Drift: New Zealand's Squandered Mandate for Change

Article # 445

In late 2023, New Zealanders voted decisively for change. After six years of Labour government under Jacinda Ardern and Chris Hipkins, the country was exhausted. The NZX had become one of the worst‑performing stock markets in the developed world [1]. Trust in core institutions, from the police to the healthcare system, had cratered [2]. Real economic growth was negative [3]. The cost of living was crushing ordinary families, while housing remained stubbornly unaffordable.

The coalition government swept to power on a mandate to reverse this decline. But two years later, that mandate has been squandered through timidity and a fatal misreading of the moment.

It's tempting to view this government's approach through the lens of John Key and Bill English's post‑GFC strategy. Between 2008 and 2017, that duo carefully managed spending cuts while allowing growth to flourish organically [4]. They made incremental reforms, maintained fiscal discipline, and let the private sector drive recovery. It worked brilliantly. Unemployment fell, growth returned, and National won three consecutive elections.

But 2026 is not 2010, and the global playing field has fundamentally changed. Interest rates have surged after over a decade of easy money [5]. New Zealand's underlying productivity crisis can no longer be ignored [6].

This government has tried to apply the Key‑English playbook to a radically different situation. Ministers speak reassuringly of “green shoots”, yet the economy contracted 0.9% in Q2 2025, then grew just 1.1% in Q3, a volatile pattern that speaks to underlying fragility rather than sustained recovery [7]. Real GDP per capita continues falling [8].

The retail sector tells the story most viscerally. Boxing Day sales slumped 12.4%, consumers spent just $51.2 million on non‑food retail, down from $58.5 million the previous year [9]. As Simplicity chief economist Shamubeel Eaqub observed, “For a lot of businesses this should be their saving grace” [10].

January 2026 brought only marginal relief: core retail spending lifted a mere 0.6% compared to the same month last year, with weather events depressing regional performance and retailers “just treading water as the economy moves sideways, rather than forwards,” according to Retail NZ CEO Carolyn Young [11]. In the meantime, retail business liquidations surged 34% year‑on‑year [12].

Consider ACT leader David Seymour's State of the Nation speech on Sunday, where he diagnosed the core problem with brutal clarity. “People work their guts out only to find that they're further behind,” he said, noting young New Zealanders simply “can't make the numbers add up” when looking at student loans, wages, taxes, and housing costs. He called emigration a “flashing light on the dashboard” and observed that previous generations worked hard “because hard work was a rewarding strategy. That deal feels broken.” He admitted the government is “on track to post a small surplus by 2030, but after that, our ageing population will put us back in the red for more decades of deficit spending.” Yet his proposed solution, reducing the number of ministers to 20 and departments to 30, only epitomises the incrementalism that has defined this government. When your coalition partner polling at 7.6% is calling for bolder action than you are, you've misread the moment [13].

With the election now confirmed for 7 November 2026, Prime Minister Christopher Luxon’s party has a narrow lead in recent polls, but the fundamentals are troubling. The latest Roy Morgan poll has National at 34.5% compared to Labour's 30.5%, with the coalition government on 52% versus the opposition's 44% [14]. Yet 51.5% of voters say New Zealand is “heading in the wrong direction” [15].

The Argentina Mirror

In 1913, Argentina's per capita income exceeded Germany, France, Sweden, Italy, and Spain [16]. Like New Zealand, it was a resource‑rich agricultural powerhouse built on classical liberal foundations. Both countries ranked among the world's wealthiest in the first half of the 20th century [17].

Argentina's fall was dramatic. Decades of Peronist corporatism culminated in the crisis that brought Javier Milei to power. By December 2023, Argentina faced 211% annual inflation, 42% poverty, a 15% quasi‑fiscal deficit, and an economy in free fall [18].

Milei cut the budget by 30% and balanced it by his second month in the job [18]. He implemented 1,246 deregulations through August 2025 [18]. He abolished 10 ministries and fired more than 53,000 public employees [18]. Annual inflation fell from 211% to around 32% by January 2026 [18–21]. GDP grew 6.3% and investment surged 32% in the second quarter of 2025 [18]. More than 11 million people have been pulled out of poverty [18].

The results are transformative. After Milei eliminated rent controls, rental housing supply tripled and real prices fell 30% [18]. When he deregulated agricultural markets, vaccine costs for livestock producers dropped by two‑thirds [18]. Home appliance prices fell 35% after eliminating import‑licensing schemes [18].

There are real victories here. They’re 28‑year‑old Franco signing a 30‑year mortgage,  “unthinkable only a couple of years ago” [18]. They’re freelancer Cecilia finally able to focus on work instead of navigating convoluted tax laws [18]. They’re farmer Pedro Gassiebayle reinvesting in his business and thinking about efficiency for the first time [18].

To be sure, Argentina's transformation faces headwinds. Monthly inflation ticked up to 2.9% in January 2026 in the fifth consecutive monthly increase, and questions have emerged about the government's statistical methodology [19–21]. The path remains narrow and fraught. But even with a few snags, the direction is unmistakable: from complete collapse toward functioning markets.

New Zealand's Drift

Compare that to New Zealand. Two years after a change in government, there's been no meaningful regulatory reform despite endless consultation. Government spending has barely been constrained [22]. Infrastructure delivery remains slow and over‑budget [23]. Housing consents have fallen [24]. The promised Fast‑track Approvals Bill has been watered down. RMA reform has been incremental when transformation was needed.

Most damningly, the fundamental drivers of our decline remain unaddressed. We still can't build houses efficiently. We still can't deliver infrastructure on time or budget. Our planning system still makes simple projects take years to consent. Meanwhile, retailers close their doors while politicians tout those elusive green shoots.

The Key‑English approach worked because the GFC was primarily a demand shock. New Zealand's current malaise is structural.

We have a productivity crisis decades in the making [25]. We have infrastructure crumbling from underinvestment [26]. We have planning and regulatory systems that strangle growth.

As Austrian economist Ludwig von Mises told Argentines in 1959: “Economic recovery does not come from a miracle; it comes from the adoption of sound economic policies” [18].

The Electoral Reckoning

With nine months until the election, this government faces an uncomfortable reckoning. Voters were promised change and received continuity. They were told to trust the process while their living standards declined. Now they're being asked to believe in green shoots while retail spending barely budges and liquidations surge.

The opposition will hammer a simple message: You had your chance and you wasted it. And they'll be right. This government has fundamentally misread the moment. It applied a playbook designed for managing cyclical downturns to a structural crisis requiring transformation.

What makes Argentina's transformation particularly instructive is that Milei turned the mainstreaming of libertarian thought into political victory [18]. He became the first political leader in 80 years to propose that the whole corporatist state had to be torn down and replaced with limited government [18]. New Zealand faces no such ideological battle. We already have strong institutions, low corruption, an independent central bank, and largely functional markets. We don't need revolution; we need our government to use the mandate voters gave them.

The tragedy is that we could reform from strength if our leaders found the courage. Instead, we're drifting toward the point where only painful corrections remain viable. Postponing necessary reforms doesn't achieve stability. It ensures that, when reform finally comes, it's painful and disruptive.

Two years ago, voters gave this government a mandate for change. Nine months from an election, with retail sales barely growing and businesses liquidating at record rates, they're learning that careful management of decline is still decline. As Milei declared to Argentines: “Either we persist on the path of decadence, or we dare to travel the path of freedom” [18].

New Zealand faces the same choice. Two years ago, voters chose change but received decadence, polite, incremental, delivered with press releases about green shoots while retailers close their doors.

Argentina's history suggests we're running out of time to change course. The voters will render their verdict on November 7.

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 445

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References

1. NZX. Market performance data, 2020–2023.

2. Statistics New Zealand. New Zealand General Social Survey: Trust in public institutions, 2018–2023.

3. Statistics New Zealand. Gross Domestic Product (GDP) data, 2022–2025.

4. New Zealand Treasury. Fiscal consolidation analysis, 2008–2017.

5. Reserve Bank of New Zealand. Official Cash Rate (OCR) data, 2021–2023.

6. OECD. Productivity statistics for New Zealand.

7. Statistics New Zealand. Quarterly GDP data, Q2–Q3 2025.

8. Statistics New Zealand. Real GDP per capita data, 2024–2025.

9. Worldline NZ. Retail spending data and Boxing Day sales figures, December 2025.

10. RNZ. “Tough December for retailers, as Boxing Day sales slump 12.4 percent.” 13 January 2026.

11. Inside Retail NZ / Ragtrader. Retail sector reports, January 2026.

12. Centrix. Retail business liquidations data, reported February 2026.

13. RNZ / Reid Research. Polling data on ACT Party support, January 2026.

14. Roy Morgan. New Zealand voting intention poll, January 2026.

15. Roy Morgan. Government confidence rating, January 2026.

16. Maddison Project Database. Historical GDP per capita comparisons, 1913.

17. Maddison Project Database. Long‑term international income comparisons, early 20th century.

18. Vásquez, Ian, and Marcos Falcone. “Liberty Versus Power in Milei’s Argentina.” Cato Institute – Free Society, Fall 2025.

19. ABC News. Argentina inflation reporting, February 2026.

20. Fortune. Argentina inflation and economic reform coverage, February 2026.

21. Washington Times. Argentina inflation and fiscal policy reporting, February 2026.

22. New Zealand Treasury. Budget documents, 2024–2026.

23. Infrastructure Commission Te Waihanga. Project delivery and cost‑overrun reports.

24. Statistics New Zealand. Building consents data, 2024–2025.

25. New Zealand Productivity Commission. Long‑term productivity analysis.

26. Infrastructure Commission Te Waihanga. Infrastructure deficit assessments.

The Squeeze Play: When Essentials Outpace Everything Else

There's a peculiar phenomenon unfolding across New Zealand households, and it doesn't add up. While families cut back on discretionary spending, three relentless forces continue their upward march: rates, power, and insurance premiums.

Kiwibank's latest inflation analysis reveals the problem.[1] Overall inflation sits at 3%, but council rates are up 8.8% year-on-year and electricity has surged 11.3%. Meanwhile, rent and building costs remain soft, responding as they should to economic pressure. This is Economics 101 – except for the outliers that won't bend.

Households respond to price signals by cutting spending, businesses adjust to market conditions, but monopolistic and quasi-monopolistic services continue their upward trajectory regardless of economic headwinds. When essentials become the only thing still inflating, we're not seeing healthy price discovery – we're watching economic dysfunction concentrate in the places people can't escape.

The Democratic Disconnect

In Hastings – Hawke's Bay's largest district – the mayoral election delivered an instructive lesson in vote-splitting. Marcus Buddo had a detailed plan about rates, spending, and debt. Steve Gibson had a plan of ideas. Damon Harvey had a plan of sorts. Between them, they split the centre-right vote.[2][3] Wendy Schollum had a plan to have a plan – and won with 6,722 votes, representing 26.06% of the total vote.[3]

What ratepayers inherited is a focus on process, not outcomes. The problem isn't reviewing assets or benchmarking contracts – it's the absence of a clear plan for cutting spending, reducing debt, and passing savings to ratepayers. In her first month, the new mayor reported focusing on "bringing our new council together," "establishing how we'll work as a team," and "meeting with staff to look at how we can do more with less."[14] Classic "all hui and no doey" [16,17]– lots of meetings, team-building, and singing while rates grow at triple the rate of inflation.[1] 

The RBNZ may deliver some further relief through rate cuts, as economists predict.[1] But that relief will be swallowed by cost increases that don't respond to monetary policy. Council rates aren't discretionary. Power bills aren't negotiable. Insurance premiums exist beyond household bargaining power. The very things households need most are the things rising fastest, creating a squeeze that monetary policy cannot relieve.

The Rates Reality

Hastings imposed a 19% rates increase for 2024/25[5][6] and another 15% for 2025/26.[7] These aren't just numbers on a page – they represent real pain for households already stretched thin by the cost of living crisis. For an average property paying $3,000 annually, rates have jumped to approximately $4,000, with another increase pushing that toward $4,600.

Ratepayers have done their bit – the cyclone-specific targeted rate elevated these increases to the upper band among New Zealand councils. But here's the problem: this is temporary revenue with a 16-year sunset clause,[6] yet spending patterns suggest permanent cost increases have been baked in, with significant portions funding non-cyclone expenditure.

When the cyclone charge expires, does the council try to keep ratepayers paying the cyclone charges to fund other council nice-to-haves, or does it reduce rates? The current trajectory builds in a structural deficit that future ratepayers will inherit. It's a classic government budget problem: temporary revenue streams funding permanent spending commitments. The logic doesn’t add up, and costs get kicked down the road regardless.

Across New Zealand, councils have faced unprecedented cost pressures. A 2024 report commissioned by Local Government NZ found that construction costs for bridges increased 38%, sewage systems 30%, and roads and water supply systems 27% over three years.[8] The average rates increase across the country hit 15% for 2024/25,[8] with some councils proposing even higher increases. But these pressures, while real, don't explain why councils can't find operational efficiencies to partially offset infrastructure cost inflation.

The Residential Reckoning

Nowhere does this squeeze play out more starkly than in residential rental property, where New Zealand's retirement wealth delusion meets economic reality.

For decades, Kiwis were sold a simple story: property is the path to retirement security. Buy a rental. Watch it appreciate. Collect rent. Retire comfortably. It's been cultural gospel, reinforced by favourable tax treatment and the absence of capital gains taxes. An entire generation built its retirement strategy around this asset class.

But that story is fast becoming a tragedy. Residential landlords face the same 8.8% rates increase, insurance premiums that have doubled or tripled post-Gabrielle.[1] These costs aren't negotiable. They simply arrive and must be paid. Unlike businesses that can adjust their cost structures or pass costs to customers, landlords operate in a market with hard ceilings.

Tenants can't just absorb corresponding rent increases endlessly. The market has found its ceiling through the hard limit of what people can actually pay when their own costs are climbing. Tenants are facing their own squeeze – grocery bills up, power bills up, their own insurance costs rising. There's no capacity to absorb 8-11% annual rent increases. So who wears it? The landlord.

When non-negotiable costs grow at 8-11% annually, but rent increases are market-capped at 3-4%, the gap widens, and the squeeze tightens. Properties once generating positive cash flow now require subsidies from other income. The "investment" becomes a wealth destroyer rather than a wealth builder.

The residential property investment model was built for an era where rates grew modestly and insurance was predictable. That era is over. We now have a cohort who bet retirement security on an asset class where holding costs accelerate faster than income. Some will sell. Some will hold on, hoping for capital appreciation to compensate for negative carry. Many will discover too late that their retirement strategy has a fundamental flaw.

It's sad – not because property investors deserve special sympathy, but because it represents massive misallocation of national savings. An entire generation channelled wealth-building into residential property instead of productive assets or diversified investments. Capital that could have funded business growth, innovation, or infrastructure went into bidding up house prices instead. Now they're discovering that when monopolistic cost structures meet market-limited revenue, leverage works in reverse.

The Policy Vacuum

The Kiwibank data disproves the myth of symmetrical adjustment.[1] Households adapt. Markets respond. But essentials march to their own drum, disconnected from broader economic discipline. This asymmetry matters because it means traditional economic responses – tightening monetary policy, reducing household spending – fail to address the source of inflation when it concentrates in monopolistic services.

The government is considering rates-capping legislation to refocus councils on "doing the basics, brilliantly."[10] But rates capping may be only the opening salvo. The Government has just announced proposals to eliminate regional councillors entirely, replacing them with 'Combined Territories Boards' made up of mayors.[15] More significantly, each region will be required to prepare a 'regional reorganisation plan' within two years, with options including merging territorial authorities into unitary councils. The Government's stated goal: "cut duplication, reduce costs, and streamline decision-making."[15]

For councils like Hastings already stretched thin by cyclone recovery, this represents both opportunity and threat.

The opportunity: forced consolidation might finally deliver the operational efficiencies that should have been found voluntarily.

The threat: poorly designed reorganisation could create even larger bureaucracies with less accountability. The pressure to demonstrate fiscal discipline just intensified dramatically.

Council external debt has surged from $353 million in December 2023[11] to $472 million as at 30 June 2025,[13] and is projected to reach $700 million by 2030.[9] That's debt more than doubling in less than three years, with the trajectory showing no signs of slowing. Interest payments alone consume an ever-larger share of rates revenue, creating a vicious cycle where borrowing to fund current operations crowds out funding for actual services.

With voter turnout at just 44.71%[3] and Schollum winning with 26.06% of votes cast, approximately 12% of eligible voters delivered her a victory. She has three years to prove she deserves to be re-elected, which means proving she understands how angry ratepayers are about rate rises. The mandate is thin. The patience is thinner.

For property investors, the question is starker: how long can negative carry be sustained before the retirement wealth strategy becomes the retirement wealth trap? For how many years can landlords subsidise tenants from other income before they capitulate and sell? And when they do sell, who buys investment property with known negative carry characteristics?

Until we confront why essentials climb at double-digit rates while the broader economy slows, we're not solving inflation. We're watching it concentrate in the places people can't escape. That concentration makes the burden harder to bear and the economic distortions more severe.

That's not economics adapting. That's economics breaking down, one essential service at a time.

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 435

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References

[1] Kiwibank Economics (2025). "NZ Inflation: What's really happening?"

[2] NZ Herald (2024). "Hastings mayoral race - Wendy Schollum claims the win, but her closest rival hasn't conceded."

[3] NZ Herald (2024). "Local elections 2025: Wendy Schollum new Hastings Mayor as last-minute voters extend her lead."

[5] Hastings District Council (2024). "Council reduces proposed rate increase."

[6] Wikipedia (2025). "2022–2025 term of the Hastings District Council."

[7] NZ Herald (2025). "Central Hawke's Bay tries to lower rates hike to 10% as cyclone-hit Hastings sticks with 15%."

[8] 1News (2024). "New Zealand homeowners facing an average rates rise of 15%."

[9] NZ Herald (2024). "Hastings facing one of highest rates rises in country - council could hit $700 million debt."

[10] RNZ (2025). "Local Government New Zealand crying foul over potential rates capping."

[11] NZ Herald (2024). "Hastings District Council nearly $400 million in debt as cyclone costs compound."

[13] Hastings District Council (2025). "2024-2025 Annual Report."

[14] Schollum, W. (2024). Facebook post, Mayor Wendy Schollum of Heretaunga Hastings, November 2024.

[15] New Zealand Government (2025). "Local Government Reorganisation Proposals." BayBuzz Special Alert.

[16] NZ Herald. (2020). Too much hui and not enough do-ey: Why workplace meetings can be wasteful. Retrieved from https://www.nzherald.co.nz

[17] National Māori Authority. (n.d.). Matthew Tukaki on suicide prevention: “Too much hui and not enough doey – so we are taking action right now.” Retrieved from https://www.nationalmaoriauthority.nz

The 12-Month Tax Gambit: Labour's Calculated Risk

Announcing a major tax policy a year before an election isn't just unusual; it's almost unheard of.

Conventional political wisdom dictates you either implement unpopular measures early in your term, or promise them after securing victory. Labour's decision to foreground a 28% capital gains tax ‘CGT’ a full year out from polling day demands examination, particularly through the lens of economist Arthur Laffer. His insight cuts straight through political calculation: speeding fines are a tax. Governments use taxes to stop people doing things they don't want them to do. So why would you tax investment when the country desperately needs more of it?¹

The timing becomes immediately suspect. Labour sits in opposition facing a National-led government, and historically, opposition parties campaign on aspiration rather than taxation. Helen Clark's 2005 Labour government actively campaigned against CGT proposals, recognising the electoral toxicity.² Yet here we are in late 2025, with Labour essentially writing National's attack ads 12 months in advance.

The Political Theatre

The political play is obvious: announce now, let the controversy "settle," and by election day the CGT feels like old news rather than shocking revelation. Labour hopes voters will be desensitised to what might otherwise be campaign-ending policy. It's political inoculation through extended exposure, with the policy carefully designed as "CGT light" (exempting family homes, farms, KiwiSaver and shares) to avoid the comprehensive wealth taxation that spooked voters in previous attempts.²

Yet as business commentator Damien Grant observes, the policy amounts to "a marketing plan sketched on the back of a napkin that had been used to wipe the lipstick off a chardonnay glass after drinks at a Fabian Society soiree."⁶ The policy amounts to a few pages in a glossy press release with less substance than a frozen coke.

If you own property in July 2027 and sell it after that date, you pay 28% of any increase in value, with no allowance for inflation. Family homes are exempt. That's essentially it—the rest is left to imagination and future consultation.

Recent polling shows Labour's framing is working – 43% support versus 36% opposition.² The 12-month runway allows this narrative to solidify. Labour bets that sustained messaging about "fairness" will ultimately land better than National's "tax on ambition" counter-narrative.

Laffer Curve | Source: Norway's Wealth Tax Unchains a Capital Exodus

The Fine Fallacy

Laffer's analogy cuts through the fluff. When government fines speeding, fewer people speed – that's the point. When government taxes cigarettes heavily, fewer people smoke – that's the objective. These are taxes deliberately designed to discourage the behaviour.

Applied to investment taxes, the logic is inescapable. When government taxes investment gains at 28%, fewer people invest. Yet that's meant to be revenue-neutral economic policy rather than deliberate discouragement? You cannot fine an activity and simultaneously expect more of it.

The contradiction becomes starker considering New Zealand's actual needs. Treasury warns that 52% of total tax comes from personal income tax, and the group paying this tax is shrinking due to an ageing population.⁴

The country desperately needs productive investment in commercial property, business expansion, and capital formation. Yet Labour proposes taxing precisely these activities, at rates designed to be punitive enough to raise revenue.

This is the economic equivalent of installing speed cameras on the motorway while simultaneously complaining that traffic isn't moving fast enough. You cannot discourage and encourage the same behaviour simultaneously.

The Implementation Damage

The July 2027 implementation date provides convenient political distance: win in November 2026, govern for eight months, then introduce legislation.²

But here's where political cleverness creates economic damage - the announcement effect begins immediately. Why would a developer start a commercial property project in 2026 knowing that any gains realised in 2028 or 2029 will face 28% taxation? Investment decisions from now until 2027 will be distorted by anticipated future taxes, locking capital out of productive uses or sending it offshore.³

The economic damage begins not when the tax takes effect, but when it's announced. We're living through that damage period now. The speeding camera has been installed, and the signs are up; don't be surprised when drivers slow down.

The British Warning

Laffer's analysis of Gordon Brown's decision to raise Britain's top rate from 40% to 50% provides the cautionary tale. The UK Treasury's own "Laffer section" showed the increase "not only did not get more revenue, it got you a lot less prosperity. People left the country, people used tax shelters, dodges, loopholes, all that."¹ As Laffer emphasised, this wasn't his opinion imposing American economics on Britain—"This was Britain doing the Laffer curve."¹

As Laffer notes from decades of US tax data: "Every time we've raised the highest tax rate on the top 1% of income earners, three things have happened. The economy has underperformed, tax revenues from the rich have gone down, and the poor have been hammered."¹

Conversely: "Every single time we've lowered tax rates on the rich, the economy has outperformed. Tax revenues from the rich have gone up and the poor have had opportunities to earn a living, to live a better life."¹

The Practical Nightmares

The practical problems compound the economic ones. Grant notes that inflation has already created havoc in Australia, where properties often can't be sold “because almost all of the price is considered a capital gain. This will be worse on the Hipkins plan because there is no indexation.”⁶

Consider a property bought in 2015 for $500,000 is now worth $800,000. Under Labour's plan, the entire $300,000 gain faces 28% taxation – that’s $84,000. But how much of that gain is real appreciation versus inflation? Without indexation, investors pay tax on phantom gains that merely reflect currency debasement.

Meanwhile, definitional nightmares await. Australia's capital gains tax guide runs to 339 pages, with court judgements adding hundreds more.⁶ Is replacing a kitchen a capital improvement or maintenance? What about landscaping? A 2028 Fisher and Paykel dishwasher replacing a 1980s Westinghouse: expense, or capital upgrade? As Grant notes drily: "Tax lawyers and accountants will be kept busy."⁶

The Chartered Accountants Institute supports Labour's proposal – hardly surprising, given it guarantees full employment for their profession dealing with compliance complexity.

The Fiscal Illusion

Even Chartered Accountants acknowledge that CGTs "do not generate significant revenue in the short or even medium terms. Long term, however, they typically provide a steady revenue stream… Using them to cover a specific policy expense is unusual."⁴ Yet Labour wants to use this non-existent revenue immediately to subsidise doctor visits.

As Grant observes: "There is a cash shortfall on Labour's own analysis in the early years which, like everything else in this policy, the resolution is left to the imagination."⁶ Here's the speeding fine logic again: if you install cameras to generate revenue from fines, you're simultaneously reducing the very behaviour that generates the revenue.

Successful speed cameras mean less speeding, and therefore less revenue. A capital gains tax that successfully deters property speculation means less property investment, and again, less revenue.

The Historical Pattern

This is Labour's seventh CGT attempt since 1973.² Norman Kirk's first attempt taxed gains at up to 90%, a rate so confiscatory it was quickly abandoned. Phil Goff's 2011 version, David Cunliffe's 2014 proposal, and Jacinda Ardern's 2019 attempt all failed politically.

Each previous effort proved politically costly and economically counterproductive. Voters instinctively understand Laffer's speeding fine logic, even if they can't articulate the economics by name. They recognise taxing investment reduces investment, just as fining speeding reduces speeding. Winston Churchill’s timeless observation perfectly captures the impossibility of taxing your way to prosperity – you cannot stand in a bucket and lift yourself up by the handles.⁵

The Alternative Vision

Laffer's prescription for struggling economies is brutally simple: "You want a low-rate, broad-based flat tax, spending restraint, sound money, minimal regulations, and free trade. And then get the hell out of the way."¹ Labour offers the opposite with new taxes on capital, sketchy implementation details, and revenue projections that don't add up.

As Laffer puts it: "Poor people don't work to pay taxes. They work to get what they can after tax. It's that very personal and very private incentive that motivates them to work, to quit one job and go to another job, to get the education they need to do it."¹ Replace "poor people" with "investors" and the logic remains - capital seeks returns. Tax those returns heavily enough, and capital goes elsewhere.

Perhaps most revealing: if this policy were genuinely beneficial for economic growth, why the elaborate political choreography? The answer lies in Laffer's observation about lottery tickets: "Everyone—tall, short, skinny, fat, old, young—they all want to be rich. Why does your government then turn around and tax the living hell out of the rich?"¹

New Zealanders don't want to punish success; they want pathways to achieve it themselves. They buy lottery tickets hoping to strike it rich. The government encourages dreams of wealth while simultaneously taxing the achievement of wealth.

The Verdict

The election will shortly reveal whether Labour's calculated 12-month strategy succeeds politically. By announcing early, they've given the policy time to settle, given themselves something concrete to campaign on, and satisfied membership demands for action on wealth taxation.

But both Laffer's economic analysis and Grant's practical critique suggest that regardless of electoral outcome, the policy itself represents strategic error. It's economic theory ignored in favour of political positioning.

New Zealand has better options. Genuine broadening of the tax base, reform of property taxation to encourage productive use, addressing infrastructure bottlenecks, and creating conditions for productivity growth would all contribute more to long-term prosperity than taxing capital gains at 28%. But those approaches require the hard work of reform rather than the easy politics of taxing "wealthy property investors."

Is Labour's CGT announcement politically canny, or economically catastrophic? When you deliberately discourage an activity through taxation, you can’t be surprised when you get less of it.

Labour has installed the camera; investment will slow accordingly. Whether that's clever politics or economic self-harm depends entirely on whether you're focused on winning the next election or building the next generation's prosperity.

As Laffer would note, you cannot tax an economy into prosperity. And you most certainly cannot stand in a bucket and lift yourself up by the handles.

Nick Stewart
(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 433

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References

1. Simmons, M. (2024). Reality Check: Interview with Arthur Laffer. Times Radio.

2. Opes Partners (2025). 'Does New Zealand Have a Capital Gains Tax? [2025]'. Available at: https://www.opespartners.co.nz/tax/capital-gains-tax-nz

3. RNZ (2025). 'What you need to know: Seven questions about a capital gains tax'. Available at: https://www.rnz.co.nz/news/business/577065/what-you-need-to-know-seven-questions-about-a-capital-gains-tax

4. Chartered Accountants Australia and New Zealand (2025). 'Capital gains tax must be considered as part of tax reform'.

5. Churchill, W.S. (1906). For Free Trade. London: Arthur Humphreys.

6. Grant, D. (2025). 'Hipkins' capital gains tax policy leaves more questions than answers'. Stuff. Available at: https://www.stuff.co.nz/politics/360878756/damien-grant-hipkins-capital-gains-tax-policy-leaves-more-questions-answers