“Say it ain’t so, bro.”
That was the reaction of Australian Prime Minister Malcolm Turnbull to news Monday that his trans-Tasman counterpart was leaving office. Yet while social media quickly dubbed it “Jexit,” unlike other recent political shocks, New Zealand Prime Minister John Key jumped from power voluntarily rather than being pushed out by voters.
In a surprise announcement, Key told the nation of 4.5 million that he would step down on December 12, attributing family reasons to his decision not to contest a fourth election in 2017.
“Throughout these years I have given everything I could to this job that I cherish, and this country that I love. All of this has come at quite some sacrifice for the people who are dearest to me – my family,” he said.
Saying he had “never seen myself as a career politician,” the investment banker-turned-politician said after eight years as prime minister and 10 years as leader of his center-right National Party, it was simply the “right time to go.”
“I absolutely believe we can win the next election. But I do not believe that, if you asked me if I was committed to serving out a fourth term, that I could look the public in the eye and say yes,” he announced at a news conference in Wellington.
“It is my expectation that on Monday, 12 December National [lawmakers] will hold a special caucus meeting to elect a new leader and later that day I will tender my resignation to the Governor-General.”
Key said his government had steered the world’s 53rd largest economy through the global financial crisis, the Christchurch earthquakes and other disasters, while having made reforms to tax, welfare, planning, and labor laws and liberalizing trade, along with advancing race relations.
The 55-year-old said his government had a “proud record of strong economic management, a commitment to the most vulnerable in our society and lots of ideas to keep lifting New Zealanders up in the world,” while his party was well-funded and cohesive, with a number of potential successors.
Among them, Key nominated Bill English, his finance minister and deputy prime minister, as his likely replacement, saying, “I believe that National, under Bill’s leadership, would win the election in 2017.”
Financial Markets React
Financial markets reacted negatively to the latest political shock, with the nation’s benchmark stock index dropping by 0.7 percent, and the local currency slipping by almost half a U.S. cent.
“There is now greater uncertainty over economic policy for the next parliamentary term, mainly through greater uncertainty over which parties will form government,” ASB Bank chief economist Nick Tuffley told Bloomberg News. “Whether the probability of a change in government is increased or reduced will depend on the incoming prime minister.”
As noted recently by The Diplomat, the National Party appeared well placed to win a fourth term in government under Key, with opinion polls giving it nearly half the vote, ahead of the 37.5 percent support enjoyed by the opposition Labor and Green parties.
New Zealand consumers appear to be in confident mood too, with the latest ANZ-Roy Morgan Consumer Confidence Index reaching in November its highest level since April 2015.
“Consumers are no longer in cruise control; it’s pedal to the medal,” said ANZ chief economist Cameron Bagrie.
Bagrie said the strong confidence reading reflected an economy that was performing well, with a strengthening labor market, low cost of living pressures, an improved outlook for the key dairy industry and the wealth boost from rising house prices.
Although he noted risks including recent quakes, a potentially slowing housing market and a more volatile global environment, the Australian bank’s economist said the economy “doesn’t have the same widespread vulnerabilities and imbalances that have often tipped it over in the past when negative shocks have hit.”
In an October 2016 economic outlook, the Australian bank forecast real gross domestic product (GDP) would reach 3.4 percent in 2016, easing to 3.3 percent next year and 2.3 percent in 2018 as credit growth eased and the economy reached capacity constraints.
Yet in a February 2016 report, the International Monetary Fund (IMF) warned that risks were “tilted to the downside,” including a renewed decline in dairy prices, slower growth in China and Australia, an extended El Nino weather pattern, a housing boom and high levels of household debt, and financial market volatility caused by higher U.S. interest rates.
In November, the Reserve Bank of New Zealand (RBNZ) cut official interest rates to a record low of 1.75 percent, citing “significant surplus capacity” across the global economy, low global inflation, heightened political uncertainty and elevated market volatility. It said weak global conditions and low interest rates were keeping the Kiwi dollar “higher than is sustainable for balanced economic growth… a decline in the exchange rate is needed.”
While it noted strong population growth, construction activity, tourism and immigration, RBNZ said house price inflation “remains excessive and is posing concerns for financial stability” while numerous uncertainties remain, “particularly in respect of the international outlook.”
Australian Envy
Nevertheless, Australians have looked enviously across the Tasman at Key’s successful economic reforms, including raising the consumption tax, cutting income and company tax rates, and better targeting welfare. New Zealand’s jobless rate has dropped below its larger rival’s, while Key’s government delivered a budget surplus even while Australian treasurers postponed such fiscal prudence to the never-never.
With an economic growth rate of 3.6 percent in the year through June, the South Pacific nation is among the fastest-growing nations in the developed world, even while Australia’s economy has slowed to an estimated rate of around 2.5 percent.
“It is not surprising in these circumstances that New Zealand under Key is shifting the balance of movement across the Tasman Strait, attracting net migrants from Australia — although many of them are probably Kiwis returning to enjoy the better times,” wrote the Australian’s China correspondent, Rowan Callick.
Key has also proved willing to tackle social reforms too, increasing paid parental leave and reducing long-term welfare dependency, as well as supporting gay marriage. Yet despite his popular touch, he failed to convince New Zealanders to support changing the national flag, while he also regretted not seeing the Trans-Pacific Partnership enacted.
“John Key provides a lesson to all Australian leaders: after a decent stint, secure your place in political history by going before you’re pushed. If [former Australian Prime Minister] John Howard is the exemplar in the negative, the leader who stayed too long, the New Zealand prime minister’s declaration that he will leave office next week is a rare instance – far too rare – of a successful leader leaving unforced at a time of his choosing,” wrote former Sydney Morning Herald journalist Tim Dick.
Dick noted that since winning office in 2008, Key had seen off five Australian leaders, winning re-election in 2011 and 2014, with his successor, likely English, to become just the third New Zealand leader in 17 years.
“His lesson is that electorally successful conservatism can come with a reasonable cloak, it doesn’t have to be harsh, it doesn’t have to be consistently mean. In other words, the real Malcolm Turnbull can exist, and he does. He just lives in Auckland,” Dick added.
When elected by his Liberal Party in September 2015 as Australia’s fifth leader in five years, Turnbull cited Key as an example of someone who had “been able to achieve very significant economic reforms in New Zealand” by bringing people with him and “respecting their intelligence.”
Key has had his share of scandals, including a “hair pulling” incident at an Auckland café that led to a public apology.
But in quitting while still highly regarded by his countrymen, Key has set an example for other political leaders that have outstayed their welcome.
His next step likely will be a return to the business world, with Key eyeing potential company board roles in New Zealand and Australia after he quits parliament in 2017.
“There will always be people who come up with a million conspiracy theories, but I encourage people to see it as what it is. I feel like I’m going out on top,” Key said.
“Jexit” or otherwise, quitting never seemed quite so sweet.