‘Two years of hard grind’ but Luxon says ‘recovery has arrived’

Prime Minister Christopher Luxon says New Zealand has come through “two years of hard grind” and has now entered a period of recovery, as the National-led Government looks to shift its focus from fixing economic fundamentals to what he describes as “building the future”.

Speaking at his State of the Nation address in Auckland today, January 19, Luxon acknowledged the pressures faced by households and businesses over recent years, blaming high inflation and interest rates for much of the strain.

“It’s been a tough time for Kiwi households and businesses over the last five years and that’s primarily down to high inflation and high interest rates,” he said.

Luxon said when National took office two years ago, its immediate priority was stabilising the economy by cutting what he described as wasteful spending.

“On taking office two years ago, our first priority was to fix the basics in the economy by stopping wasteful spending to help lower inflation and interest rates.”

He said inflation had since fallen from more than 7 percent to about 3 percent, while interest rates had dropped to the point where families were refixing mortgages from rates starting with a 7 to rates starting with a 4 or 5.

Luxon also pointed to gains in education, saying the proportion of new entrants achieving expected reading levels had risen from 36 percent to 58 percent, and in law and order, where he said government policies had contributed to 38,000 fewer victims of violent crime.

“In law and order, simple measures like banning gang patches, tougher sentences for criminals and more police on the beat have resulted in 38,000 fewer victims of violent crime,” he said.

Despite those gains, Luxon said more work lay ahead.

“It is not enough to just fix the basics, but you can’t build the future until you’ve got the fundamentals right.”

He said the Government was now confident enough in the economic direction to shift more attention toward long-term reform.

“It’s been two years of hard grind by everyone, but I feel confident now that things are turning around and that recovery has arrived.”

Luxon also spoke about the need for New Zealand to be more outward-looking in an increasingly volatile global environment, citing work to strengthen defence and economic partnerships and pointing to progress toward a free trade agreement with India.

“A more volatile and uncertain world underscores the importance of controlling what we can,” he said.

Reform in three key areas

Looking ahead, Luxon said National would campaign on major reforms across three key areas: KiwiSaver, NCEA and the Resource Management Act (RMA).

He confirmed the Government would lift the default KiwiSaver contribution rate for both employers and employees from 3 percent to 4 percent by April 1, 2028, and said National would campaign on gradually increasing contributions to 6 per cent each by 2032.

On education, Luxon said NCEA would be replaced with a new qualification featuring clearer grading and higher literacy and numeracy standards.

He also described reform of the RMA as a long-term “gamechanger”, aimed at making it easier to build housing and critical infrastructure such as roads, energy projects, hospitals and schools.

“National is focused on our plan to fix the basics and build the future for all New Zealanders,” Luxon said.

“That plan is working and we need to stick with it so that all New Zealanders can get ahead and have the opportunities they deserve.”