National has had to scrap one of its major welfare policies in order to fund its tax package after NZ First forced it to back down over allowing foreign buyers back into the housing market.
Incoming Prime Minister Christopher Luxon unveiled the policy concession as part of the historic deal on Friday, 41 days since the election - and 21 since the final results - to deliver the country’s first coalition of three political parties, involving National, Act and NZ First.
"I said on election night that we would be a Government that would deliver for every New Zealander, regardless of who we are, where we are, and whatever our life circumstances are. How we do that has been at the very core of our negotiations."
Outgoing Prime Minister Chris Hipkins wasted no time in adapting to his new Opposition role, accusing the incoming Government of sowing seeds of "very divisive debates" with a raft of policies around the Treaty of Waitangi, including a commitment to support Act’s referendum on the Treaty principles to the select committee stage.
"This is going to be a Government that drives people apart," Hipkins said.
The deal struck between National, Act and NZ First also included the novel approach of the Deputy Prime Minister role being divided in half across the term - an issue that had proved a sticking point in the final stages of negotiations.
NZ First’s Winston Peters will be Deputy Prime Minister until May 2025 before Act’s David Seymour takes over for the final 18 months.
National has pledged to keep its tax relief package but had to find alternative ways of funding it, with its agreement with NZ First scrapping plans on allowing foreign buyers back into the housing market that it hoped would have raised $740 million a year.
One of those is not raising the Working for Families abatement threshold from $42,700 to $50,000 in 2026, saving an estimated $555m over three years, and changing fees-free tertiary education to the final, rather than first, year.
These come on top of roughly $2 billion they hoped to save over four years by decoupling benefit increases from wages and reverting to inflation, effectively cutting the average Jobseeker benefit by about $40 a week.
There was also the possibility of additional savings from a further shrinking of the public service. National had wanted a 6.5 per cent reduction from certain public agencies - with savings of $594m - while Act wanted a far greater reduction by returning the public service to 2017 levels. National has agreed to look for efficiencies in the public service while keeping the 2017 levels in mind.
Hitting pause on future changes to income tax beyond next year is also not going to lose Luxon any credibility; National’s tax package was to continue adjusting the income tax thresholds for inflation only if it was "affordable and responsible".
There was also many areas of agreement, including plans to scrap the Māori Health Authority, Three Waters and Resource Management Act reforms. National’s bid to return 90-day work trials and scrap fair pay agreements and social insurance scheme also made it through.
There are broad commitments to maintaining climate change commitments, but offshore oil and gas exploration is back and the climate change portfolio - along with the environment - are outside of Cabinet.
During the election campaign, Luxon said it would be "divisive" to have a referendum on the Treaty of Waitangi principles, which was one of Act’s more important campaign policies.
Luxon has agreed to introduce a Treaty Principles Bill based on existing Act policy and support it to a select committee, which will ensure a national debate without necessarily leading to a referendum.
Seymour confirmed to the Herald the bill would include a binding referendum as part of the commencement clause, and he would work to convince the public why it was necessary and not divisive.
Another area of compromise was in National and Act agreeing to keep the superannuation eligibility age at 65, which had long been championed by Peters.
A $1.2b capital funding for the regions wasn’t totally unexpected; it harks back to the Provincial Growth Fund that Peters wrangled out of Labour in 2017, and while NZ First’s 2023 manifesto didn’t put a figure on such a fund, it stressed the importance of regional infrastructure.
Luxon has also agreed to fund 500 more police officers over two years, 200 more than National had campaigned on but with an extra six months to deliver than NZ First had wanted.
There is crossover between the two deals, with both Act and NZ First gaining commitments to repeal the Therapeutic Products Act and historic smokefree legislation passed at the end of 2022, which includes a world-first generational ban. The latter would also have the effect of increasing tax revenue from tobacco sales.
Luxon did not budge on Act leader David Seymour’s wish to scrap the firearms registry, but Luxon did agree to reviewing it, as well as a rewrite of the Arms Act.
Peters secured the coveted role of Foreign Affairs Minister – a job he has filled in previous administrations.
Seymour will become the Minister for Regulation - one of his major campaign policies.
There are Cabinet 20 ministers - 14 from National, three from Act and three from NZ First.
National has kept many of the big jobs including Finance, Education, Health, Social Development and Justice. The role of Attorney-General has gone to Judith Collins.
Hipkins will resign as Prime Minister on behalf of the Government on Monday ahead of the new ministers and Government being sworn in.
Hipkins congratulated the three parties on reaching their deal before describing it as a "very confused and contradictory grab bag that will ultimately take New Zealand backwards".
He suspected the axing of the foreign buyers’ tax would require the next Government to borrow money to fund its tax cuts.
"That means that inflation will stay higher for longer, interest rates will stay higher for longer and, ultimately, New Zealanders will pay more than they are likely to benefit from in the tax cuts."
The ministerial lineup
NATIONAL PARTY MINISTERS INSIDE CABINET
Christopher Luxon: Prime Minister, Minister for National Security and Intelligence, Minister Responsible for Ministerial Services
Nicola Willis: Minister of Finance, Minister for the Public Service, Minister for Social Investment, Associate Minister of Climate Change
Chris Bishop: Minister of Housing, Minister for Infrastructure, Minister Responsible for RMA Reform, Minister for Sport and Recreation, Leader of the House, Associate Minister of Finance
Dr Shane Reti: Minister of Health, Minister for Pacific Peoples
Simeon Brown: Minister for Energy, Minister of Local Government, Minister of Transport, Minister for Auckland, Deputy Leader of the House
Erica Stanford: Minister of Education, Minister of Immigration
Paul Goldsmith: Minister for Arts, Culture and Heritage, Minister of Justice, Minister for State Owned Enterprises, Minister for Treaty of Waitangi Negotiations
Louise Upston: Minister for the Community and Voluntary Sector, Minister for Child Poverty Reduction, Minister for Social Development and Employment
Judith Collins: Attorney-General, Minister of Defence, Minister for Digitising Government, Minister Responsible for the GCSB, Minister Responsible for the NZSIS, Minister of Science, Innovation and Technology, Minister for Space, Lead Co-ordination Minister for the Government’s Response to the Royal Commission’s Report into the Terrorist Attack on the Christchurch Mosques
Mark Mitchell: Minister of Corrections, Minister for Emergency Management and Recovery, Minister of Police
Todd McClay: Minister of Agriculture, Minister of Forestry, Minister for Hunting and Fishing, Minister for Trade, Associate Minister of Foreign Affairs
Tama Potaka: Minister of Conservation, Minister for Māori Crown Relations: Te Arawhiti, Minister for Māori Development, Minister for Whānau Ora, Associate Minister of Housing (Social Housing)
Matt Doocey: Minister for ACC, Minister for Mental Health, Minister for Tourism and Hospitality, Minister for Youth, Associate Minister of Health, Associate Minister of Transport
Melissa Lee: Minister for Economic Development, Minister for Ethnic Communities, Minister for Media and Communications, Associate Minister for ACC
NATIONAL PARTY MINISTERS OUTSIDE CABINET
Simon Watts: Minister of Climate Change, Minister of Revenue
Penny Simmonds: Minister for Disability Issues, Minister for the Environment, Minister for Tertiary Education and Skills, Associate Minister for Social Development and Employment
Chris Penk: Minister for Building and Construction, Minister for Land Information, Minister for Veterans, Associate Minister of Defence, Associate Minister of Immigration
Nicola Grigg: Minister of State for Trade, Minister for Women, Associate Minister of Agriculture (Horticulture)
Andrew Bayly: Minister of Commerce and Consumer Affairs, Minister for Small Business and Manufacturing, Minister of Statistics
ACT NEW ZEALAND MINISTERS
David Seymour (Deputy Prime Minister from May 31, 2025): Minister for Regulation, Associate Minister of Education (Partnership Schools), Associate Minister of Finance, Associate Minister of Health (Pharmac)
Brooke van Velden: Minister of Internal Affairs, Minister for Workplace Relations and Safety
Nicole McKee: Minister for Courts, Associate Minister of Justice (Firearms)
Andrew Hoggard (outside Cabinet): Minister for Biosecurity, Minister for Food Safety, Associate Minister of Agriculture (Animal Welfare, Skills), Associate Minister for the Environment
Karen Chhour (outside Cabinet): Minister for Children, Minister for the Prevention of Family and Sexual Violence
Simon Court MP: Parliamentary Under-Secretary to the Minister for Infrastructure and the Minister Responsible for RMA Reform
NEW ZEALAND FIRST MINISTERS
Winston Peters: (Deputy Prime Minister until May 31, 2025), Minister of Foreign Affairs, Minister for Racing
Shane Jones: Minister for Oceans and Fisheries, Minister for Regional Development, Minister for Resources, Associate Minister of Finance, Associate Minister for Energy
Casey Costello: Minister of Customs, Minister for Seniors, Associate Minister of Health, Associate Minister of Immigration, Associate Minister of Police
Mark Patterson (outside Cabinet): Minister for Rural Communities, Associate Minister of Agriculture
Jenny Marcroft MP: Parliamentary Under-Secretary to the Minister for Media and Communications
— The New Zealand Herald and Reuters
