After ousting Tony Abbott last month, Malcolm Turnbull referred to New Zealand Prime Minister John Key as an example of successful political leadership. "You have to be able to bring people with you respecting their intelligence," he said. "John Key has been able to achieve very significant economic reforms in New Zealand by doing just that: by explaining complex issues and then making a case for them."
Turnbull was repeating a point commonly made by business critics of the Abbott-Hockey regime. Key, in New Zealand, along with Premier Mike Baird in NSW, provided an alternative, more measured and ultimately more successful model of right-of-centre leadership, which the Coalition in Canberra could well emulate.
How valid is the Key comparison for Turnbull? There are certainly some striking parallels between the pair's personal trajectories. Both are self-made men who pursued business careers and acquired significant personal fortunes as merchant bankers. (Key worked for Merrill Lynch in Singapore and London, and then for the New York Federal Reserve Bank.) Both entered politics relatively late and forced their way to the top through dint of ability, confidence and popularity. Both became leaders of their respective parties within four years of entering Parliament. Key, however, has never been challenged for the leadership of the right-of-centre National Party and went on to win three consecutive elections. Moreover, his governments have presided over a steady period of economic growth (at least until the recent downturn in dairy prices).
Key, as Turnbull remarked, is a highly effective communicator. He mixes easily with all types of people and is a constant presence in the New Zealand media. His perennially cheerful personality and sunny smile project a positive outlook for the country. (Critics are less impressed. At Merrill Lynch he acquired the nickname "the smiling assassin", which has stuck with him.) His self-identification with the All Blacks, which flows genuinely from a schoolboy-like hero-worship (reminiscent of John Howard and the Australian cricket team), help to cement his image as a man of the people.
Significantly, Key has managed to maintain his popularity while implementing a number of initially unpopular changes. In an effort to discourage ambitious Kiwis from leaving for Australia, his government cut income tax, particularly the top rate, and paid for it by increasing the rate of GST. Key had not flagged these changes at the previous election but relied on a comprehensive campaign of public information and advocacy.
On the vexed issue of asset sales, Key promised no such sales in his first term, a commitment he kept in order to gain voter trust. For his second term, he announced a program of partial sale of assets, such as Air New Zealand and state-owned electricity-generating companies. The LFabour opposition campaigned against the sales but without success (a result similar to that in NSW).
Effective communication and advocacy are essential but only part of the recipe for Key's success. Equally, if not more important, are the substance and timing of the policies being communicated and advocated. Key has been deliberately cautious, implementing gradual changes over several terms of government. Since the searing experience of the 1980s and early 1990s, New Zealand political culture has turned firmly against sudden, radical change. The Lange-Douglas Labour government adopted a blitzkrieg strategy towards economic political reform. The next National government, in its turn, outdid Labour in imposing radical, unpopular policies that had not been foreshadowed in opposition. As a result, New Zealanders voted to change their electoral system to one of proportional representation, which reduces the likelihood of single-party government. Under Key, the National Party has come to terms with the electoral change that many of its leaders did so much to resist at the time.
In this policy of gradualism, Key has been greatly assisted by his deputy and Finance Minister (the equivalent of treasurer), Bill English. English entered Parliament in 1990, in time to witness the public repudiation of blitzkrieg economic policymaking. He served time as party leader, leading the National Party to one of its defeats against Helen Clark's Labour. After Key's ascent to the leadership, English stayed on to become the back-room powerhouse behind the Key grin.
English is the main architect of Key's fiscal strategy, which saw New Zealand weather the global financial crisis and set out on a path for budget surplus. He is also a keen reformer of social policy, aiming to retain a reasonable safety net while better targeting the welfare dollar, and has taken a keen interest in public service performance. Leaving Key to look after the politics and win the elections, English has been content to work on a number of medium-term policy strategies.
Giving the annual John Howard lecture at the Menzies Research Centre earlier this year, English described his approach as "incremental radicalism", achieving major change by gradual steps. The political achievement is impressive. The current government, according to a respected commentator on New Zealand politics, Colin James, is the most right-leaning New Zealand government since the early 1990s. But, so far, it has not seriously risked electoral defeat.
What are the lessons for Turnbull and the Coalition government? Communicating with the public and presenting an upbeat persona are important ingredients of an effective regime and certainly better than Abbott's relentless negativity. But substance is more important than style. The engine room, not the marketing message, determines the outcome.
The New Zealand double-act of popular politician and technocratic treasurer finds certain parallels in the successful Hawke-Keating and Howard-Costello teams (though neither of the treasurers in those pairs was without leadership aspirations). How the Turnbull-Morrison partnership will work remains to be seen. Will Turnbull be prepared to share responsibility for economic policy with his Treasurer? Will Scott Morrison play loyal second fiddle?
Whatever the personal dynamics, the most crucial factor will be the content and timing of major economic decisions. The New Zealand experience points to the value of incremental change that has been thoroughly explained and justified to the voters. This lesson should also be evident from the brief and sorry history of the Abbott government. Abbott and his treasurer, Joe, Hockey allowed themselves to be seduced into a radical crash-through approach, which involved ditching major election commitments. They never recovered from the political damage of their first budget. Present-day Australians have no more stomach than New Zealanders for sudden and unheralded reforms. As I have argued before, greater fiscal transparency over the past 15 years has removed any excuse for an incoming government to claim an unforeseen fiscal crisis as a justification for tearing up election promises. Howard and his treasurer, Peter Costello, got away with it but they were the last who could. Costello pulled up the ladder after himself with his charter of budget honesty.
Whether this lesson has been fully absorbed remains to be seen. Signs are mixed. Some in the business community seemed to welcome Turnbull's ascension to power as an opportunity to wind the clock back to last year. They hoped Turnbull would be able to make the case for the 2014 budget that Hockey and Abbott were unable to make. From this perspective, the problem is essentially one of communication, which a skilled communicator like Turnbull should be able to solve. Key is then quoted as an example to show what successful communication can achieve.
Others recognise that the problem of the 2014 budget was one of substance and timing, not just communication. Key could not have sold the 2014 budget if he had previously made the same election commitments as Abbott. Nor would he have tried.
The lesson for Turnbull, and for those who wish him success, is to pause, reconsider priorities, and establish a medium-term economic and fiscal strategy. Given that the election is only a year away, all major change on issues such as taxation should be delayed until after then. Instead, effort should be put into developing a set of coherent policies that can be fully explained and put before the voters. If this means making a few concessions to gain wider support, so be it. Adjustment is the essence of incrementalism.
Can Turnbull, with all his restless talk of being nimble, agile and innovative, slow the pace of change enough to take the voters with him? Is his snap summit on economic reform another stunt aimed at bolstering the next Newspoll or is it the first step on a new, more measured path of policy development? Will his impatient business backers, who have been discussing economic reform among themselves for months, have the good sense to see that successful change takes time?
Richard Mulgan is an emeritus professor with the Crawford School of Public Policy at the Australian National University. firstname.lastname@example.org