Oceania: The Key And Turnbull Show

Australia’s Malcolm Turnbull nominated New Zealand’s John Key as a model leader on the night he was installed in the top job. As Turnbull prepares for his first general election as prime minister while Key enters his eighth year as leader in 2016, the Australian will be hoping the “bromance” can help him achieve the same political longevity.

Speaking to the media after his successful leadership coup over former Australian Prime Minister Tony Abbott in September 2015, Turnbull was quick to nominate Key as a role model for economic reform.

“My firm belief is that to be a successful leader in 2015, perhaps at any time, you have to be able to bring people with you by respecting their intelligence in the manner you explain things…John Key for example, has been able to achieve very significant economic reforms in New Zealand by doing just that,” he said.

Turnbull will have noted Key’s success in hiking the consumption tax and cutting personal income taxes in just his first term in office, with both measures flagged for a future Turnbull government. In 2014 elections, Key’s National Party secured its third straight term in office, with HSBC economist Paul Bloxham describing New Zealand as a “rock star economy” for its success in outpacing most of its developed peers.

“Key as a new prime minister inherited a budget and an economy in deep trouble…Six years later, the budget is in surplus, unemployment at 5.6 percent is falling and the economy is growing so strongly the New Zealand Reserve Bank became the first among developed countries to raise interest rates to deter inflation,” the Australian Financial Review’s Jennifer Hewett wrote in September 2014.

In contrast, Turnbull’s first major economic statement released in December 2015 pointed to faltering economic growth in the wake of the end of a mining boom and deteriorating government finances, with the “Lucky Country” striving to extend its 25-year economic winning streak.

In foreign policy, both nations have supported coalition forces in Iraq, while supporting Trans-Pacific Partnership trade talks and working toward closer trans-Tasman business ties under the Single Economic Market agenda, with Australia remaining New Zealand’s largest trading partner.

While not enjoying the same close defense ties with the United States as it did previously under the ANZUS (Australia, New Zealand, United States) security treaty, the 2012 Wellington Declaration between New Zealand and the United States has helped strengthen military co-operation between the two former allies.

Shared Philosophies

While 54-year-old Key is Turnbull’s junior by six years, both share similar backgrounds as successful businesspeople prior to entering politics. Turnbull’s net worth was estimated in 2010 at A$186 million ($130 million), Australian Parliament’s second-richest lawmaker, having built his fortune on the sale of his Internet business OzEmail and as a former merchant banker and lawyer.

Key’s wealth was estimated at NZ$55 million ($36 million) in the National Business Review’s 2015 Rich List, the wealthiest lawmaker in the nation, after a prosperous career as a foreign exchange trader in New Zealand and overseas.

Yet similar to their current counterparts in Britain and Canada, both Key and Turnbull are politically aligned toward the center, being described as “socially progressive but economically conservative.”

Turnbull campaigned for an Australian republic in an unsuccessful referendum campaign in 1999 and has previously supported a new Australian flag, with Key having already initiated referendum to change his nation’s flag. The New Zealand leader has led the way on legalizing same-sex marriage, with Turnbull planning a plebiscite on the issue in 2017, while both have pushed for action on climate change.

Given their similarities, “it’s clearly no mistake then that Turnbull’s first overseas trip took him across the Tasman,” wrote the Sydney Morning Herald’s Adam Gartrell.

“Because while Australia loves to think itself superior to New Zealand, there’s at least one thing it’s unquestionably been doing better over the past seven or eight years: government. While we’ve been busy churning through prime ministers and slipping into ever more rancorous and vacuous political debates, New Zealand has been a model of stable, sensible democracy. And John Key deserves a lot of the credit for that,” he said.

Key’s “radical incrementalism” of making big changes slowly but methodically, his “man of the people” persona, and ability to maintain his popularity through effective communication have made him a model for Turnbull, according to the political correspondent.

At a joint press conference during Turnbull’s October 2015 visit, Key reaffirmed the bromance between the two leaders.

“We’re both economic conservatives, we’re both pretty socially liberal, we both lead center-right parties that represent broad constituencies,” he said.

“We’re both by nature, sunny and optimistic people and I think that’s got to be a recipe for a relationship that works well.”

Political Honeymoon

In a December opinion poll, Key was rated as New Zealand’s preferred prime minister by 65 percent of those surveyed, well ahead of his Labour rival, Andrew Little, who polled just 16 percent.

According to the New Zealand Herald, Key plans to stand for an historic fourth term, telling the newspaper he would stay leader “as long as I think I can add value and the party wants me.”

Meanwhile, Turnbull’s political honeymoon has continued, with the latest poll in January 2016 giving him 80 percent support as preferred prime minister to Opposition Leader Bill Shorten’s 19 percent. Turnbull’s Liberal-National Coalition also led Labor by 55 percent to 45 percent on a two-party preferred basis.

The poll boost came despite scandals that led to two ministers departing Cabinet before Christmas and a reported internal war over party pre-selections in Turnbull’s home state of New South Wales. Shorten’s Labor party has also campaigned strongly against proposals to raise Australia’s goods and services tax (GST) from 10 to 15 percent, saying, “We will oppose a 15 percent GST on everything with every breath in our body.”

Despite speculation over an early election, Griffith University political scientist Paul Williams told The Diplomat that September appeared the most likely date for Australia’s next poll, with Turnbull set to “win in a canter” despite the risk of a tough May budget.

“They can’t go to an election and say all is well, when we know a budget surplus could be 10 years away and we have a debt problem…[but] they can implement some of that pain and their huge margin in the opinion polls will cushion it,” he said.

However, with rival Abbott having recently confirmed his intentions to seek re-election, Williams said an electoral triumph for Turnbull would not completely vanquish his internal party foes. Unlike former Prime Minister Julia Gillard, who faced destabilization from ousted rival Kevin Rudd, Abbott has a more sizeable parliamentary support base.

“Turnbull might have a rougher time over a longer period than Gillard, as really it was only Rudd, whereas Abbott probably has a dozen or more hard-core supporters around him. And as we are seeing in the New South Wales Liberal Party pre-selections, the gloves are coming off between the party’s liberals and conservatives,” he said.

The election contest could also become a lot tougher if Labor replaced its leader, Williams said.

“On paper, Labor should be ahead and the Coalition way behind,” he said, pointing to the Turnbull government’s ministerial losses and policy conflicts over the GST, with Labor presenting a more unified message against a tax hike.

“Labor can reverse this with a different leader, and they are spoilt for choice. There’s four candidates who stand out – I think Anthony Albanese would have the edge today, but Tanya Plibersek is also a strong contender, so is Chris Bowen and Tony Burke. Any of those four would give Malcolm Turnbull a run for his money – I wouldn’t say they would win, but it would put Labor on a level playing field,” he said.

With both Turnbull and Key staking much of their leadership credentials on economic management, both will be hoping for more economic sunshine in 2016 despite the storm clouds drifting over from China and elsewhere.

According to ANZ Research, the New Zealand economy has entered the new year with “reasonable momentum” despite risks including “the weather, the global scene, low export prices and some deteriorating structural metrics.”

The Australian bank expects the world’s 54th-largest economy to post a modest upturn, from an estimated 2.4 percent GDP gain in 2015 to 2.5 percent this year and 2.8 percent in 2017, helped by easier financial conditions, a strong construction pipeline, record net migration inflows and an ongoing tourism boom.

In contrast, ANZ said the larger Australian economy faces a number of challenges, including the fading impact of historically low interest rates and reduced residential investment.

Australian Treasurer Scott Morrison told Fairfax Media he was “keenly aware of the strong headwinds” facing the global economy, with slumping prices for Australia’s key exports of iron ore and coal forcing the government to cut its GDP forecast from 2.75 percent to 2.5 percent for fiscal 2016.

Turnbull also faces his first major foreign policy test in 2016, in deciding on the winner of a hotly contested A$50 billion ($35 billion) submarine contract with French, German and Japanese bidders. According to media reports, the Japanese bid was favored by Abbott and is backed by Washington as cementing stronger regional defense ties, but domestic political considerations such as jobs are likely to strongly influence the decision.

Despite Turnbull’s reported family ties to China and Abbott’s previously close relationship with Japanese Prime Minister Shinzo Abe, Turnbull has trodden carefully to avoid any perception of favoritism between the two regional giants, although he warned Beijing not to “push the envelope” with island building in the South China Sea.

Similar to Turnbull, Key has stressed that New Zealand has not picked a side in the South China Sea dispute, but he has called for stability to protect trade.

“A lot of our goods go through that waterway, but also we’re increasingly engaged with Asia, it’s really our big market – not just China but right across Asia – so anything that destabilizes that in any way is fundamentally bad for us,” he told NZN.

Amid growing economic challenges, can Turnbull and Key sustain their apparent political success?

Griffith University’s Williams still sees the leaders remaining in office for some time yet, despite Turnbull’s weakness of being “occasionally too verbose.”

“A week is a long time in politics, and some crisis could beset them or ill health could intervene, but on current circumstances, they’re very much in control of their political circumstances, Key even more than Turnbull. There doesn’t seem to be a cell inside Key’s party which would like to see him go, whereas there’s one inside Turnbull’s party,” he said.

“They’re there at their own pleasure for the short to medium future, which bodes poorly for their opponents both in and outside their parties.”