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Analysis: The tail did not wag the dog, it barely wiggled

MMP got a bad rap over the last month's prevarications and brinksmanship.

It seemed as if a thrice-rejected 72 year-old politician with just 7.2 percent of the vote was holding an entire nation to ransom. Many worried his policy prescription to destroy migration and wreck our clean system for Goods and Services Taxes would cause economic and budget chaos.

The apparently endless uncertainty and the days-on-end of waiting for said 72 year-old to harangue the press, grin cheshire cat-like and then wander off for a Vietnamese lunch down the road sapped the nation's confidence and patience. There was much wailing and gnashing of op-eds about the unfairness and indecisiveness of MMP. Many hankered for the good old days when the largest party that won on the night could then form a Government by itself.

And yet the deals revealed on Tuesday showed he did not hold anyone to ransom and that the Mixed Member Proportional system of electing our Governments is working just fine.

New Zealand voted in 1993 to stop giving any one party the power to enact an entire agenda the day after they won an election, or even worse, enact an agenda they had not told anyone about before the election.

Since 1996, we've broadly had Governments that stuck to the centre and had their rougher instincts smoothed out by either the central pull of MMP or the policies of the smaller parties they needed help from to govern.

That means we've had Governments that generally follow the public's view, rather than dragging voters along behind them in their rough wake. Policies have changed in an incrementalist fashion over time. The last Government even promoted this policy incrementalism as a feature rather than a bug of MMP when it was advising its trans-Tasman brothers-in-arms about how to do change and still win elections.

And so it is this with this latest change of Government.

Neither minor party was able to wag the dog of the biggest governing party and the majority of voters got the policies they voted for.

The agreements show the new Government's policies are broadly supported by most of the electorate, even if the single largest party isn't. The smaller parties got one or two small policy wins that neither knocked the major party off its main track nor have shocked the public and the financial gatekeepers with their extremism.

The moves to introduce a Climate Commission and a Carbon Act to target a carbon neutral country by 2050 was an established policy agreed by New Zealand First, the Greens and Labour.

The move to soften the blow of the introduction of agriculture into the Emissions Trading Scheme (by increasing the exemption from Labour’s 90 percent to New Zealand First’s 95 percent) has calmed some of the nerves of farmers.

New Zealand First was also able to remove the threat of a water tax and to secure the existing irrigation scheme investments. This was MMP working at its best to soften the impact of a change of Government.

The same can be said of New Zealand First’s own radicalism with monetary policy and migration people policy. The end result was a shift to a Reserve Bank Act that actually brings New Zealand into line with the orthodoxy practiced for decades in Australia, the United States and Britain. The change means our Reserve Bank will have a dual mandate of low inflation and full employment. No foreign investor or currency trader will bat an eyelid at that.

Winston Peters’ proposal to move to a Singaporean-style system of targeting currency values rather than interest rates would have been radical, but was not adopted. Another quiet victory for the moderating force of MMP.

The same can be said on migration. Peters’ plan to slash net migration by 60,000 would have been virtually impossible without completely shutting down international education and imposing severe restrictions on the recruitment of temporary migrant workers in the aged care, hospitality, agriculture, horticulture and tourism sectors. The disruption and injustice would have been damaging to both our guests and the economy.

MMP also did a great job protecting the government’s finances. New Zealand First’s proposals to take GST off food and share GST receipts from tourism with local councils would have massively undermined a clean and effective consumption tax. Protecting New Zealand’s broad-based and low rate tax system is a good thing.

Peters’ gains with the $1 billion regional development fund and the Greens’ $100 million green investment bank have not blown the bank either. Labour already had a plan to build a $200 million regional fund. The net effects of the two policies was $900 million of capital, which was well within Labour’s contingency set when it released its alternative budget just before the election.

Again, there is nothing in this slightly tweaked budget to freak the markets or change the outlook for ongoing surpluses and a gradual reduction in the Government’s already low debt ratios.

More than 50 percent of voters got the foreign buyers’ ban they wanted and the massive increase in state-backed building of more affordable housing that they wanted and New Zealand needed.

Neither minor party was able to wag the dog of the biggest governing party and the majority of voters got the policies they voted for. The rough edges of the toughest of those policies were knocked off in the MMP process.

Job done, and let’s hope that’s the end of the whole whinging and moaning about MMP for at least another three years.