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Cablegate: New Zealand's Labour Party: Seeking Victory in The

This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 04 WELLINGTON 000650

SIPDIS

STATE FOR D (CASTRO), EAP/ANP, EAP/RSP, EAP/EP, INR/EAP
NSC FOR VICTOR CHA AND MICHAEL GREEN
SECDEF FOR OSD/ISA LIZ PHU
PACOM FOR J2/J233/J5/SJFHQ

E.O. 12958: DECL: 08/25/2015
TAGS: PREL PGOV NZ
SUBJECT: NEW ZEALAND'S LABOUR PARTY: SEEKING VICTORY IN THE
CENTER OF MIDDLE EARTH

REF: A. WELLINGTON 642
B. WELLINGTON 635
C. WELLINGTON 594
D. WELLINGTON 566
E. WELLINGTON 439
F. WELLINGTON 237
G. 2004 WELLINGTON 89

Classified By: Charge D'Affaires David R. Burnett,
For Reasons 1.4 (B) and (D)

1. (C) Summary: Locked in a tougher than expected battle for
votes, a once-confident Labour Party has forsaken its
reputation for fiscal restraint to dish out promises of pork
for students and low- and middle-income families. In the
run-up to New Zealand's September 17 election, Labour also
has played on anti-American sentiment by claiming the
opposition National Party is beholden to U.S. interests and
itching to eliminate the country's iconic anti-nuclear
policy. Just six months ago, Labour appeared to be coasting
to a historic third term in office, the first time a Labour
Government would have served more than six consecutive years
since 1949. But it stumbled badly in May when -- following
six years of large budget surpluses -- its annual budget
disappointed the public by failing to provide immediate tax
cuts.

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2. (C) Labour appears to be turning around its fortunes with
its election-year gifts. It has also gained ground by
casting National as a party of the rich with a hidden agenda
to destroy social programs. Center-left Labour also appears
to be attracting voters by remaining pragmatic and cautious
in its policies overall, calculating that solidifying its
appeal to the middle of the New Zealand electorate should be
enough to spell victory in the election. Public opinion
polls show Labour widening its lead over National, which had
a slight edge just two months ago. The race is still too
close to call, though. End Summary.

---------------------------
FROM THE LEFT TO THE CENTER
---------------------------

3. (C) New Zealand's governing Labour Party occupies the
center-left of the political spectrum. Its election
successes in 1999 and 2002 rested on its ability to build
bridges with two camps: working-class supporters
representing the party's roots, and younger, often
university-educated, urban liberals. Since the center-right
National Party began climbing in the polls in early 2004,
Labour has shifted its focus to consolidate support in the
center, particularly among lower- and middle-income wage
earners.

4. (C) Labour supports a strong role for government in
improving life for the country's less advantaged, and
generally backs income redistribution to achieve that end.
Since returning to power in 1999 after nine years in
opposition, Labour has restored some of the cuts in social
spending and rolled back parts of the employer-friendly labor
laws enacted by National-run governments in the 1990s,
exacerbating divergence of investment to Australia.

5. (C) On non-economic social policy, the Labour-led
government adheres more closely to its traditional roots. It
legalized (previously de facto) prostitution in 2003 and
enacted a civil union law in 2004 that provides legal
recognition for same-sex and other couples as an alternative
to traditional marriage. Recognizing the risk of promoting
such controversial measures, the Government allowed Labour
and coalition members to vote on both bills according to
their conscience. Here in liberal New Zealand, even most
members of the opposition voted in favor of civil union, but
members of the public opposed to the bill still blame Labour
for its passage.

6. (C) Despite such occasional risk-taking, Labour under
Prime Minister Clark has in most respects taken a pragmatic,
centrist and, until recently, fiscally conservative approach
to governing. It has kept a tight rein on overall budget
outlays, even while it ramped up spending on education,
health care and selected social programs. Aided by a strong
economy that increased tax revenues, Labour has produced
budget surpluses for six years and reduced government debt,
on which it now stakes its claim to being a prudent financial
manager. And, as an example of the party's pragmatism,
Labour has risked a rift with its traditional left-wing
allies by aggressively pursuing liberalized trade, both
within the World Trade Organization and in bilateral
agreements (including talks now under way with China).

-----------------------------------
FINDING LOOSE CHANGE UNDER THE SOFA
-----------------------------------

7. (C) But under pressure from National, Labour has abandoned
some of its caution and begun to hike spending, aiming to
appeal to middle-of-the-road New Zealanders who had been left
out of the party's social programs and might be tempted by
National's tax cuts. The first move was a Government
announcement in July that it would forgive the interest on
student loans for students who remain in the country, gaining
support not only among students but also among their parents
and grandparents who have watched New Zealand graduates seek
higher-paying jobs overseas to help pay off student loans.

8. (C) Next, Labour repackaged and expanded its 2004
showpiece "Working for Families" (WWF) program, originally
designed to increase welfare benefits for the working poor
and large middle-income families. Labour's public
advertisements showcasing WWF originally were to culminate in
triumph this month, in time to ensure Labour's reelection.
But when the public seemed underwhelmed, and drawn instead to
National's pledge to cut taxes for all New Zealanders, Labour
repackaged WWF as "tax relief" and announced on August 18 it
would expand the program to cover 350,000 families at an
estimated annual cost of NZ $400 million (US $277 million).
The move has been applauded by many voters, although others
have reacted with skepticism: the Government had previously
insisted there was no money for tax cuts. (Many of the funds
for expanded WWF allegedly come from higher-than-expected tax
revenues.)

9. (C) Matthew Palmer (protect), son of former Labour PM Sir
Geoffrey Palmer, told us that Labour's May budget avoided
spending down the surplus precisely so the Government could
use the money for election year dazzlers as needed. More
spending announcements are to come, he reckons.

----------------------
The Anti-American Card
----------------------

10. (C) With Labour battered by the National Party on
domestic issues and bettered by National in the polls
starting in May, the Government opened up a second front with
National: foreign policy. One cabinet member asserted -- but
later could offer no evidence -- that U.S. interests were
providing National with campaign funds and advice (ref D).
Foreign Minister Goff separately accused National of seeking
U.S. advice on how to move New Zealand public opinion to
reverse its ban on nuclear-armed and nuclear-propelled ships
(ref C).

11. (C) Labour's spending promises, together with questions
it has raised about National on both domestic and foreign
policy, appear to be paying off: Poll results announced
August 21 showed Labour widening its lead over National from
four to eight points, with Labour at 45 percent approval
versus National at 37 percent.

--------------------
Labour's weak points
--------------------

12. (C) In addition to satisfying some voters' suspicions
over Labour's sudden ability to fund election-year bonanzas,
the Party still has some vulnerabilities heading into
elections. "Working for Families" and student loans do
nothing for higher-income wage earners or singles. The large
budget surplus has fueled a public perception that there is
plenty of money available to fund tax cuts, and these groups
now see that Labour has largesse to spend but they will not
benefit. Moreover, Labour has done little to counter
National's claims that the Government bureaucracy, which has
grown significantly under Labour, is taking from taxpayers
money that rightfully belongs to them.

13. (C) Labour also still suffers from a perception among
some in the public that the Government is arrogant in its
belief that it knows better than taxpayers how to spend their
money. Similarly, in a land that values the common "bloke,"
Labour officials -- and particularly PM Clark and her circle
of female advisors and confidantes -- often appear obsessed
with political correctness and more interested in fringe
groups than the "mainstream."

14. (C) Meanwhile, Labour has had to tread carefully on
issues involving Maori, now that many of these traditional
Labour supporters are being drawn to the Maori Party. While
the loss of Maori support alone will not cost Labour the
race, the Labour Party has taken pains to mollify its Maori
members over clashes on Foreshore and Seabed legislation and
has spent a lot of time campaigning among this electorate.
Maori compose 15 percent of New Zealand's 4 million people.
Even before National's May up-tick in the polls, Labour
leaders warned party members at their Party conference that
the loss of Maori support could threaten the Government's
reelection. But Labour's efforts to attract Maori voters, on
top of the Government's proclivity to afford Maori special
status in cultural and economic programs, alienates many
lower- and middle-income voters the Government is trying to
court.
15. (C) Meanwhile, the Labour government's decision to
negotiate a trade deal with China has drawn fire from both
sides of the political spectrum. The Greens criticize
China's environmental and labor records; the trade unions and
some business executives see a threat of even greater
competition with low-wage Chinese manufacturers.

---------------------
Partner or Millstone?
---------------------

16. (C) A coalition will likely be needed for whatever party
proves the top vote-getter. Labour currently governs in
coalition with Jim Anderton's Progressive Party and is
supported by United Future on budget and confidence motions
and by the Green Party on a case-by-case basis. While
National and NZ First have demurred on naming their preferred
coalition partners, Labour has declared it would maintain its
ties to the Progressives and strengthen the role of the
Greens.

17. (C) The Greens cooled their relations with the Labour
Party when Labour allowed a moratorium on genetically
modified agricultural products to lapse in 2003. In recent
weeks, however, PM Clark has joined Green Party co-leader
Jeanette Fitzsimmons on the campaign trail. While Labour has
likely sapped some Green support with its student loan
program, Labour wants the Greens to receive at least 5
percent of the vote, the minimum required for a party to be
represented in Parliament. This would keep the Greens as a
viable coalition partner. By campaigning so closely with the
Greens, Labour risks belying it's hard-won image as a
centrist Party, however. (NB: We will report septel on the
implications for the United States of this and other possible
coalitions.)

-------------------
Leader: Helen Clark
-------------------

18. (C) Helen Elizabeth Clark, 55, has served continuously in
Parliament since 1981 and as Prime Minister since December
1999. She has served as Minister of Housing and
Conservation, Minister of Health and Deputy Prime Minister
and was leader of the opposition during the National
administrations from 1993 to 1999. She is a political
survivor. David Lange, the former prime minister who died
August 13, wrote in his autobiography that Clark kept out of
discussions of the economic reforms of the late 1980s. While
some Labour members suffered politically due to public
backlash over the pace and breadth of the reforms, Clark
emerged untarnished. Many people forget that she was nearly
toppled as leader by Michael Cullen, now the deputy prime
minister, in the 1990s.

19. (C) With an approach deemed managerial if not
micro-managerial, Clark is closely engaged in virtually every
policy decision. She holds nearly absolute influence and
authority over her party and cabinet. Such centralized
control contributes to a dearth of young Labour
leaders-in-waiting, raising concern in the party about who
would follow Clark and Cullen. Clark is believed to want to
head an influential world organization after she leaves
office. Clark regularly beats National's Don Brash and other
opposition Party leaders in polls asking Kiwis to name their
"preferred Prime Minister."
Burnett

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