As New Zealand grapples with rising electricity prices and a complex economic recovery, the government is at a crossroads. With a major review of the electricity market nearing a decision, ministers are weighing radical interventions against more measured reforms. The review, led by the offshore consultancy Frontier, was launched in late 2024 and has already returned its findings, which are currently being analyzed by Energy Minister Simon Watts and his team.

The report's recommendations could lead to a significant overhaul of the market, including the revival of a controversial proposal from 2021: the creation of a new entity called “Thermal Co,” which would manage and eventually retire the thermal generation assets of major power companies. This move, potentially backed by a large Crown stake, could have a major impact on electricity pricing and the incentive for renewable energy investment.

While the idea is seen as a bold and interventionist step, it has gained support from some coalition partners, including NZ First. However, the Act Party has shown little public awareness of the report, and National is in a difficult position, torn between acknowledging the need for reform and fearing the political fallout of more radical measures.

Meanwhile, the government is also facing criticism over the affordability of basic goods like butter, which have surged in price due to high commodity values. While the government acknowledges that rising prices are beneficial for rural economies, they are also a burden on low-income households. This has sparked a debate over whether the focus should be on increasing wages and addressing the broader structural issues that have kept New Zealand’s incomes low compared to other developed nations.

Act Party leader and Deputy Prime Minister David Seymour has criticized the tendency to blame corporations like supermarkets and banks for high prices, arguing that the real issue lies in the broader economic challenges that have held back wages. This sentiment has become a growing concern within the coalition, as the government seeks to balance economic reform with public expectations.

As the coalition prepares for the next election, asset sales have become a central theme. However, the government may face criticism if the partially privatized energy companies, such as Genesis and Meridian, are seen as exploiting consumers. This highlights the ongoing tension between economic recovery and public trust in the government's ability to deliver affordable living standards.

The government's challenge is clear: it must convince New Zealanders that its economic “track” is the right one, even if it means breaking from the past and embracing a more stable and long-term approach to energy and economic reform. With the next major decision on the electricity market expected by the end of September, the political landscape is poised for significant change.