Outsider Transferable Vote (OTV)

## CONTEXT **Situation:** New Zealand operates under a Mixed Member Proportional (MMP) electoral system, which includes a 5% party vote threshold for a party to gain seats in Parliament unless it wins an electorate seat. This threshold is designed to prevent fragmentation and keep extremist micro-parties out of government. However, it also creates a high barrier for new, moderate, or innovative parties like The Opportunities Party (TOP) to enter the political landscape. **Complication:** The recent news of the National Party ruling out a coalition or cooperation agreement with TOP highlights a recurring problem: voters are often reluctant to "waste" their party vote on a new party that polls below the 5% threshold. This creates a self-fulfilling prophecy where new parties cannot gain traction because voters fear their vote will be ineffective. This dynamic stifles political competition and locks in the existing party duopoly, reducing the diversity of ideas in Parliament. **Question:** How can New Zealand reduce the "wasted vote" problem for new parties without fundamentally altering the MMP system or lowering the 5% threshold, which could lead to fragmentation? **Answer:** Implement an "Outsider Transferable Vote" (OTV) mechanism. This is a targeted, low-cost tweak that allows a voter's party vote to transfer to a second-choice party, but *only* if their first-choice party is a new party (one not in the previous Parliament) that fails to clear the 5% threshold. This preserves the threshold's stabilizing function while lowering the barrier to entry for genuine new political movements. ## PROBLEM **Core Problem:** The 5% threshold in New Zealand's MMP system creates a significant "strategic voting" problem. Voters who prefer a new or small party are pressured to vote for a larger, established party to avoid "wasting" their vote. This is not just a theoretical concern; it directly suppresses the vote share of new parties, making it nearly impossible for them to gain a foothold. For example, in the 2020 election, TOP received 1.0% of the party vote, and the New Conservative Party received 1.5%—both well below the threshold, meaning over 100,000 votes were effectively discarded from the proportional allocation. **Specific Harms:** The cost of inaction is a calcified political landscape. New ideas on climate, housing, and economic reform struggle to gain parliamentary representation. Voter disillusionment grows as people feel their vote doesn't matter if they don't support the major parties. This is particularly acute for younger voters, who are more likely to support new parties. Furthermore, the current system incentivizes major parties to ignore the concerns of voters who support smaller parties, as those votes are likely to flow to them anyway under strategic voting pressure. **Cost of Inaction:** Without reform, New Zealand will continue to see a slow but steady decline in voter turnout and satisfaction with democracy. The political system will remain a two-and-a-half-party system (Labour, National, Greens), with new entrants effectively locked out. This denies Parliament the fresh perspectives and policy innovation that new parties can bring, and it entrenches the status quo on critical long-term issues. ## PROPOSED SOLUTION **Situation:** The current MMP system needs a minor, targeted adjustment to address the "wasted vote" problem for new parties without opening the door to fragmentation. **Decision:** Implement the Outsider Transferable Vote (OTV). This is not a full ranked-choice voting system. It is a single, conditional transfer: a voter can designate a second-choice party, but that transfer only activates if the first-choice party is a new party (not in the previous Parliament) and fails to reach the 5% threshold. **Action:** The Electoral Commission would redesign the party vote ballot to include a small, optional "Second Choice" column. Voters would mark their primary party and, if they wish, a secondary party. The vote counting process would proceed as normal. After the initial count, any votes for new parties that fall below the threshold would be transferred to the voter's designated second choice. Votes for established parties (those already in Parliament) would not be transferable, preserving the threshold's function for existing players. **Process:** This would require a simple amendment to the Electoral Act 1993. The implementation cost would be minimal, primarily involving ballot redesign and public education campaigns. A pilot program could be run for a single election cycle to test the mechanism. Rejected alternatives include: (1) lowering the threshold to 3%, which could lead to fragmentation; (2) full ranked-choice voting, which is a much larger systemic change; and (3) doing nothing, which perpetuates the current problem. **Execution:** The change would be phased in over one electoral cycle. The Electoral Commission would launch a public information campaign explaining the new option. Political parties would be encouraged to signal their preferred "second-choice" partners, creating a new dimension of pre-election coalition signaling. ## EXPECTED IMPACT **Who Benefits:** The primary beneficiaries are voters who support new or small parties. They would no longer feel forced to vote strategically for a major party. New parties themselves would benefit from a more accurate reflection of their genuine support, as voters would be less hesitant to cast a first-preference vote for them. Established parties could also benefit if they are chosen as the second-choice recipient, potentially picking up votes they would not have otherwise received. **How Metrics Change:** The most direct metric is the reduction in "wasted votes." In the 2020 election, the ~2.5% of votes that went to parties below the threshold (excluding the Māori Party, which won an electorate seat) could have been partially reallocated. We would expect to see a measurable increase in the vote share of new parties, perhaps by 1-3 percentage points, as strategic voting pressure decreases. Voter satisfaction surveys should show an improvement, particularly among younger demographics. **Scope and Magnitude:** The impact is moderate but significant. It would not radically alter the composition of Parliament overnight, but it would create a more dynamic and responsive political ecosystem. Over two or three electoral cycles, we could expect to see one or two new parties successfully cross the threshold, bringing fresh policy ideas into the legislative process. The system would become more resilient to the emergence of new political movements, reducing the risk of sudden, disruptive populist surges by providing a more gradual pathway to representation. ## DECISION LENS | | If this passes | If this doesn't pass | |---|---|---| | **What will happen** | Voters for new parties have a safety net; vote share for new parties increases slightly; one or two new parties may enter Parliament over a decade. | Strategic voting continues; new parties remain locked out; voter disillusionment with the "wasted vote" problem persists. | | **What won't happen** | The 5% threshold won't be weakened for established parties; the system won't become a full ranked-choice voting system; extremist micro-parties won't gain a foothold. | The political landscape won't become more dynamic; the barrier to entry for new ideas remains high; the status quo of the two-party-plus-Greens dynamic is preserved. | ## PRECEDENTS EXAMPLE: Germany — What: Germany's MMP system uses a 5% threshold but allows voters to give both a first and second vote (constituency and party list). While not a direct transfer for new parties, the system's design has been studied for its ability to accommodate new entrants. The key lesson is that a targeted, conditional transfer is feasible within an MMP framework. — Outcome: Germany has a more diverse multi-party system than New Zealand, with new parties like the Pirate Party and the AfD gaining seats over time, though the threshold remains a barrier. — Outcome: Germany has a more diverse multi-party system than New Zealand, with new parties like the Pirate Party and the AfD gaining seats over time, though the threshold remains a barrier. EXAMPLE: Australia (Senate) — What: Australia's Senate uses a full ranked-choice voting system (Single Transferable Vote) where voters can rank all candidates. This eliminates the "wasted vote" problem entirely, as votes are transferred until all seats are filled. However, it is a much more complex system. — Outcome: The Senate has a high degree of minor party representation, but the system is criticized for being confusing and for the prevalence of "above the line" voting, which gives party control over preference flows. — Outcome: The Senate has a high degree of minor party representation, but the system is criticized for being confusing and for the prevalence of "above the line" voting, which gives party control over preference flows. EXAMPLE: New Zealand (Māori Electorates) — What: New Zealand already has a precedent for a conditional electoral mechanism: the Māori electorate option. Voters of Māori descent can choose to vote in either the general or Māori roll, a choice that is not available to non-Māori. This demonstrates that the New Zealand electoral system is flexible enough to accommodate targeted, conditional voting mechanisms. — Outcome: The Māori electorates have ensured guaranteed Māori representation in Parliament, a successful example of a targeted electoral tweak achieving a specific policy goal. — Outcome: The Māori electorates have ensured guaranteed Māori representation in Parliament, a successful example of a targeted electoral tweak achieving a specific policy goal.

July 27, 2026