Data Flash (New Zealand)
NZ Election Results
Key Points
Preliminary poll results suggest that Labour and the Alliance will be able to form a majority government without the
involvement of the Green Party. Labour and the Alliance control 63 out of 120 seats.
The Greens failed to take the 5% hurdle. Moreover, Green Party leader Fitzsimons did not succeed in taking the
high-profile seat of Coromandel, which would have made the 5% hurdle irrelevant. (NZ First achieved the latter through
Winston Peters' narrow win in his electorate of Tauranga.)
The Greens lost the Coromandel electorate seat by only 400 votes (out of around 25,000 in total) and were only 0.13%
away from the 5% threshold.
While the closeness of the results suggests that the counting of special votes (ex-patriats etc) could change the
outcome, we consider a swing to the Greens unlikely at this stage, with the conservative parties usually having an
advantage on special votes.
Nevertheless, a considerable degree of uncertainty remains until the announcement of the final vote count on 10
December. If the Greens gain representation in Parliament, the combined seats of a Labour/Alliance Government would
reduce to 60, one short of an absolute majority.
Both the Prime Minister designate, Helen Clark, and Alliance leader Anderton have signalled their willingness to come to
some arrangement with the Greens in that case. However, the Greens have been vague so far about the exact nature of such
an arrangement, i.e. participation in a cabinet or simply providing parliamentary support of a Labour/Alliance minority
government.
The potential inclusion of the Greens would dilute some of the Labour dominance of a future Government.:::Given a
somewhat disappointing performance of the Alliance, Labour has nearly five times as many MPs as the Alliance on current
seat allocations - suggesting a strong Labour influence on personnel and policy matters.:::Including the Greens would
not only mean shifting the balance between the parties, but also potentially causing a greater influence of the left
wing of the Labour Party.
With regards to Personnel, the Alliance is likely to get four positions in a 20-member cabinet. Helen Clark will be
Prime Minister, Jim Anderton Deputy Prime Minister and Minister of Business Development (a new portfolio), while Michael
Cullen will take over as the Treasurer.
Helen Clark and Jim Anderton will set up a team for coalition negotiations.:::However, unlike in 1996 between National
and New Zealand First, any agreement will be rather general, suggesting a fast completion of the talks. Helen Clark
intends to have the new Government in office before Christmas.
Election Results
Party:::::::::: % 1999 % 1996::::::::::Seats 1999:::::::::::::Seats 1996
::::::::::::::::::::::::::::::::::Electorate List Total:::Electorate List Total
Labour:::::::::: 38.9::::28.2::::::::41::::: 11::::52::::::::26::::: 11:::37
Alliance:::::::::7.9:::::10.1:::::::::1::::: 10::::11:::::::::1::::: 12:::13
National:::::::::30.7::::34.3::::::::23::::: 18::::41::::::::30::::: 14:::44
ACT::::::::::::::7.0:::::6.2::::::::::0::::: 9:::::9:::::::::1::::: 7:::8
United:::::::::: 0.5:::::0.9::::::::::1::::: 0:::::1:::::::::1::::: 0:::1
NZ First:::::::::4.2:::::13.1:::::::::1::::: 5:::::6:::::::::6::::: 11:::17
Green Party::::: 4.9:::::n/a::::::::::0::::: 0:::::0::::::::n/a:::::n/a::n/a
Others:::::::::: 5.9:::::7.2::::::::::0::::: 0:::::0:::::::::0::::: 0:::0
Total:::::::::: 100.0:::100.0:::::::::67::::: 53:::120::::: 65::::: 55:::120
Ambitious plans have been announced for the first 100 days in office, with Labour promising to move on changing the
rules for interest:::payments on student loans, lifting:::superannuation payments, introducing a new 39% marginal tax
rate for incomes over $60,000, reviewing the minimum wage, starting work to repeal the Employment Contracts Act and to
reverse recent changes to the accident compensation insurance, and setting up a new agency for business and industry
development.
The Alliance has announced similar policies, with desired changes going somewhat further in most areas. While Labour is
unlikely to concede in most cases, it may agree to a rise in the minimum wage as early as 1 January.
From a macroeconomic perspective, the key medium-term issue will be a higher path for government expenditure than would
have been pursued by a National-led government. While Labour's costings suggest a medium-term difference in the fiscal
balance of only around 0.6-0.7% of GDP compared to current government policy, we suspect the gap to be more pronounced
over time, with fiscal surpluses constrained to around 1% of GDP.
A key development with respect to monetary policy will be a review of the operation of policy to be conducted early next
year.:::A foreign expert is likely to be asked to undertake the review.:::As Treasurer designate Michael Cullen has
stated, neither the RBNZ's sole focus on price stability, nor the 0-3% target range will be up for change. However,
there is the risk that Alliance leader Anderton will not easily make those concessions, given that a significant
tightening in monetary policy next year - which looks increasingly:::likely,:::given latest inflation:::indicators:::-
constitutes:::a key risk to his ambitions in the:::business development portfolio.
In the event of the Greens getting into Parliament, their key direct:::influence on the Government
would:::be:::a:::stronger environmental orientation. However, more indirectly, through the shift of the internal balance
of power within the coalition (see comment above), their influence would likely result also in a higher degree of fiscal
expansion, as well as a slower path of tariff reductions.
Likely Market Reaction
The main risk for the market was a strong showing by the parties of the far left - the Alliance and the Greens. As
things stand on election night results, this has not eventuated. This should be of comfort to the market and so a small
positive reaction seems possible over the coming week. Having said this, the market may already be marginally long the
NZD which will limit any short-term increase.
While there is some uncertainty about whether the Green Party will ultimately cross the 5% threshold, this should not be
a major focus for the market. It is unlikely that the Greens will have much influence on economic policy settings even
if they do manage to gain representation in Parliament.
Of immediate interest to the market are the exact role of Jim Anderton and the review of the operational aspects of
monetary policy.:::The first of these should be resolved fairly quickly. The:::monetary policy review has the potential
to have:::to destabilising influence if it is not managed tightly by Michael Cullen.:::However, these things are not
major concerns given the dominant role of Labour in the coalition.
Over the longer term, the policy slippage in the Labour/Alliance programme carries the risk that it will be negative for
New Zealand's economic performance. However, any slippage will not be dramatic:::enough to offset the positive cyclical
influences expected to impact on the economy over the next few years.
ENDS
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