"The mood for change appears to be strong," economist says
The general election is fast approaching, and according to ASB economists, the poll could be close and consistent with traditional MMP norms, with potential delays possible in the formation of the new government.
Under the mixed member proportional (MMP) voting system, every eligible voter gets to vote one electorate member of parliament and one party, with the party vote a determinant on how many MPs each party gets.
In an economic note, titled “Incremental rather than transformational change,” Mark Smith (pictured above), ASB Bank senior economist, said neither of the left- or right-leaning blocs may be able to form an outright majority, and that a change in government was more likely than not, with NZ First potentially the kingmaker.
There are currently five main political parties in parliament and two independents: Labour – centre left (seats: 62), Greens – left/environmental (9), National – centre right (34), Act – right (10), Te Pāti Māori (2), and Independent (2).
Two major blocks seemed to have formed leading up to the election: a left-leaning block (Labour, Greens, Te Pāti Māori) and a right-leaning bloc (National, ACT).
Smith noted that “the mood for change appears to be strong” in this election and that the poll will likely yield one of the following possibilities (in order of likelihood):
- a National/ACT/NZ First coalition government
- a majority National/ACT coalition government
- a minority National/ACT coalition government with support provided by NZ First
- a majority Labour, Greens, TPM Coalition government
- a minority Labour, Greens, TPM coalition government
“As Labour has ruled out working with NZ First (and vice versa), it seems more likely that a National/ACT/NZ First arrangement will be in charge of the Treasury benches,” Smith said.
A conclusive result was a possibility, with the shape of the next government could be known on election night, or a day or two after. But it could also take several weeks for the new government to be formed – that is, if the results are close and neither of the left or right blocs has an outright majority.
“A tight election could mean protracted coalition negotiations and up to 10 weeks until the new government is formed, which could result in a period of heightened uncertainty and additional volatility,” Smith said. “However, this should have only modest economic and market impacts, with the NZ economy and NZ financial markets being impacted by more sizeable and enduring influences.”
ASB economists also noted that despite the campaign rhetoric, “the policy positions of the major parties are not substantively different, and we don’t expect transformative change.”
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“If, as seems likely, NZ First is the kingmaker, proposed policy settings would likely have to be tweaked,” Smith said. “Tax relief will likely be scaled back, some proposed new taxes shelved, with more focus on government expenditure restraint. Such a scenario would help cement the RBNZ’s on-hold stance for the OCR.”
The NZ general election will take place on Oct. 14.
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