The New Zealand general election is shaping up as a close run thing. There are plenty of previews and prognostications about, this is a 'in a nutshell' overview:
- The Nationals are the incumbent government
- Labour is the main opposition
- Polling is pointing to a close race, with results for Labour improving (on a uptrend)
- At present it appears national will poll highest, but not enough to win government outright
A minority government appears it'll be the most likely outcome, with the 'winner' having to rely on support from minority party NZ First (in general, a populist party running on protectionism, reduced immigration, less foreign ownership of property).
I'll be keeping an eye on polls ahead of September 23.
But. the bottom line is that regardless of winner policy direction will not be too much changed. There may be more 'populist ' policy if NZ First hold the key, but as is often the case their views are expected to moderate with the responsibility of governing, and the doing of dirty deals (who'd have though it could be so complicated, right?).
And, for monetary policy, in the near term its not likely to be swayed by the election outcome. If Labour win there may be more expansionary fiscal policy implemented, which'll ten towards an earlier tightening path from the Reserve Bank of New Zealand, this is something we'll have to watch. Labour have also made noises about changing the RBNZ act (to add more emphasis on full employment to the RBNZ goal of price stability), again something to watch but it'd be a good way off in the distance.
Yes, there is election risk, but keep your eye too on developments in the NZ economy for monetary policy direction too:
- relatively strong economic data
- strong NZD (the RBNZ jawbone it from time to time)
- lack of tradable inflation
- macroprudential tools implemented to cool the housing market
The RBNZ is currently very much on hold.