As I was listening to NZ First leader Peters begin his decision speech yesterday I noted that the thing he said in the preamble ...

(I'll paraphrase) That the NZ economy was going to slow in future but it wasn't his fault.


Ah well

Here is a take on what to expect from Capital Economics (bolding mine):

First, on the economy:

  • But the less growth-friendly policies of those parties mean the risks to our forecasts are on the downside
  • We have highlighted before that the polices of the Labour and New Zealand First parties are more likely to lead to slower GDP growth than otherwise as they involve reducing net migration by more than the National party, imposing stricter restraints on housing market activity and running tighter fiscal policy
  • We won't know what policies the coalition has agreed until early next week

On the NZD:

  • What this would mean for interest rates and the New Zealand dollar partly depends on whether the new government changes the mandate of the Reserve Bank of New Zealand (RBNZ)
  • In his press conference earlier today, NZ First leader Winston Peters said he did not secure a deal that would make the RBNZ target the exchange rate, à la the Monetary Authority of Singapore.
  • But in her press conference, PM-in- waiting Jacinda Ardern hinted that Labour would fulfil its pledge to add full employment to the RBNZ's current price stability mandate. If the new Government then selects a new RBNZ Governor in March who agrees with such shift of emphasis, then monetary policy would presumably be looser than otherwise.
  • So if our forecast that interest rates won't rise from 1.75% until late 2019 is wrong, it may be because rates stay there longer.
  • The risks to our forecasts that the dollar will be US$0.68 at end-2017, US$0.70 at end-2018 and US$0.80 at end-2019 therefore lie on the downside.