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Heather Roy's Diary 30 September 2005

Heather Roy's Diary 30 September 2005

Still Waters Run Deep

The official line from the leaders of the main parties is that we are simply waiting until the special votes are counted before governing coalitions are announced, but the 'specials' are unlikely to alter the fundamental calculations of power. It follows therefore that the long silence on the political front can only be explained by furious negotiations between party leaders, which are not reaching a conclusion at any speed.

I have to admit at that I have no particular personal insights into the key negotiations, as ACT is not a "kingmaker". We have always said we would support any party that promotes the policies we advocate “ for obvious reasons this means that ACT will only support a National led government. The swing parties are United Future, New Zealand First and the Maori Party.

None of these have made any unequivocal commitment to Labour or National. The first two pledged to talk to the largest party first. However, given Labour's tiny lead over National, they could plausibly declare it a dead heat.

You'll recall that the election night results (in terms of seats) were as follows:

Labour: 50 National 49 New Zealand First 7 Green Party 6 Maori Party 4 United Future 3 ACT New Zealand 2 Jim Anderton's Progressives 1

The special votes may well favour the Maori Party as a high number of these were cast in the Maori electorates. This being the case the size of the parliament may be reduced from the present 122 to 121. According to the formula used that loss of one seat, would result in one less National MP.

Under this scenario for National to govern it will need the active or passive support of ACT, New Zealand First, United Future and the Maori Party. At first glance this would seem an impossible task but given Peter Dunne's "bottom lines" about the Greens participating in Cabinet it would appear he is considering his options. And Helen Clark cannot have improved her chances of a deal with the Maori party by infamously describing them as "The last cab on the rank".

As for New Zealand First we should remember that Winston Peters solemnly promised the electorate before the election that he would take no longer than 3 weeks after the election before announcing which main party he would support. He is now two thirds of the way into his self imposed time limit.

Who wants to be in Government?

The question inevitably arises as to whether or not it is desirable to be in government. The omens are not good - last month the current account deficit reached a record $1.1 billion deficit. At this point things get confusing because one of the main issues during the election was the government's record $7.4 billion deficit and the need to return this to New Zealanders through tax cuts.

The issue was a legitimate one but the government is not the same thing as the country. As a nation we - families and companies - are spending more than we earn at a substantial rate so our total balance of payments (the current account) is in the red. This debt is quite separate from government spending and the $7.4 billion government surplus.

The current account deficit is not in itself a cause for panic but it does suggest that the New Zealand dollar needs to fall. That will cause a rise in interest rates, which in turn will slow the property market. The property market has been a little overheated with mortgage repayments becoming seriously out of kilter with rental incomes.

All these problems point to a slowing in the economy and the government of the day is likely to be blamed. A rickety coalition will be an easy target and will find it difficult to take decisive action on any front. Going into government right now may not be all it seems but it is widely thought that neither leader of the two big parties will survive if they don't become Prime Minister.

ENDS

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