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NZ re-elects Labour-led minority government

Sun, 28 Jul 2002

Data Flash (New Zealand)
NZ re-elects Labour-led minority government

As widely expected, New Zealand re-elected a Labour-led minority government on Saturday. However, there was a mild swing towards the centre-right in the overall vote.

Labour increased its share of the vote and will have 52 seats in the 120 member Parliament.

Its coalition partner, the Progressive Coalition (which was formed after the split of the previous coalition partner, the Alliance), will only add two MPs to that, leaving the Government 7 seats short of an absolute majority. The latter had been a serious prospect at the beginning of the campaign.

Rather than attempt to enter into formal coalition arrangements with another party, the Prime Minister, Helen Clark, has expressed her preference for a minority government.

Ms Clark has headed a minority government since 1999, with support from the Greens on confidence and occasional support from other parties on individual pieces of legislation.

The Greens have already assured Ms Clark of support in Parliament for the formation of the new Government. However, the Greens have also announced that support would be withdrawn if the Government went ahead with its plan to lift the moratorium on the commercial use of genetic modification. That decision is due in October 2003.

While the Greens' stance has been criticised as potentially holding the Government to ransom over a single issue, Saturday's election result has provided the Prime Minister with a fall-back option in the form of the United Future party. That party increased its support significantly during the final 10 days of the campaign and now has a sufficient number of MPs to be able to provide the required support for the Government should the Greens withdraw. United has declared that it would be open to such an arrangement.

The strong showing of United was part of the fragmentation of the centre-right vote. NZ First also benefited from that trend (+6%), while the National Party reached a low of 21% (-9%).

The National Party is blaming its poor showing on its lack of preparation for an early election, mistakes in the campaign strategy, as well as a general lack of a mood for change.

With the outcome in line with expectations, we do not expect any market reaction.

Timetable from here: it will take several weeks to confirm final results and Parliament is unlikely to convene until early September. At that point the Government will be formed.

Regarding the decision on the next RBNZ Governor, we do not expect an announcement until the second half of September. However, Finance Minister Dr Cullen will receive a shortlist of candidates by mid-August.


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