NZ elections 2017: A game of thrones - TDS

After weeks of whipsawing polls, the incumbent National Party under Prime Minister Bill English garnered a decent 46% of the votes in yesterday’s New Zealand election and while this is a financial market-friendly outcome, National is three seats short of the 61 required to govern, explains the research team at TDS.

Key Quotes

“Labour performed well under its new leader, but even with its traditional Greens partner still requires a third party to govern.”

“NZ First under Winston Peters is therefore back in his role as ‘kingmaker’, despite losing his seat. At the time of writing, Peters says that he will “speak to colleagues and party bosses” ahead of discussions with the major parties. As it is well known that he doesn't work with the Greens, a National-NZ First coalition remains the most likely outcome.”

“We expect a lot of noise and posturing over the coming days and weeks, but actual political risk to the economy is minimal, and we stick with our out-of-consensus RBNZ view. We see incoming RBNZ Governor Spencer being anything but a docile caretaker, and look for a hawkish shift in tone by year end. This implies higher swap rates and fresh NZD outperformance by year end and into 2018.”