New Zealand now has a caretaker Government while political parties begin negotiations to form a Government following the weekend’s General Election. In the last three elections the result was clear cut – all that National had to do was negotiate with ACT and United Future – one-man parties with little negotiating power. 23 September 2017 delivered a result that political watchers from the 1990s will know well – NZ First is the monarch-maker.

Voters delivered support across the political spectrum. National secured 46 percent, Labour 35.8 percent, the Greens 5.9 percent (making the Labour-Green bloc of 41.7 percent) and NZ First in pole position with 7.5 percent.

NZ First leader Rt Hon Winston Peters has indicated he will take his time to negotiate. The final count is two weeks away. Before the Election he revealed that, if in a position to form a Government, he will announce his intentions by or on 12 October. This date corresponds with the return of writs for the election when the final results are officially returned to the Governor General.

Key results

  • National’s vote was down just one percent on its 2014 poll and after three terms in office is a significant achievement for the party and in particular leader Rt Hon Bill English. But the Party failed to use the 2017 election to rejuvenate its MPs – there will be few new faces in the National caucus. If in Government National will seek to remedy this by elevating young MPs to cabinet and exiting some under-performing long-termers.
  • Labour grew its vote by 12 percent and now has 13 new MPs – it is reinvigorated with some outstanding talent joining its ranks. Labour has its mojo back.
  • NZ First lost Northland but holds the balance of power.
  • The Green Party survived but has to decide whether it will remain an environment and social justice party or an environment party. 
  • The Māori Party is destroyed.
  • ACT may well have enjoyed its last accommodation in Epsom.
  • The Opportunities Party has laid the foundations for the future (if its funder wants to keep up the payments).

Future Government?

  • There is a range of options for a future Government:
  • National-NZ First Government – this is the most likely.
  • National minority Government with NZ First support on confidence and supply only, otherwise negotiated vote-by-vote.
  • Labour-Green minority Government with NZ First support on confidence and supply only, otherwise negotiated vote-by-vote.
  • Labour-Green-NZ First Government.

As indicated a National-NZ First Government is the most likely. While NZ First has greater policy alignment with Labour, the ‘commonsense’ and pragmatic Winston Peters will be attracted to a cleaner and less complex coalition arrangement. But it’s complicated. There is negative history and unfinished business with National and there is the question of who leaked Mr Peters’ superannuation details. On the other hand, Winston Peters is not fond of the Greens and may have difficulty with the youth of Labour’s new leader.

One thing we know – don’t assume anything and expect the unexpected.

Winston Peters is a masterful negotiator, he thinks outside the box and this is likely to be his last term in Parliament. The biggest issue for him is the survival of his Party when he retires.

And once a Government is formed, past experience tells us it will not be smooth. Policy differences will flare. A Government formed in coalition with NZ First or with a confidence and supply agreement is by nature testy, slow and unstable. There is the potential for a Government involving NZ First not to run the full three-year term.

Special votes

Special votes will change the share of party vote declared for each party on Election night. The Electoral Commission is predicting 15 percent of total votes to be specials (384,072) and aims to have them counted, with the final result delivered at 2pm on Saturday 7 October. In the past specials have favoured the centre left. In 2014 the Greens gained a seat, National lost a seat and Labour gained one percent party support. A similar result is expected this election, with National possibly losing one or two seats, with the Greens and Labour strengthening their position slightly. Depending on where the specials fall, they could put Labour in a stronger negotiating position.

Déjà vu?

Voters are familiar with and weary of Winston Peters being placed in the position of king or queen-maker.

In the country’s first experience of MMP in 1996 Mr Peters conducted parallel negotiations with Labour and National for seven weeks before taking a deal with National. This made him Deputy Prime Minister along with policy concessions which included free health care for under five year olds and a Goldcard for superannuitants. In 2005 NZ First negotiated a supply and confidence agreement with Labour which made Mr Peters Foreign Affairs Minister outside cabinet.

Coalition negotiations

Past coalition negotiations suggest NZ First will cherry pick policy concessions and maximise cabinet positions for its MPs. Rt Hon Winston Peters has been dismissive when asked if he seeks a reprise of his role as Deputy Prime Minister but this cannot be ruled out.

Broadly, Mr Peters is an economic interventionist and a nationalist opposing foreign ownership with a “New Zealand for New Zealanders” mantra. But he is socially conservative. Throughout the Election campaign a list of NZ First ‘negotiating bottom-lines’ grew. In reality the list is a construct. As we have seen in the past the NZ First leader will look for high profile deliverables in return for supporting policies he agrees with.

As indicated there is significant policy alignment between New Zealand First and Labour and major policy gaps between New Zealand First and National.

Cutting current net immigration from 70,000 per year to 10,000 per year is NZ First policy, which secured considerable voter support. National wants to retain these levels. Labour’s policy calls for a 20-25,000 per year cut although the Party’s new leader is known to dislike this policy. Given immigration is so tied into economic growth and that many key industries depend on immigrant labour, immigration settings will be an acute source of tension in negotiations.

Monetary policy
NZ First wants a change to the Reserve Bank Act to broaden the bank's focus beyond inflation to include economic growth, employment and the value of the currency. National may agree to a review of the Act.

Asset sales
NZ First wants state asset sales ruled out. This would sit comfortably with Labour. National has mooted the sale of Landcorp farms but would easily back off this, with their asset sales agenda having been largely met during previous terms

Foreign Ownership
NZ First has policies opposing foreign ownership while supporting foreign investment “provided it is in the interests of New Zealanders and not the private interests of foreign shareholders.” The Election campaign saw little of this rhetoric and this policy position is unlikely to be pursued in negotiations.

NZ First policy calls for a 20 percent tax rate for export businesses. National could offer to review this while Labour could include it in a tax review.

Climate change
Labour, the Greens and NZ First take a more urgent approach to climate change. They want to include agriculture in the greenhouse emissions approach. The issue here is how much the policy matters to NZ First.

Resource Management
Labour, the Greens and NZ First are more aligned on the RMA and together signed up to a critical minorities report on the Resource Management Amendment Bill.

Regional development
Pre-Election, a rail line to Northland could have been the ‘big’ negotiation deliverable for Mr Peters. But with Northland voters rejecting him as their local MP it is not clear whether this policy will remain his primary focus. What we do know is that NZ First support comes from the regions and the Party leader can be expected to support regional economic initiatives. This is inline with National policy. But NZ First’s policy to return GST revenues from tourism to the regions is not.

NZ First is opposed to Labour’s water royalty on farmers but at the same time supports Labour’s approach to water bottles.

NZ First wants a referendum on the Māori seats. While Labour has ruled this out National could find a way to accommodate a poll.

Charter schools
Labour is opposed to charter schools in principle (Deputy Kelvin Davis is committed to two) and National only signed up to them as part of its negotiation with ACT. NZ First is opposed to them. It’s unlikely any more charter schools will be approved.

Pike River
Labour and NZ First are both committed to re-entering the mine. National is opposed.

Labour and NZ First are in sync on keeping the retirement age at 65 but National has long term plans to lift it to 67.

Other NZ First policies
Other policies New Zealand First may introduce into Government-forming negotiations include removing GST on food, making Kiwibank the Government's official bank (rather than Westpac), introducing a Government-owned 'Kiwifund' option for Kiwisavers and giving preference for majority-owned New Zealand firms in government procurement (centrally and locally).

Off the shelf one-offs
In the past NZ First has shown a skill to negotiate one-off policies, which are easy for a majority partner to sign up to. The GoldCard for superannuitants is an example of this. Expect the card to be revamped with added benefits including three free doctors' visits.

Business impact

NZ First will secure concessions – and they won’t be inline with Labour or National policy. This is the nature of MMP and the negotiations required to form a Government.

There is the potential for some aspects of a coalition agreement to impact on business – most notably a cut to immigration. But policy concessions may also deliver opportunity particularly in the area of regional development and procurement.



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