Kiwi drops near five-month low as NZ First backs Labour-led coalition

His September 23 jubilation now a long way away, Bill English gives a concession speech at Parliament his evening (photo: Rob Hosking)

The New Zealand dollar fell near a five-month low after NZ First leader Winston Peters said he would support a Labour-led government, saying the nation voted for change, and that capitalism needs to regain its "human face."

The kiwi dropped as low as 70.37USc, the lowest since May 30, and was trading at 70.45USc  as at 8.30pm from 70.94USc  before MrPeters started his briefing. The local currency started declining amid reports the incumbent National Party baulked at NZ First's demands for ministerial posts.

After an intense round of negotiations in a tightly contested election, Mr Peters today said NZ First entered into a coalition agreement with Labour with the Green Party signing up to a confidence and supply agreement and sitting outside cabinet. Labour leader Jacinda Ardern said in a press conference this evening that NZ First will get four cabinet positions and one undersecretary position. The Greens will have ministerial portfolios, she said.

Ms Ardern intends to wrap up the final areas of agreement in the next 24 hours and said Labour will hold a caucus meeting to elect cabinet positions tomorrow. She will confirm and announce ministerial portfolios later this week and sign and release agreements with NZ First and the Green Party early next week.

The prime minister-elect said the two parties have had "a long conversation about what we wanted to achieve together" in regards to changing the Reserve Bank Act and it is a priority but the details will be released in the agreements next week. Ms Ardern said there won't be a change before the next monetary policy statement on November 9, and wouldn't confirm there would be changes before the new governor is chosen.

Earlier, Peters said he expected the Reserve Bank Act to change and while he pushed for a Singapore-style model, he said he didn't get that concession. On immigration, he said he anticipated there were be "fewer people coming here". He also expected 10,000 affordable homes to be built every year to help boost ownership for first-home buyers.

Ardern said the party was "sticking with its policy on migration", which was to reduce the numbers of immigrants, and that the government would prioritise a ban on foreign property buying of significant assets and existing housing.

Peters said his party believed an economic slowdown is "already here" and those risks fed into the decision made. He is still considering the deputy prime ministership, but didn't elaborate on ministerial posts, other than to say NZ First didn't secure the finance portfolio.

"Far too many New Zealanders have come to view today's capitalism, not as their friend, but as their foe. And they are not all wrong," Peters said. "That is why we believe that capitalism must regain its responsible, its human, face. That perception has influenced our negotiations."

Outgoing prime minister Bill English paid tribute to his opponent saying Ms Ardern did a remarkable job in turning around the party after such a short time in the role, and said he hoped the incoming government took the opportunity provided by the "pretty good shape" of the economy.

New Zealand's financial markets have been in a state of flux since the Sept. 23 election which left NZ First holding the balance of power and once special votes were counted the gap between National and the Labour-Green bloc got even tighter.

James Lindsay, a senior portfolio manager at Nikko Asset Management, said the new government could lead to a sell-off in New Zealand equities: "It will come as a bit of a surprise to offshore people who've seen the New Zealand story as pretty solid." Mr Lindsay said he will be focused on policy announcements as they are made.

The benchmark S&P/NZX 50 index closed at a record 8124.07 today having already gained 18%  since the start of the year. That's setting it up for a fifth year of double-digit growth if it can maintain that strength until the end of December.

Before today's announcement traders had said a National-led administration would probably stoke a knee-jerk jump in the currency whereas a Labour-led government would push it lower.

Westpac Banking Corp senior economist Michael Gordon said while no policy was formally announced at Peters' briefing, "his decision was based on which party would best protect the economy during what he sees as a looming downturn" and "infrastructure, regional development and social housing are likely to feature."

(BusinessDesk)


18 · Got a question about this story? Leave it in Comments & Questions below.

This article is tagged with the following keywords. Find out more about MyNBR Tags

Post Comment

18 Comments & Questions

Commenter icon key: Subscriber Verified

The story of MMP. Where unpopular losers become winners who instantly initiate the sounding of the death knell on the NZ economy!

Let's tax you!!!

Reply
Share
  • 0
  • 0

Have you a better plan to pay for Country infrastructure, health, education and justice? Not to mention Super, which is the biggest cost.

Suggest you move to Africa, because without collecting sufficient taxes to deliver these, we would be heading in that direction.

Reply
Share
  • 0
  • 0

Oh dear Richard. F for fail!

Reply
Share
  • 0
  • 0

Overhaul of Reserve Bank Act! There is no crisis like a monetary crisis and Peters just welcomed one into our house ... talk about playing with matches in a crowded theater.

Kiwi is heading much, much lower on this news, everything is up for grabs now. Quelle surprise!

Reply
Share
  • 0
  • 0

But money isn't everything - is it? It is people, it is people, it is people. Without people what would you have?

Reply
Share
  • 0
  • 0

A lower currency is a good thing. It helps exporters, making the goods more competitive overseas.

Exports are the way to build wealth, rather than the housing ponzi scheme, which only benefitted the banksters. No surprise Jonkey got a plum job because of it, when he was their plant all along.

Poor old Bill got the hospital pass again, but its not going to be an easy ride for the incoming government has the first signs of a deteriorating housing market are already evident in Auckland.

Overseas holidays wont be so more, but thats a good think also. People will be spending there money locally.

But the best think about this is the ignorance of National will be gone very shortly, as a new broom will sweep clean.

Reply
Share
  • 0
  • 3

Mercantilist bull****. Exports are merely the cost of our imports which are an important element in our quality of life.

The cost of living just got a lot more expensive for those who voted in this government: higher fuel costs, food costs (esp meat), forget the smartphones, you can't afford them, forget changing over the car.

Although I'll probably get higher interest rates out of it, so will benefit, finally. Oh, add higher mortgage costs to my list above.

Reply
Share
  • 0
  • 0

Good summary of the road ahead Mark. Yes , this one will hurt most those who voted for it.
Oh and you missed out the price of milk. Heh!

Reply
Share
  • 0
  • 0

Might I suggest increasing the minimum wage could go someway to paying for the increased costs of food. Some regulation on the duopoly would help also.

And reduced consumption of milk might be a good thing, as long as we clean up our waterways.

The focus should be to increase exports and decrease imports, and because we depend more on exports rather than imports a lower exchange rate will facilitate this.

Most imports are junk retail items anyway. Who needs a smartphone anyway, and we have more than enough electricity to reduce the oil imports.

And Mark maybe you should put you money into something more productive, like a business that maunfactures locally.

Walk the talk, rather than being a spectator!

Reply
Share
  • 0
  • 0

I stopped at minimum wage. Legislating minimum wages simply denies jobs to those unskilled who are the most vulnerable. Best way to lose their jobs to automation/AI.

Government intervention in our lives is the answer to nothing. Please write that on a whiteboard 50,000 times.

As for putting my efforts into a firm that produces locally, what are you even talking about?

Reply
Share
  • 0
  • 0

Get rid of the emissions tax scheme. That will reduce, significantly, costs of production at every link and layer.

Reply
Share
  • 0
  • 0

Mugabe will be proud of Peters devalued currency as we line up for bread.

Peters held the country to ransome just like Mugabe as he took power and snuffed out the political will of the people.

Reply
Share
  • 0
  • 0

Welcome to the Banana Republic of NZ

Reply
Share
  • 0
  • 0

Those people in the photo all look as though they just dodged a bullet :-)

Reply
Share
  • 0
  • 0

Great,now exporters can make some real money.

Reply
Share
  • 0
  • 0

And exporters will pay more for fuel and other imports. Inflation "here we come".
Also people, please remember, the Governments "plan" is ALWAYS plan B.
Plan A is always, "Play the game in front of you".
Nothing over the past two weeks, or ever, will change that.

Reply
Share
  • 0
  • 0

Unfortunately you won’t have a Labour market to support it Gary... they’ll be all on the unemployment benefit with Labour and to old to work with Winston.... not to mention the slow up in imagration, the migrants are the only ones that wish to work hard now.

Reply
Share
  • 0
  • 0

Welcome the Socialist State of New Zealand
Goodbye the Capitalist State of New Zealand
God Help us all.

Reply
Share
  • 0
  • 0

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.6890 0.0002 0.03%
AUD 0.9037 0.0002 0.02%
EUR 0.5812 -0.0002 -0.03%
GBP 0.5180 0.0003 0.06%
HKD 5.3812 0.0015 0.03%
JPY 76.7030 0.0820 0.11%

Commods

Commodity Price Change Time
Gold Index 1290.4 -1.540 2017-11-23T00:
Oil Brent 63.3 0.770 2017-11-22T00:
Oil Nymex 58.0 1.170 2017-11-22T00:
Silver Index 17.1 0.150 2017-11-22T00:

Indices

Symbol Open High Last %
NASDAQ 6869.5 6874.2 6862.5 0.07%
DJI 23597.2 23605.8 23590.8 -0.27%