New Zealand: PM J.Ardern faces a tough new term – UOB

Lee Sue Ann, Economist at UOB Group, assesses the recent win of PM Jacinda Ardern at the October 17 national elections.

Key Quotes

“New Zealand’s governing Labour Party, led by incumbent Prime Minister (PM) Jacinda Ardern won the country’s general election on Saturday (17 October), in an unprecedented landside over the opposition National Party, led by Judith Collins. It was the first time a New Zealand political party has secured a majority government under the mixed-member proportional representation (MMP) voting system introduced since 1996.”

“But with 100% of ballots counted for the preliminary results, the Labour Party has achieved the highest percentage of the popular vote (49.1%) for any political party since the National Party won 54.0% in 1951. This election was the worst defeat for the National Party, which won nearly 27% of the vote, down on last election’s 44% and the party worst defeat since 2002.”

“Ardern's re-election was buoyed by her "go hard and go early" approach to handling the COVID-19 pandemic, which has helped the country avoid the devastating outbreaks seen elsewhere.”

“Still, Ardern looks set to face another tough term ahead, as she attempts to address issues such as inequality, child poverty, climate change and the housing market; whilst steering the economy from the COVID-19 fallout. Regardless of the election result, the New Zealand economic outlook remains bleak. GDP plunged 12.2% q/q in 2Q20, following a revised 1.4% q/q fall in 1Q20 (-1.6% q/q previously). This marks the biggest three-month contraction since quarterly records began in 1977.”

“Uncertainties surrounding border closures look set to keep business investment and household spending subdued. Whilst a substantial fiscal response has been in place, the weakening global economic outlook is likely to weigh on goods exports, and unemployment is expected to rise following the expiry of wage subsidies paid by the government. The bill for government measures has already resulted in government debt rising from below 20% of GDP earlier in the year to 27.6% in June, and it is projected to rise to 53.6% over the coming four years.”