BGA Senior Adviser Penny Tucker wrote a client update on New Zealand’s November 7 general election and what the possible outcomes could mean for businesses.

Context

  • New Zealand is facing what commentators are calling an inflection election. Voters face two distinct paths in the November 7 general election, each with trade-offs. The center-left promises immediate relief from a sustained cost-of-living crisis driven by recent economic settings, a systemic productivity slump and geopolitical volatility. It would require substantial borrowing on top of already rising debt, and some economists have warned of an “Argentina scenario.” For its part, the center-right offers incremental improvement through cost cutting, more business- and innovation-friendly policies and public sector reform. Relief from high costs would be slower, the gap between rich and poor would continue to widen and restructuring the public sector would carry costs for public sector workers.
  • The election is too close to call: polls show a nearly even split under various coalition scenarios, and some electorates may be decided by a few hundred votes or less. This reflects New Zealand’s diverse and mature democracy, but it also points to a prolonged period of post-election negotiations. New Zealand uses a mixed-member proportional (MMP) voting system, in which the makeup of Parliament reflects the national popular vote. This typically requires coalitions and agreements between parties and can produce unexpected partnerships.

Significance

  • A renewed center-right government would enter office with the advantage of established ministerial relationships, an existing policy program and considerable legislative groundwork. Its immediate task would be to translate its election commitments into a refreshed coalition agreement and a program for the first 100 days.
  • A change of government would produce a more substantial reset of policy direction. A Labour-led administration, potentially dependent on the Greens and Te Pāti Māori, would face the immediate challenge of negotiating a coalition agreement while establishing which existing government initiatives should continue, be amended or be abandoned.

Implications

  • For businesses, the most consequential immediate issue may be the degree of policy certainty emerging from coalition negotiations rather than the election result itself.
  • A center-left administration would bring a different mix of opportunities and obligations. Health care, housing, renewable energy and publicly supported infrastructure could benefit from increased policy attention. Conversely, businesses would need to assess potential changes to taxation, employment law, environmental regulation and investment incentives. Labour’s proposed small-business tax concessions would also be relevant.

We will continue to keep you updated on developments in New Zealand as they occur. If you have any comments or questions, please contact BGA Senior Adviser Penny Tucker at ptucker@bowergroupasia.com.

Best regards,
BGA New Zealand Team

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