NZ new Government: A step to the left - Westpac

Labour and New Zealand First have formed a minority coalition government, with a confidence and supply agreement from the Greens, notes Dominick Stephens, Chief Economist at Westpac.

Key Quotes

“Policy details are thin on the ground, but the new Government is likely to be more interventionist in the economy, tougher on foreign investment, and more liberal on social spending than the last Government.”

“Policy details so far suggest some downside risk to our GDP forecast for 2018 and upside risk to our GDP forecasts for 2019 and 2020, but this could change as new information comes to light.”

“The impact that the new Government has on the economy, in both the short run and the long run, will depend on whether it addresses the distortions in New Zealand’s tax system that favour property and have skewed the economy.”

“Proposed changes to the RBNZ Act seem unlikely to have a large effect on the conduct of monetary policy.”