Nov. 28 (Bloomberg) -- New Zealand Prime Minister John Key began forming a government after his National party gained its best election result in 60 years, securing support from two smaller parties to ensure a majority in parliament.
Key met with senior ministers yesterday and plans talks today with the ACT and United Future parties, which backed him in the last parliament and have pledged to do so again. With 60 seats in the 121-member legislature, Key will be able to govern with support from the two parties, which both have one seat.
“He will be able to put through most of his economic agenda, I would think, without too much difficulty,” Raymond Miller, an associate professor at the University of Auckland, said in a telephone interview. “The challenge is to remain in touch with public opinion and not to exceed his powers, given the relatively small working majority he’s going to have.”
National won 48 percent of votes, the most it has taken since 1951, compared with 27 percent for the main opposition Labour Party, according to the Electoral Commission. In his second term, the 50-year-old multimillionaire and former foreign exchange head at Merrill Lynch & Co. must steer New Zealand’s recovery from its worst natural disaster in 80 years amid global economic turmoil.
“It’s my intention over the next three years to run a government that’s very much along the lines and similar to the previous government that we ran in 2008 to 2011,” Key told reporters in Auckland yesterday. “I expect it to be a balanced government, I expect it to be moderate.”
Key triumphed over Labour leader Phil Goff, 58, after managing the economy through a global financial crisis and a Feb. 22 earthquake that devastated the business district of the second-largest city, Christchurch, killing 181 people.
He has pledged to sell part of the government’s stake in four energy companies and the national airline to help erase a NZ$18.4 billion ($13.6 billion) budget deficit.
“We have got the result that markets were largely expecting,” said Craig Brown, a senior investment analyst at Auckland-based fund manager OnePath. “He can actually hit the ground running and continue with the policies and approach he was taking before, which I think is important given the volatile financial markets that we’re operating in.”
Support for National rose from 45 percent in the last election, when the party gained 58 seats.
Key’s opinion poll support as preferred prime minister has exceeded 50 percent all year even as economic growth slowed and New Zealand lost its top credit grades at Standard & Poor’s and Fitch Ratings in September, with both citing concern that government and household debt was too high.
Still, New Zealand stocks have outperformed in the region, with the NZX 50 Index down 2.7 percent this year compared with the MSCI Asia Pacific Index’s 19 percent drop. The benchmark gained 0.2 percent at the 5 p.m. market close in Wellington, with the New Zealand dollar rising as much as 2 percent to 75.54 U.S. cents, the strongest in a week.
“The market liked the clean result and the fact that we’re going to have a stable government for the next three years,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The kiwi has managed to do quite well today.”
The Christchurch earthquake and a temblor in September last year that didn’t cause any fatalities damped consumer spending. New Zealand faces a NZ$20 billion reconstruction bill.
While the Treasury Department forecasts annual average growth of 2.3 percent in the year ending in March, the central bank has said the country may not be immune to a worsening of the European debt crisis.
“Anything happening in New Zealand now pales into insignificance in terms of what’s happening internationally,” Sam Stubbs, chief executive officer of Tower Ltd’s investment unit, said in an interview.
Pre-election polls showed Key was four times more popular than Goff, with a reputation for financial management and ability to connect with voters. He was photographed drinking beer while cooking meat on a barbeque with Prince William in January last year, when the U.K. royal visited Wellington.
Rugby World Cup
At the opening game of the Rugby World Cup on Sept. 9 in Auckland, he sang the anthem alongside the national All Blacks team on the field, and was on the podium to shake the hand of captain Richie McCaw after the team won the final on Oct. 23.
Support for Labour slumped from 34 percent in the 2008 election as voters rejected Goff’s plans to raise taxes on capital gains and high income earners. Labour, which secured 34 seats, opposes the proposed asset sales and pledged to remove sales tax on fresh fruit and vegetables to ease the cost of living for low income families.
“It wasn’t our time this time,” Goff said in televised comments after conceding defeat. “We can be proud of the fact we took some of the tough decisions that others have shied away from in the knowledge that they might not be immediately popular.”
Goff told reporters he is reviewing his leadership of the party and will discuss that with colleagues this week. Labour’s vote dropped to the lowest since 1928 as the rival Green party surged to 10.6 percent from 6.7 percent three years ago to take 13 seats in parliament, according to Electoral Commission data.
The New Zealand First party, formed by veteran politician Winston Peters after his break with National, won eight seats from none in 2008. Key has ruled out working with Peters.
ACT candidate John Banks won the Epsom constituency in Auckland and will be his party’s only parliamentarian, as it got 1.1 percent of the national vote. United Future leader Peter Dunne, who was revenue minister in Key’s previous government, retained the Ohariu constituency and is also on his own in parliament.
Key also said he plans talks with the Maori party, which won three seats and has opposed the asset sales program. The party may support the plan if Maori tribes are able to be “major” investors in the stakes, co-leader Tariana Turia said on Television New Zealand yesterday.
The Electoral Commission estimated that 73.8 percent of enrolled voters participated in the Nov. 26 ballot. That would be the lowest turnout since 1887, according to the agency’s website.
Under the nation’s mixed member proportional voting system, New Zealanders cast two ballots, one for a party and the other for a candidate in their constituency. There are 63 general constituencies and seven special constituencies reserved for native Maori voters.
Parties need to garner five percent of the vote or win a constituency to get into parliament.
In a non-binding referendum alongside the ballot, voters were asked to retain or change the voting system. Fifty-four percent said they want to keep the so-called MMP system, while 43 percent opted to change it, according to votes submitted before polling day tallied on the Electoral Commission website. The commission aims to publish official results by Dec. 10.
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