Jacinda Ardern Takes Power in New Zealand in Generational Shift

Updated on
  • NZ First leader Peters backs Labour, ousting National Party
  • Kiwi dollar falls on concern Labour policies may slow growth

Jacinda Ardern

Photographer: Hannah Peters/Getty Images

Jacinda Ardern will become New Zealand’s youngest prime minister in more than 150 years after winning the backing of a minor nationalist party to form a coalition government.

After 12 days of negotiations, New Zealand First leader Winston Peters Thursday threw his support behind the 37-year-old, saying an economic slowdown was looming and that capitalism needed to regain its “human face.”

“It is an absolute honor and a privilege to have the ability to form a government for all New Zealanders,” Ardern told reporters. She said the talks with New Zealand First “have formed a solid foundation on which we can build a coalition government.”

The announcement caps a stunning rise for Ardern, who became Labour leader less than two months before the Sept. 23 election and will now take it into office for the first time in nine years. The local currency dropped on concern the new government’s policies, such as a potential cut in immigration, may curb economic growth.

‘Political Risks’

“In terms of political risks, we’ve gone from zero-out-of-10 to four-or-five-out-of-10,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. “Given that Peters is on the record for slashing immigration, reducing offshore ownership, changing the RBNZ’s mandate, until we get clarity on all of those policies, we’re going to have a lot of jitters and political and economic risk.”

Read more: A roundup of analyst reaction to the election outcome

The local currency fell as much as 1.6 percent. It traded at 70.45 U.S. cents as of 9:02 p.m. in Wellington.

Ardern’s rise has drawn comparisons with the generational change in leadership seen in countries like Canada and France. Even though New Zealand’s economy is growing strongly, she has argued that too many people have been left behind during nine years of conservative government and pledged to tackle social issues such as child poverty and housing affordability.

Labour and New Zealand First both campaigned on reducing immigration, increasing home construction and reforming the central bank. Ardern said New Zealand First will hold four cabinet positions, which she expects to confirm next week along with details of final policies. The coalition agreement will also be signed early next week, she said.

With the additional support of Labour’s ally the Green Party, the new government will control 63 of the 120 seats in parliament. The Greens will have a supply and confidence agreement with Labour, which is expected to be concluded Friday, Ardern said. The Greens have been offered ministerial positions although it isn’t clear if they are inside cabinet.

‘Unusual Result’

The ruling National Party, led by Bill English, won 56 seats but was forced to seek the backing of New Zealand First when other smaller parties it has relied on to govern in the past nine years didn’t make it back into parliament.

New Zealand’s proportional representation electoral system has favored coalitions since it was introduced in 1996, but today’s decision is the first time the party with the most votes hasn’t led the government. Labour got 36.9 percent of the vote while National, which was seeking a rare fourth consecutive term, secured 44.4 percent.

“It’s an unusual result,” English told reporters. “There probably hasn’t been a party anywhere in the world that got 44 percent of the vote and didn’t win the election. But we all know the rules.”

National would be strong opposition and hold the new government to account, English said. He declined to say whether he will remain the party’s leader, saying that was something to be considered in coming weeks.

During its nine years in office, National returned the budget to surplus and helped to make the economy one of the fastest growing in the developed world. 

Friend or Foe?

However, Peters said the negotiations to form a government took place against a background of changing economic circumstances “which we cannot ignore,” and that the first signs of a slowdown in the New Zealand economy are already there. Economic growth slowed to 2.5 percent in the year through June, from 3.4 percent a year earlier.

“Far too many New Zealanders have come to view today’s capitalism, not as their friend but as their foe,” he said. “And they are not all wrong. That is why we believe capitalism must regain its human face.”

Labour has proposed a Fed-style dual mandate for the central bank of full employment and price stability, and a committee decision-making system including external members.

Peters said there will be changes to the Reserve Bank Act and implied they would be in line with Labour’s policy, saying he didn’t secure a Singapore-style monetary policy that he favors.

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