We have been fairly relaxed, counting ourselves lucky for our stable political landscape. Many expected next year to pass without fanfare, with the incumbent government set to make it four in a row.
Approval ratings have been high and there hasn’t been anyone on the other side with enough credibility to mount a genuine challenge.
Not so much now. Without John Key, the 2017 election has been thrown wide open. We can now add ourselves to the list of hard-to-predict political events, alongside elections in Germany, France and possibly Italy.
We’re not in the same precarious boat as any of those countries.
Our unemployment rate is half that of France, our banks are healthy unlike those in Italy, and we don’t have the unenviable task of holding a dysfunctional region together like Germany does.
However, the potential for political change always brings uncertainty, and we should expect a dose of that to hit our shores next year. Make no mistake, it’s going to be close.
National won 47 per cent of the party vote at the last two elections, well above the best that Labour achieved under Helen Clark.
The problem is, John Key was undoubtedly worth a few per cent, so without him National is heading for the low to mid-40s. That would still be a strong result, but not enough to govern with its current partners.
Unless Act can lift its game in a big way, National will have to consider the prospect of working with Winston Peters, which would inevitably mean conceding to some of his demands. That could make for some uncomfortable negotiations as the other team, desperate to get into power, may be willing to give away more.
A change of government wouldn’t derail the economy. New Zealand heads into 2017 in very good shape. Economic growth is strong, unemployment is at an eight-year low, and the dairy payout will be the highest in three years.
Despite all that, political nervousness could dent business confidence, putting hiring and spending decisions on hold. It will be a headwind for the sharemarket, limiting returns and creating a bit more volatility.
The biggest area of policy difference is housing. National can’t be blamed for such an overvalued market, but it has definitely dropped the ball for letting it get out of hand. The housing market will be firmly in the firing line from opposition parties, and possibly even the new leadership of the current regime.
That wouldn’t be a bad thing. A housing slowdown would knock economic activity in the short-term, but it would swing the balance toward investment in more productive sectors.
We might also see some moves on the retirement age, or toward compulsory KiwiSaver. Those would be sensible, long-term moves that are positive for our capital markets.
This article was published in The New Zealand Herald on 14th December 2016.