Investors taking a wait-and-see stance after Labour leader Little steps down

Tuesday 1st August 2017

Investors will be keeping a close eye on the next opinion polls after news that Jacinda Ardern has replaced Andrew Little as the new leader of the opposition Labour Party.

Earlier Tuesday, Little announced he was stepping down after the latest poll results ahead of the Sept. 23 election. "As leader, I must take responsibility for these results. I do take responsibility and believe that Labour must have an opportunity to perform better under new leadership through to the election", he said.

The two most influential political polls were published Sunday and Monday and both showed support for the Labour Party falling to 24 percent, 1 percentage point below its 2014 election party vote. The Newshub-Reid Research poll broadcast Monday evening, showed National down 2.2 points at 45 percent, while the TVNZ Colmar-Brunton poll broadcast Sunday evening showed National steady at 47 percent.

The election is expected to be tight and while National is ahead, it may have to rely on opposition New Zealand First, led by Winston Peters, to form a government. Labour, which has an agreement with the Green Party, would also have to rely on Peters if they were able to garner enough votes. On Tuesday the Green Party said it is committed to working with Labour to change the government this September.

"I am really unsure how it will play out from here," said AMP Capital New Zealand managing director Grant Hassell. Overall, "it does look a little chaotic this close to an election," he said. He noted, however, there was no market reaction to Little's announcement. He said a key factor will be whether New Zealand First gains support.

Matthew Goodson, managing director at Salt Funds Management in Auckland, said the next polls will be key to gauging the impact and what "permutations and combinations we can see", in terms of which parties can form a government.

He said the market has paid little attention to the looming election. However, "if it does pay attention, it will pay attention in a hurry." He said the best outcome for markets would be a continuation of the current National-led coalition. He also noted that there has been experience in the past of New Zealand First being part of coalition where policy has continued on a relatively steady path.

However, if the polls point to a more unexpected combination of a Labour - NZ First - Green Party coalition then markets would start to get nervous, he said.

(BusinessDesk)

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