The New Zealand general election was held on July 27. Contrary to early predictions, the incumbent Labour government did not win enough seats in the House of Representatives to have a clear majority. Labour (52 seats) and the Progressive Coalition (two seats) won 54 seats between them in the 120 seat House and opted to form a minority government, relying on a formal agreement with United Future New Zealand (eight seats) to support them on matters of confidence and supply. Labour leader Helen Clark will enter her second three-year term as prime minister and the majority of cabinet ministers will retain their pre-election portfolios. Despite Labour winning only a minority of seats in the House, it is likely that the government will continue with its pre-election monetary, banking and securities markets and institutions policy.
The snap election on July 27, four months early, was announced by Helen Clark in June. The reason given for the early election was that the split in Labour's then coalition partner, the Alliance, had created difficulties within the government. Perhaps not coincidentally, the election was also called at a time when Labour was recording over 50% support in the opinion polls on the back of a strong economy. Labour made it clear that it was aiming for a majority under New Zealand's relatively new mixed member proportional representation electoral system.
Labour won 52 of the 120 seats in House and its coalition partner, the Progressive Coalition (one faction of the former Alliance Party) won a further two. The Greens, which backed Labour in the previous parliament won nine seats and the centrist United Future unexpectedly took eight. Either of these minor parties were potential coalition partners for Labour. However, during the election campaign Labour and the Greens fell out over genetic engineering when the Greens insisted that they would not support the government if Labour ended the moratorium on genetic engineering. Instead of entering into a formal coalition with United Future, Labour opted to form a minority government relying on United Future for support on confidence and supply.
The general consensus is that the new minority government will be stable and should not adversely affect business and the economy. As one of Labour's key strategies for growth, Dr Michael Cullen, deputy prime minister and minister of finance, has pledged to continue Labour's stable approach to public finances and monetary policy.
In cabinet, Labour member of parliament Leanne Dalziel replaces Paul Swain as minister of commerce but it is expected that the government's securities markets, banking and commercial policies will continue to be implemented as indicated before the election. Significant pieces of legislation affecting the banking and commercial sectors expected to be passed in the next six months include the Securities Markets and Institutions Bill, the Electronic Transactions Bill and the Consumer Credit Bill.
Although Labour now has an obligation to consult United Future on policy matters, the general direction of banking and commercial policy in New Zealand is unlikely to change.
James Aitken and Hannah McKechnie