Election fails to ruffle the markets

New Zealand's financial markets are expected to respond to next Saturday's election with a big yawn, according to commentators. And neither are the markets bracing themselves for an interest rate rise from the Reserve Bank as it delivers its quarterly monetary policy statement next Thursday.

Reserve Bank governor, Dr Alan Bollard, is expected to give a severe warning about inflation, which is heading towards 3.5 per cent thanks to fast rising petrol prices adding around $500 a year to people's household spending.

Neither of the two main political parties are expected to give Dr Bollard or the financial markets cause for worry although a National government would limit the bank's powers to intervene in the currency market.

It is more likely to be outside influences such as fuel prices and exchange rate shifts concerning the bank governor, said analysts.

UBS economist, Robin Clements, said he had looked at three possible scenarios for the economy: if the National Party got in, it would be positive, if the Labour government stayed in, it would be neutral while the Green Party becoming a major influence would be rated as a negative.

The markets see little difference in the two main parties' policies. "The two parties are not talking about a radical shift in policy that will affect the economy in the next year," said ASB's chief economist, Anthony Byett.

When asked why he thought the business community seemed to like National finance spokesman, John Key, he said, "He hasn't done anything yet."

- HERALD ON SUNDAY