He said a lot of people will have been surprised by the level of support for National in Auckland, particularly in the traditional Labour areas. “I think that is largely to do with the excessive restrictions that were placed on Auckland through the pandemic. There will be a lot of businesspeople in Auckland who are still holding a pretty severe grudge against Labour and the Greens because of that.”
Lister said he wouldn’t expect a dramatic bounce from the New Zealand sharemarket today but there would be a positive mood.
“The market will be slightly cautious because we know we are seeing a change in government but we don’t have complete clarity around what that looks like and there is still a decent chance NZ First will be in the mix.”
He said people were also aware that a change of government wouldn’t deal with some of the challenges New Zealand was immediately facing.
“There’s lots of international uncertainty. We have got an inflation report coming out this week - it’s not going to give us the silver bullet we are looking for in terms of the cost of living coming down,” Lister said.
“Chris Luxon still has a challenge on his hands - very much so - our fiscal position is not the greatest. It won’t be a walk in the park.”
Lister said a National-Act Government would be good for the housing market and those in the real estate sector, and businesses linked to the sector could get a little bit of a boost.
Shane Solly, portfolio manager at Harbour Asset Management, said he also expected the electricity generators to get a boost from a change in government with the Lake Onslow development less likely to go ahead.
“Many people in the industry were quite wary of the unintended consequences of that.”
Solly said proposed changes to taxation would also be favourable to the residential property market, which could boost the retirement village and aged care sector.
That could also flow through into more properties being built, which was potentially beneficial for Fletcher Building.
“It might provide a little ray of sunshine in what has been a pretty difficult time for Fletchers,” Solly said.
But some businesses could find things tough, particularly real estate players that had large office portfolios in Wellington. “Clearly there is going to be less demand, less growth there.
“The market is going to see this as positive, history shows us you tend to see a little bit of a bounce when you get a change to a National Government.”
But Solly said there were also bigger factors bubbling away in the background in terms of interest rates.
“We are still beholden to this tighter monetary policy setting. Inflation numbers are coming down but have not fallen enough. A change in government will be less inflationary. They will spend money but probably in a different way.”
Lister said the inflation picture was still a messy one.
“We still need to knock that on the head without causing a recession. That will still be a challenge.
“National and Act will both be quite keen to reduce spending, particularly the spending they see as wasteful. But it’s tough to do that on a large scale when you have got a slightly weaker revenue position to work with and when you don’t want to cut services - we have got that infrastructure deficit, we need more spending on education and health - so it’s a tough one. You want to save money but not be compromising those areas which don’t have enough resources to meet capacity.”
Westpac chief economist Kelly Eckhold said there was a high degree of commonality among the centre-right parties, particularly on tax bracket adjustments, easing tax obligations on property investors, reduced regulation for farmers, redistribution of carbon tax income to taxpayers, and focusing the Reserve Bank’s mandate on inflation.
But Act and NZ First tended to favour greater spending cuts and doubted the extent to which National’s proposed tax on homes bought by foreigners would be able to fund tax cuts.
NZ First also had some higher-cost spending initiatives and Eckhold said National may need to make bigger cuts in order to fund those initiatives and to get NZ First on side.
“The bottom line is more spending cuts may need to be agreed to get the coalition across the line.”
He expected it would be some time before coalition talks were completed, which could affect National’s plans to deliver a mini-Budget before Christmas.
“This ‘mini-Budget’ or Half-Year Economic and Fiscal Update is likely to not be released before mid-December, meaning no new fully-costed government policy initiatives until then.”
Eckhold said financial market volatility may be slightly elevated as coalition negotiations evolve.
“However, [the] centre-right’s strong performance on the night will help to assuage some uncertainty.”
