Jim Eagles: United offers a moderating economic influence

New Zealand business will be justified in watching with mild apprehension as the nature and direction of the next Government takes shape over the next few days.

Only mild, because it is clear that Labour, which will lead the process, is far from virulently anti-business.

On balance, the negative aspects of its first term (higher taxes, stricter employment rules, a trend back to state control) probably outweighed the positives (enthusiasm for trade, creation of industry working parties, closer links between science and industry).

Business can nevertheless be grateful that the essence of the economic reforms of Rogernomics and Ruthlessics were left in place.

This gives business a stable environment to work in.

But there are grounds for apprehension about how the new Administration will cope as the economic tailwind, which made life comfortable in its first term, turns into a chilly headwind, and whether in seeking solutions it looks to the left or the right.

It is not too difficult to keep people happy, satisfy a few populist causes and behave in a fiscally responsible way when you are enjoying historically favourable terms of trade and (by New Zealand standards) a booming economy.

But it is a lot harder to perform the same trick when commodity prices are sliding (falling dairy prices alone will take $1.6 billion out of the economy in the coming year), the dollar is rising, interest rates are higher, the public sector looks rapacious (and might become even hungrier if Labour Minister Margaret Wilson's pay equity legislation is passed) and the global economy remains shaky at best.

The first indication of which way Helen Clark is likely to respond to that challenge will come from her talks with the Greens and United Future.

With the demise of the Alliance there is no doubt that, economically, the Greens are now the most extreme left-wing party in Parliament.

A Labour-led Government which looks primarily to the Greens for support will be far more likely to act on the worrying hints about a stricter Resource Management Act, even tougher employment rules and anti-enterprise attitudes which slipped out from time to time during the last three years.

By contrast, the other potential partner, United Future, is economically liberal.

If Labour turns that way, then business will have reason to hope the new Government might indeed put more resources behind the encouraging first-term rhetoric about boosting growth.

After all, on Business New Zealand's pre-election economic scorecard, the Greens scored just three out of 21 while United Future got 17.

Add United Future's score to the disappointing nine that Labour achieved, and the average looks reasonably respectable. But add instead the Greens' pathetic three and the new Administration's economic credentials are rather scary.

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