The New Zealand dollar has risen to its highest level this month and the benchmark stock index has gained from yesterday's close, suggesting little risk premium has been added for the resignation of Prime Minister John Key and the likelihood of a new finance minister should Bill English become PM.
English says he won't be able to retain the portfolio if he's successful in his tilt to be New Zealand's next prime minister, meaning the country will also be greeting a new minister in charge of the Treasury. He's up against factions of the caucus who may support Health Minister Jonathan Coleman and Corrections Minister Judith Collins to be PM, making it a three-horse race.
The loss of Key, a popular prime minister who has dominated in most-favoured leader polls during his terms, has the potential to sway the outcome of next year's election if, for example, a weakened National ends up having to form a coalition with NZ First or a Labour-Greens grouping seeks to form a government.
"We would see it increasing the risk premium at the margin," said Chris Green, director, economics and strategy, at First NZ Capital. "Obviously it depends how the PM position evolves and the finance position. There are risks around the potential for a less clean election going forward, if Peters emerges as kingmaker and what would his price be."
Green predicts a heightened sensitivity in financial markets to New Zealand political polls. First NZ's central scenario is that there will be a National-led government after the next election and that English as PM would keep a sense of continuity in government policy.
