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Peters as Kingmaker: What next for investors?

New Zealand may be on tenterhooks waiting for New Zealand First leader Winston Peters' coalition decision, but investors do not have cause to worry ... yet, commentators say.

Monday, September 25th 2017, 6:00AM

by Susan Edmunds

Saturday's election result put Peters in pole position to determine the next government. But he is tipped to take his time over the decision.

Usually, political uncertainty would cause a market wobble but, after weeks of fluctuating polls, pundits say most of the unknowns are already priced in.

ASB wealth economist Chris Tennent-Brown said, while there was uncertainty, the result was not as uncertain as some of the potential outcomes that had been predicted. 

"Most people will be expecting National and New Zealand First to be able to come up with something over the coming days."

He said the sharemarket would probably not respond in a meaningful way unless it looked likely that the next government would be a more complex mix than that. The dollar has been trending up against the US on the expectation of another National government.

But one area of possible contention is Peters' promise to reform the Reserve Bank Act. He said its inflation focus was out-of-date. That is in line with Labour's policy.

"As a small, open economy New Zealand is dependent on a competitive exchange rate. NZ has a persistent and chronic balance of payments deficit – and this shows the New Zealand dollar does not reflect the underlying reality," Peters said on the campaign trail.

"Risks abound in the global economy and New Zealand is highly exposed and vulnerable to any volatility. NZ First is committed to reforming the Reserve Bank Act as a vital step in safeguarding our economic future –and the future heath of regional New Zealand."

But Tennent-Brown said that did not seem to be a bottom-line.  "I would think National would be keen on maintaining the status quo, I wouldn't have thought that would be a deal breaker."

Economist Gareth Kiernan said he did not expect it to unsettle the investment markets much.  The Reserve Bank already had things it was meant to take notice of, he said. "It could put a bit more emphasis on some of those but I don't expect it overall to have much of an impact."

Adviser Brent Sheather said he was expecting "more of the same" for the next three years.  New Zealand's comparatively higher interest rates made New Zealand assets look cheaper to foreign buyers, he said.

Kiernan said property might be the most affected of the asset classes under Peters' influence. He has been strongly opposed to foreign ownership of New Zealand assets and wanted to slow immigration.

Forecasters had predicted the housing market would see a rebound in prices next year as fundamental supply-demand imbalances again pushed up prices. But if Peters changed immigration policies, that could allow weakness to continue, particularly in parts of the country where undersupply was not such an issue.

Kiernan said the result was "more or less" what the polls predicted. "An element of uncertainty has already been built in over the last month or to. I don't see anything major at this stage to unsettle the market."

If negotiations dragged out more than a couple of weeks, that could change.

Tags: ASB Brent Sheather interest rates investment RBNZ Reserve Bank

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.75 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
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BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
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CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
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Heartland Bank - Reverse Mortgage - - - -
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HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
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Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
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Resimac - LVR < 80% 8.84 8.09 7.59 7.29
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Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
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SBS Construction lending for FHB - - - -
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Median 8.64 7.29 7.32 6.65

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