Fiscal restraint probably on the table

With final figures on parliament’s make-up not due until 3 Nov, Westpac’s economists don’t see significant short term macro implications of the election outcome.

“We generally see coalition negotiations as pulling National towards a more contractionary stance as both potential partners advocate for greater fiscal restraint,” says chief economist Kelly Eckhold.

The first economic news for the newly elected coalition partners will be tomorrow’s CPI inflation figures. ANZ anticipates the report will highlight that the inflation problem is by no means solved and there are still questions around whether the 5.5% OCR is sufficient to get it sustainably back on target in an acceptable time frame.

The RBNZ noted at last month’s Monetary Policy Review the risk that rates “may need to remain at a restrictive level for a more sustained period of time.”