Markets unfazed by Labour’s landslide win

WELLINGTON: Financial markets have taken Labour’s landslide win in their stride.

By the close yesterday the New Zealand dollar was trading at US66.13c, up a touch from US66.04 late on Friday, while the sharemarket’s S&P/NZX50 index was a few points softer at 12,385.25.

Labour won almost 50% of the vote compared with 27% for the opposition National Party — enough to allow Labour to form the first majority government since the MMP electoral system came into force in 1996.

Prime Minister Jacinda Ardern has said she intends to form a government in two to three weeks — a short timeframe in historical terms.

The new government may or may not include the Green Party, which also polled strongly.

Meanwhile, former coalition partner New Zealand First is no longer in the picture after failing to exceed the 5% voting threshold.

A Labouronly government is seen as being more business friendly than a LabourGreen coalition.

Politics aside, the financial markets’ key drivers have been the current low interest rate regime, and the Reserve Bank’s quantitative easing programme.

Salt Funds managing director Matt Goodson said the result was foreseen by the opinion polls, and he noted the election was ‘‘policylight’’.

‘‘The outcome is a little more centrist perhaps than a possible

LabourGreens coalition going in,’’ Mr Goodson said.

‘‘It was a really policylight campaign from all the parties, so it’s not likely that we will have a huge plethora of changes coming in to positively or negatively affect different sectors.’’

The markets’ reaction had been muted so far.

‘‘What really matters at the moment is this remarkable monetary policy experiment being conducted with ultralow interest rates and quantitative easing, and that is unchanged for now,’’ Mr Goodson said.

‘‘That dominates the more modest changes on the fiscal and political front,’’ he said.

Harbour Asset Management portfolio manager Shane Solly said it felt like the financial markets were prepared to take a longterm view.

‘‘Certainly, people had expected a Labour win, so there is no evidence of any negative reaction,’’ he said.

‘‘There is nothing obvious to worry the capital markets. There is no negative reaction at this stage, but it is early days.’’ — The New Zealand Herald