New Zealand party chiefs meet with caucuses for coalition talks

Opposition Labour reaches out to Peters’ party to form government

New Zealand’s major party leaders met with their caucuses yesterday, preparing to kick off talks on forming the next government with a nationalist party that holds the balance of power after an inconclusive weekend election.

The ruling National Party won the most seats in Saturday’s general election, but failed to secure enough to form a government, leaving the New Zealand First Party in the position of kingmaker.

Deputy leaders of both the ruling National and opposition Labour parties said they would be willing to give up the role of deputy prime minister to win the backing of Winston Peters, who leads New Zealand First.

But the Labour Party, whose support spiked after Jacinda Ardern became leader last month, also has a chance to govern in New Zealand’s proportional representation system, if it can woo Peters into a coalition along with the Green Party.

Ardern said she had “every chance” to become the country’s youngest prime minister in modern history, adding that her team had contacted that of Peters, a veteran politician who has served in National and Labour governments.

“We are willing and available when he is ready,” Ardern, 37, told reporters in Wellington. “I respect the time that Mr Peters will need to talk with his party.” Asked about possible sticking points in talks, she said budget responsibility rules would apply in any government Labour led.

Both National and Labour are expected to stick to fiscal prudence, but to differ on monetary policy, trade and immigration. Labour wants to cut immigration and renegotiate some trade deals that could hurt two key sources of growth.

It wants to add employment to the central bank’s inflationtargeting mandate and there is some concern about New Zealand First’s preference for more central bank intervention in the currency market.

The political uncertainty weighed on the NZ dollar, which was down 0.32 per cent at $0.7243, after posting its biggest daily drop in more than four months on Monday.

Forming a coalition government could take weeks, Prime Minister Bill English has said, though he hoped talks would be constructive, even if expected to be tense. English has courted Peters since election night, when he acknowledged his “strong performance”, saying voters had given him a role in the new government’s formation.