Ardern Takes Power in New Zealand

Jacinda Ardern will become New Zealand’s youngest prime minister in more than 150 years after winning the backing of a minor nationalist party to form a coalition government.

After 12 days of negotiations, New Zealand First leader Winston Peters Thursday threw his support behind the 37-year-old, saying an economic slowdown was looming and that capitalism needed to regain its “human face.”

“It is an absolute honor and a privilege to have the ability to form a government for all New Zealanders,” Ardern told reporters. She said the talks with New Zealand First “have formed a solid foundation on which we can build a coalition government.”

The announcement caps a stunning rise for Ardern, who became Labour leader less than two months before the Sept. 23 election and will now take it into office for the first time in nine years. The local currency dropped on concern the new government’s policies, such as a potential cut in immigration, may curb economic growth.

‘Political Risks’

“In terms of political risks, we’ve gone from zero-out-of-10 to four-or-five-out-of-10,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. “Given that Peters is on the record for slashing immigration, reducing offshore ownership, changing the RBNZ’s mandate, until we get clarity on all of those policies, we’re going to have a lot of jitters and political and economic risk.”

Kiwi

NZD/USD has slid -1.7% to its lowest in nearly five months at NZ$0.7027 outright on concerns that a Labor government taking control would brings worries that the country’s deficit may increase and could therefore trigger credit rating downgrades.

Note: A change to the RBNZ’’s mandate from solely targeting inflation could occur and add full employment to its existing sole mandate of price stability.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell