New Zealand – Peters Stirring the Pot

Labour Party Prime Minister Jacinda Ardern went on six-week maternity leave following the birth of her daughter in late June, providing Winston Peters, the leader of the populist-nationalist NZ First, with an opportunity to head the government on a temporary basis. Freed from the constraints of being second-in-command, Peters has stirred controversy with impolitic comments on immigration and his defense of far-right nationalists from Australia who have been banned from speaking in New Zealand on security grounds.
Peters also roiled the political waters by echoing Regional Economic Development Minister Shane Jones’ call for the sacking of the managers of the Fonterra dairy cooperative, which reported an operating loss of $235 million in March–September 2017, after Ardern had pointedly dismissed the original comment from Jones as a “private” statement that did not reflect the view of the government.
Perhaps his most notable controversy, though, involves a lawsuit over media leaks that Peters received overpayment of his superannuation benefits for seven years. He repaid the money once the error was discovered, but the NZ First leader is now suing the Ministry of Social Development and two former Cabinet ministers from the main opposition National Party ministers for breach of privacy related to the leaks. The move puts him in conflict with Attorney-General David Parker, as representative of the government ministry, over whom Peters has direct authority as acting prime minister.
The main National Party is not yet in a position to aggressively exploit any political openings created by Peters, who in any case will return the reins of government to Ardern in early August. However, polls indicate that support for NZ First is slipping, which may heighten the risk of destabilizing tensions between the governing partners going forward.
The opposition will focus on the costs associated with Labour’s legislative priorities, including extended parental leave and a $40 per week benefit for all children during their first year of life. National’s warnings of income tax hikes and increased fuel duties will take on added resonance if the government does not take a firm stand against striking public-sector workers emboldened by what they perceive to be Labour’s reluctance to provoke conflict with the unions.
Uncertainty on that score could erode investor confidence to the extent of undermining equity prices, although it seems unlikely to have any grave consequences for a commodity-driven currency, or sovereign creditworthiness due to New Zealand’s comparatively strong underlying fiscal fundamentals. Fiscal expansion, which, in addition to the Families Package, will include free tuition for the first year of tertiary education, as well as increased healthcare expenditure and housing investments, and government transfers, will underpin fairly solid growth of close to 3% in the near term.
Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This excerpt is from our latest Political Risk Letter publication, for more information please contact us at (315) 431-0511 and sales@prsgroup.com

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