Foreign Ownership on the Table in New Zealand Coalition Talks

(Bloomberg) -- Talks to form New Zealand’s next government entered their second day with foreign ownership emerging as a topic of discussion.

The ruling National Party and Labour opposition continued separate negotiations Monday in Wellington with the nationalist New Zealand First Party, whose support both require to reach a majority in parliament. New Zealand First leader Winston Peters has set a deadline of Oct. 12 to make a decision.

“These talks are about a change in the way this country’s run, both economically and socially,” Peters told reporters after talks with National today. The sale of assets to foreign interests “is the continuing story of this country’s decline” and the topic is on the negotiation table, he said.

While National won the biggest share of the vote, the chances of it failing to secure a fourth term in office increased over the weekend when official election results handed Labour and its ally the Greens two additional seats. They now represent a more stable option for Peters because the three parties between them can muster a three-seat majority instead of just one.

The New Zealand dollar fell as much as 0.6 percent against the greenback in early trading, to its lowest level since May 30, before recovering some ground. It bought 70.71 U.S. cents at 2:51 p.m. in Wellington, down from 70.93 cents on Friday.

Foreign Ownership on the Table in New Zealand Coalition Talks

National won 56 of the 120 seats in parliament, down from 58 on election night, official results from the Electoral Commission showed Oct. 7. Labour won 46 seats, one more than the preliminary count after the Sept. 23 vote, and the Greens lifted their tally to eight from seven. New Zealand First was unchanged on nine seats, while the ACT Party has one.

Prime Minister Bill English and a team of senior ministers met with Peters and his advisers for several hours yesterday and again today. Peters has also started talks with Labour leader Jacinda Ardern and her team.

Policy Concessions

The parallel negotiations are centered on what policy concessions and ministerial posts National and Labour are willing to offer Peters in return for his support.

The 72-year-old populist has railed against foreign interests taking ownership of New Zealand assets, such as the sale of a 50 percent stake in meat processor Silver Fern Farms to China’s Shanghai Maling last year.

He also campaigned on a platform of slashing immigration, reforming the central bank and protecting the state pension entitlements of the elderly, and wants to move Auckland’s port to the impoverished regional economy of Northland.

‘Inevitable Outcome’

Foreign Ownership on the Table in New Zealand Coalition Talks

“The thing that most economy watchers seem most interested in is the potential for net migration to decline under NZ First influence,” said Stephen Toplis, head of research at Bank of New Zealand in Wellington. “We believe this is an inevitable outcome but stress that we also think net migration will moderate anyway.”

Peters wants to cut net immigration, which surged to a record 72,400 in the year through July, to just 10,000 a year, arguing migrants are taking jobs from New Zealanders and over-loading infrastructure.

Labour favors a more moderate reduction, while National says foreigners are needed to fill skills shortages and keep the economy expanding. 

National has delivered eight consecutive years of economic growth and returned the budget to surplus during nine years in power. But a strong challenge from Labour under 37-year-old Ardern has highlighted growing concerns about poverty, homelessness and the environment which the new government will need to address.

Mandate to Govern

National and Labour both claim a mandate to govern after the final election results, with English saying National remains the largest party and Ardern arguing a majority of voters want change.

National got 44.4 percent of the vote to Labour’s 36.9 percent. When combined with the Greens’ 6.3 percent, the center-left bloc won 43.2 percent.

New Zealand’s German-style electoral system is conducive to coalitions and allows any grouping that can attain a majority to govern. Still, if Peters decides to anoint a Labour-led administration, it would be the first time since proportional representation was introduced in 1996 that the party with the largest share of the vote is excluded from government.

A third option for Peters would be to sit on the cross benches and support a minority National government on confidence and supply. Former Prime Minister Jim Bolger said that by setting an Oct. 12 deadline, Peters has left very little time for a coalition deal to be struck.

“It’s almost impossible to see a detailed coalition agreement hammered out in that time,” he told Radio New Zealand last week. “That suggests very strongly that he and New Zealand First are leaning towards sitting on the cross benches.”