New Zealand will get its youngest Prime Minister in more than 150 years after the small, nationalist New Zealand First Party agreed to form a new government with Labour Party leader Jacinda Ardern, ending the National Party’s decade in power.
The outcome caps a remarkable rise for Ms. Ardern, 37, who only took over the party’s top job in August, and marks another victory for a youthful global leader promising change.
It is replete with big implications for the world’s 11th most traded currency, the central bank, immigration and foreign investment.
Labour had an even chance as National to form a government after inconclusive elections on Sept. 23 gave neither party enough seats to form a majority in parliament.
The announcement of the new government drove the New Zealand dollar down around 1.7% to its lowest levels in four and half months, as markets worried about more protectionist policies to come.
Labour said it would stick to its campaign promise to change the central bank’s mandate, seek to renegotiate the Trans-Pacific Partnership trade deal and prioritize an effort to ban foreign ownership of certain types of housing.
It has said it wants to add employment to the central bank’s mandate, which would mark a big change for the Reserve Bank of New Zealand which was the pioneer of the inflation-targeting regime adopted across the world.
Record net migration of more than 70,000 annually has fuelled demand for housing in New Zealand, far outstripping supply and pushing house prices prohibitively higher, pricing ordinary New Zealanders out of the housing market
Labour made a last minute-gamble when it appointed Ms. Ardern as a leader not long before the vote, hoping to ride the global sea of change that drove Britain to vote to leave the European Union and Donald Trump to become US president.
Her popularity and message of hope have drawn comparisons with the similarly youthful leaders such as France’s Emmanuel Macron and Canada’s Justin Trudeau.
Markets are concerned about uncertainty.
They worry that curbs to migration and trade could hurt two key sources of New Zealand’s robust growth in recent years.
More restrictive trade and foreign ownership could also hurt New Zealand’s reputation as an open economy and antagonize the likes of China, a key trading partner. Trade between the two countries has grown to more than NZ$20 billion ($14.4 billion) a year.
