Ellie Allen

New Zealand Election: What Next For The Kiwi Economy?


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It was a stunning election victory for New Zealand’s Labour Party in October, with Jacinda Ardern winning by a landslide. Ms Ardern, who had already held the office of PM for the previous three years, saw her centre left party win 49.1 percent of the vote, far more than the 26.8 percent garnered by the centre right National Party. This gave her an outright majority in the New Zealand parliament, something that has not happened since proportional representation was introduced in 1996, meaning she could abandon her coalition partners the Greens and the New Zealand First Party.

Her victory was celebrated around the world by liberals, who applauded her often repeated catchphrase “be strong, be kind” as well as her avowedly progressive outlook on issues as diverse as child poverty, climate change and gun ownership.

WHO IS JACINDA ARDERN?

Born into a Mormon family and brought up within a working class environment, Ms Ardern, 40, studied politics and communication at university and wanted to be a politician from an early age. This enabled her to get a job working for former PM Helen Clark and, later in London, Tony Blair. She returned to her native New Zealand and became an elected MP, championing gay rights and the eradication of child poverty. This proved to be the springboard that would see her win a surprise victory in the 2017 election and propel her onto the world stage, where she is regarded by some as the liberal progressive ‘anti Trump’.

Since she came into power, Ms Ardern has been praised for having dealt with the country’s worst ever terrorist attack, a volcanic eruption that killed several tourists, and the Covid-19 crisis. In particular, Ms Ardern’s tough response to the coronavirus pandemic, which saw borders shut and a strict national lockdown enforced, was seen as decisive and effective – an approach that may have helped her gain re-election.

Reacting to her landslide win, New Zealand’s PM has selected what has been called the ‘most diverse cabinet in New Zealand’s history’, which includes an openly gay deputy prime minister and a Maori woman with a facial tattoo.

WHAT NEXT FOR THE NEW ZEALAND ECONOMY?

Whilst observers have praised the way in which Jacinda Ardern has dealt with the Covid-19 crisis, the actions taken to stop its spread have not been without cost. New Zealand, like many other countries, is living though its worst economic crisis in years, with the economy shrinking 12.2 percent between April and June as lockdown measures bit. What’s more, the country has taken on large amounts of debt, which economists say will hinder any recovery.

Despite the damage, the fortunes of New Zealand’s economy are closely tied with that of China’s, and as the Asian giant has emerged from the coronavirus crisis, so too has its Kiwi trading partner. In fact, the two countries have a bilateral trade agreement in place, with New Zealand being reliant on exporting dairy and meat to China. Political relations between the two countries are on the up as Ms Ardern seems to be adopting a pragmatic approach to trade, a stance which has disappointed some progressive voters who were expecting a more hardline approach to China, which they feel is exercising undue influence over their country.

Critics of Ms Ardern’s policies say that her banning of offshore oil exploration, as well as backing a binding 2019 policy to make the economy carbon neutral by 2050, have hamstrung the economy. They argue a small export-led nation can ill afford these policies, and that they may only be storing up problems for the future. Ms Ardern has countered the criticisms saying, “This is about being on the right side of history.”

And perhaps she is right. The New Zealand economy has bounced back faster from the Covid-19 crisis than many other nations, and growth rates are now back to pre-pandemic levels. Indeed, several leading forecasters, including Westpac, have stated they believe the Kiwi economy is now primed for take-off once again.

ROCKETING HOUSE PRICES REMAIN AN ISSUE

Nevertheless, one of the biggest issues affecting the average Kiwi is the shortage of affordable housing. While the global pandemic caused house prices to crash in most countries, this has not been the case in New Zealand where very low interest rates and an already scarce housing stock have enabled repatriating nationals to snap up property and exacerbate an already sticky problem. As a result, property prices have surged 11 percent so far in 2020, with a similar gain forecast for 2021 – placing the dream of owning a home well out of reach for those at the bottom of the ladder.

New Zealand’s property bubble is a seemingly intractable problem for the country, and successive governments have failed to solve it, which has had a knock-on effect on the rates of inequality. Indeed, it has been instrumental in New Zealand having the highest rate of homelessness for any OECD country, as well as long waits for public housing. For context, the average house price in Auckland is now over NZ$1,000,000 (£513,000), and prices are rising much faster than wages.

IS NOW A GOOD TIME TO MOVE TO NEW ZEALAND?

A lot of people dream about moving to the other side of the world and settling in New Zealand. After all, for a country that is roughly the same size as Britain but has less than 10 percent of the population there’s certainly no lack of space. However, you can’t simply move there without the requisite permits and visas, and at the very least you’ll need to have skills and experience in sectors that have a deficit of workers, such as healthcare, engineering or IT. There are many other essential skills in demand, including in construction, tourism and science, and a full list is available from the New Zealand government website.

Perhaps it is worth getting a temporary work visa and seeing if you enjoy living and working in New Zealand? If you do decide to take the plunge, remember to make sure you are not wasting money needlessly on transfer fees for big ticket purchases, such as housing or cars, when you move funds between the UK and New Zealand. This can also apply if you want to send your wages back to the UK, and the best thing to do is seek out a reputable currency provider, such as Currency Solutions, who will be able to advise you on how to make transfers and ensure the whole thing goes smoothly.

Final thoughts

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