Key Re-Elected as New Zealand Prime Minister

By Tracy Withers and Chris Bourke - Nov 26, 2011 8:44 PM GMT+0700
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John Key, New Zealand's prime minister, waves to the audience after winning the general election in Auckland. Photographer: Brendon O'Hagan/Bloomberg

New Zealand Prime Minister John Key won a second term in office after his National party secured its best result in 60 years, giving him the mandate to sell state assets and help eliminate a budget deficit.

“The government will be focused on building a more competitive economy with less debt, with more jobs and with higher incomes,” Key told supporters in his victory speech in Auckland late yesterday. “I’m absolutely committed to” the asset sales program, he said.

National won 48 percent of votes, the most it has taken since 1951, according to provisional results published on the Electoral Commission website. Key has 60 seats in the 121-member parliament and will be able to command a majority with support from the ACT and United Future parties that helped him to form a government in 2008 and have again signaled their support.

Key, a 50-year-old multimillionaire and former foreign exchange head at Merrill Lynch & Co., faces the task of steering a recovery from New Zealand’s worst natural disaster in 80 years amid global economic turmoil. His government has pledged to sell part of its stake in four energy companies and the national airline to help erase a record NZ$18.4 billion ($13.6 billion) budget deficit.

“We’ve got the numbers to put that program through,” Key said in an interview with Television New Zealand, adding he is “very committed” to returning the budget to surplus.

Financial Management

Key triumphed over opposition Labour Party leader Phil Goff, 58, after managing the economy through a global financial crisis and a Feb. 22 earthquake that devastated the business district of the second-largest city, Christchurch, killing 181 people. Still, his popularity extended beyond financial management.

He was photographed drinking beer while cooking meat on a barbeque with Prince William in January last year, when the U.K. royal visited Wellington. At the opening game of the Rugby World Cup on Sept. 9 in Auckland, he sang the anthem alongside the national All Blacks team on the field, and was on the podium to shake the hand of captain Richie McCaw after the team won the final on Oct. 23.

Support for National rose from 45 percent in the last election, when the party gained 58 seats. Key’s opinion poll support as preferred prime minister has exceeded 50 percent all year even as economic growth slowed and New Zealand lost its top credit grades at Standard & Poor’s and Fitch Ratings in September, with both citing concern that government and household debt was too high.

Consumer Spending

Still, New Zealand stocks have outperformed in the region, with the NZX 50 Index down 2.9 percent this year compared with the MSCI Asia Pacific Index (MXAP)’s 21 percent drop. The New Zealand dollar peaked at a record high in August, above 88 cents against the U.S. dollar. It traded at 74.05 cents in late New York trading Nov. 25.

The Christchurch earthquake and a temblor in September last year that didn’t cause any fatalities damped consumer spending and New Zealand faces a NZ$20 billion reconstruction bill.

While the Treasury Department forecasts annual average growth of 2.3 percent in the year ending in March, the central bank has said the country may not be immune to a worsening of the European debt crisis.

Support for Labour slumped to 27 percent from 34 percent in the 2008 election as voters rejected Goff’s plans to raise taxes on capital gains and high income earners. Labour, which secured 34 seats, opposes the proposed asset sales and pledged to remove sales tax on fresh fruit and vegetables to ease the cost of living for low income families.

‘Wasn’t Our Time’

“It wasn’t our time this time,” Goff said in televised comments after conceding defeat. “We can be proud of the fact we took some of the tough decisions that others have shied away from in the knowledge that they might not be immediately popular.”

Goff told reporters he is reviewing his leadership of the party and will discuss that with colleagues next week. Labour’s vote dropped to the lowest since 1928 as the rival Green party surged to 10.6 percent from 6.7 percent three years ago to take 13 seats in parliament, according to Electoral Commission data.

The New Zealand First party won 6.8 percent of the vote, giving it eight seats, after it won none in 2008.

ACT candidate John Banks won the Epsom constituency and will be his party’s only parliamentarian, as it got 1.1 percent of the national vote. United Future leader Peter Dunne, who was revenue minister in Key’s previous government, retained the Ohariu constituency and is also on his own in parliament.

Maori Party

Key said he will also meet with the Maori party, which won three seats, although it has opposed the asset sales program.

Under the nation’s mixed member proportional voting system, New Zealanders cast two ballots, one for a party and the other for a candidate in their constituency. There are 63 general constituencies and seven special constituencies reserved for native Maori voters.

Parties need to garner five percent of the vote or win a constituency to get into parliament.

In a non-binding referendum alongside yesterday’s ballot, voters were asked to retain or change the voting system. Fifty- four percent said they want to keep the so-called MMP system, while 43 percent opted to change it, according to votes submitted before polling day tallied on the Electoral Commission website. The commission aims to publish official results by Dec. 10.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Chris Bourke at cbourke4@bloomberg.net