WELLINGTON, New Zealand-- Winston Peters, the populist who will determine New Zealand's next leader after an inconclusive election, recently offered a withering assessment of the policies that have helped the country become one of the best-performing economies in the developed world.
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"Every year we are just falling deeper into debt to the rest of the world--a debt that now stands at NZ$155 billion (US$114 billion)," the leader of the New Zealand First said during the campaign.
Mr. Peters proposed a solution: a rejection of only targeting inflation when setting interest rates. In doing so, he challenged one of New Zealand's biggest contributions to global economic thinking--a framework for monetary policy since adopted by other central banks, including those of U.K., Canada and Australia.
Mr. Peters, a 72-year-old political stalwart, is in the kingmaker position after Saturday's election failed to deliver a clear winner.
The center-right National Party, led by Prime Minister Bill English, secured 58 seats in the 120-seat single-house parliament and will seek to form a coalition with NZ First, which is projected to claim about nine seats. Mr. Peters could instead form a three-way alliance with the center-left Labour Party and pro-environment Greens.
"We invite you to be patient: don't ask us who we are going to go with," Mr. Peters said Saturday, after the election.
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Mr. Peters, who entered parliament as a National in 1978 and started NZ First in 1993, has been in this position before. After an inconclusive election in 1996, he reportedly went fishing and then kept the country waiting for weeks. He has also served as deputy prime minister and foreign minister in previous coalition governments.
What happens now depends on what Mr. Peters decides are the priority issues from his campaign.
NZ First wants to slash annual immigration to about 10,000 highly skilled people, far below the current net migration of some 70,000. National broadly favors the existing system, while Labour wants to cut the annual rate by up to 30,000.
The country's soaring house prices were a flashpoint during the campaign, with Labour linking high immigration to the affordability crisis. Mr. Peters wants to ban foreigners from buying property and tighten restrictions on foreign investment--broadly in line with Labour's manifesto.
However, he opposes Labour's planned tax on the commercial use of water, a policy loathed by farmers.
Mr. Peters wants to expand the Reserve Bank of New Zealand's role beyond controlling inflation to include other economic indicators, such as jobs and the exchange rate. The country leads the world in lamb exports, as well as shipping large amounts of dairy, wine and wool, and sellers are being hurt by the high New Zealand dollar.
Mr. English, the prime minister, has previously opposed Mr. Peters's call to give the central bank additional powers.
However, he struck a collegial tone Monday, ahead of the broader negotiations, saying he'd "always respected" Mr. Peters's place in New Zealand politics. "It's always been a bit of a maverick role," he said, adding that he thinks the coalition talks could take weeks.
The New Zealand dollar fell Monday amid the uncertainty, although the stock market was higher.
Bryce Edwards, a political scientist at Victoria University in Wellington, said Mr. Peters was a pragmatist who had previously wedded NZ First to both National and Labour. "They're not a purist party and they're not extremely policy focused," Dr. Edwards said.
Paul Dales, chief economist for Australia and New Zealand at Capital Economics, said the negotiations could influence the outlook for the economy and the New Zealand dollar, "depending on how much the bigger parties pander to New Zealand First's tougher policies on immigration and housing."
He expects economic growth of close to 3% next year, with an easing in net migration and the housing market forcing a slowdown to 2.5% in 2019. "But if National concedes a lot to NZ First, or NZ First joins forces with Labour, then GDP growth could slow further, sooner," he said.
(END) Dow Jones Newswires
September 25, 2017 05:32 ET (09:32 GMT)