New Zealand's lurch left sends Kiwi dollar crashing

The New Zealand dollar crashed on Thursday, after it emerged that a socialist-populist coalition would be making up the country’s next government.

Against the greenback, the Kiwi was 1.67% weaker at 1158 BST, trading at NZD 1.4212.

Kiwis had headed to the polls on 23 September for a scheduled general election.

As is usual under the country’s mixed-member proportional system of representation, the vote resulted in a hung parliament.

However, for the first time in more than 20 years, the resulting government was not clear, with the incumbent right-wing National party winning a large plurality of seats - but allowing its usual support partners to be maimed in the process.

That left the populist New Zealand First party, led by controversial veteran politician Winston Peters, with the balance of power.

On Thursday evening, after a protracted series of negotiations with both the National and left-wing opposition Labour party, Peters told media his party would be throwing its support behind the Labour party.

That results in a coalition led by Labour, with New Zealand First and the Green party as partners with ministerial roles.

It also sees New Zealand have its third female Prime Minister in Jacinda Ardern, who - in a storm of publicity - has risen from a last-minute installation as party leader to the country’s top political job in just three months.

“"We had a choice for a modified status quo or for change,” Peters said when announcing his decision from Parliament in Wellington.

“Both National and Labour were presented with that opportunity.

“Far too many New Zealanders have come to view today's capitalism not as their friend but as their foe … capitalism must regain its [human] face.”

In responding to the announcement from New Zealand First, Prime Minister-designate Ardern described the last few weeks of negotiations as “robust”, but said she believed both New Zealand First and the Green party would be “true allies” in achieving shared policy goals.

“Labour has always believed that governments should be a partner in ensuring an economy that works and delivers for all New Zealanders,” she told media at Parliament buildings.

“We also believe in a government that looks after its environment and ultimately looks after its people.

“I believe Labour has found true allies in Parliament to deliver on that.”

The deal was all but confirmed late in the night, as the Green party confirmed that it had received the required approval of 75% of the party to ratify a confidence-and-supply deal with Labour.

“The Green party has decided overwhelmingly to support the confidence and supply arrangement that we negotiated with the Labour party,” said leader James Shaw.

“We're all in, and there will now be a new government led by the Labour party and by Prime Minister Jacinda Ardern.”

The change in government comes after nine years and three terms of National-led government - most of them with Sir John Key at Premier House.

Once the new government is in power, changes are expected in a number of areas - primarily social issues and immigration.

Concern over severely unaffordable house prices was a major part of the election campaign, with both New Zealand First and Labour looking to restrict foreign ownership of residential assets in a bid to stem demand.

There was also concern from both parties that large-scale immigration was not being met with an appropriate level of infrastructure development.

Sir John unexpectedly resigned as Prime Minister late in 2016, and did not seek re-election.

The former forex trader was announced as the new chairman of the New Zealand division of Australia and New Zealand Banking Group on Wednesday.