By Tracy Withers
Nov. 10 (Bloomberg) — John Key fulfilled a childhood dream by becoming New Zealand’s prime minister two days ago. With the economy in recession, the former Merrill Lynch & Co. trader must act quickly to ensure it doesn’t turn into a nightmare.
“We have to re-instill confidence in our economy,” Key, 47, told TV3 News yesterday after leading the National Party to the country’s biggest election victory since 1996. “We have to get New Zealand going.”
Key plans to cut income taxes and redirect government spending to roads and a high-speed Internet network to help create jobs after the global financial crisis helped push the unemployment rate to a five-year high. Any increased spending will be made harder by projections the national budget will slip into deficit by June, snapping eight years of surpluses under Helen Clark, the Labour Party leader he ousted.
“The government has a big balance sheet, and we shouldn’t be afraid to use it,” said Cameron Bagrie, chief economist at ANZ National Bank Ltd. in Wellington. “He has been given a mandate to act quickly in response to what’s happening in the world.”
Key comes to power in a year when New Zealand business confidence plunged the most in two decades, housing prices slumped, the nation’s currency lost a quarter of its value and the benchmark stock index tumbled 33 percent. The $130 billion economy contracted in the first two quarters, the deepest recession in a decade, prompting the central bank to cut its benchmark interest rate 1.75 percentage points since July.
The National Party won 59 seats and 45.5 percent of the vote in the Nov. 8 election, the biggest percentage for a single party in a dozen years, according to the Chief Electoral Office Web site. With support from allies ACT New Zealand and United Future, the governing bloc will control 65 seats in the 122- member parliament.
Key, who campaigned under the slogan “Choosing a Brighter Future,” is the 51st leader of New Zealand, a nation of 4.2 million people. The father of two is bidding to be sworn in as prime minister within an unprecedented 10 days, allowing him to represent the nation at the annual Asia Pacific Economic Cooperation forum in Lima, Peru, starting Nov. 22
Apec leaders will discuss the global financial outlook and “it will be in the best interest of New Zealand if the new government was able to attend,” Key told reporters. “We are working through the issues to see if that is possible.”
Normally, a new leader isn’t sworn in until after absentee votes are counted, which is set to be by Nov. 22.
Key says he is prepared to put the country into debt to fund spending needed to foster growth, pledging financial assistance to people who recently lost jobs. His party plans to call in the heads of government departments and “instruct them to undertake a line-by-line review of their spending” in order to identify savings, Key said earlier this month. The party has said its proposed tax cuts are worth NZ$47 ($27.71) a week to the average wage earner.
Becoming prime minister was one of two ambitions Key shared as an 8-year-old with neighbor Gwendoline Howard in the Christchurch housing development where he grew up. The other, Howard said in an interview last month, was to earn a million dollars, which he achieved while working as a currency trader.
After graduating from the University of Canterbury in 1982 with a degree in commerce, Key worked as an auditor before joining Canterbury Clothing New Zealand, a jersey maker for the nation’s beloved All Blacks rugby team.
A television documentary named “A Day in The Life of a Trader” prompted a change in career and jobs as a currency trader for Elderbank and Bankers Trust Corp.
His career with Merrill began in Singapore in 1995, culminating with a transfer to London and promotion to head of foreign exchange.
Key returned to New Zealand in 2001 and entered parliament a year later. Then-National leader Don Brash, a former central bank governor, appointed him finance spokesman in 2004. Key became leader when Brash quit politics two years later.
Key’s victory ended Clark’s 15 years as leader of the social democratic Labour Party. She announced after the results that she would quit as party leader but remain in parliament. Labour’s support fell 7 percentage points to 33.8 percent as voters in New Zealand’s provincial seats and in much of Auckland, the nation’s most populous city, swung behind Key.
Clark, 58, was seeking to become the first Labour Party leader to win four elections after gaining power in 1999.
One of Key’s potential partners will be ACT New Zealand, which won 3.7 percent of the vote to have five members in parliament, including Roger Douglas, who was Finance Minister in the 1984-1990 Labour government.
Labour will have 43 seats, forming a 52-seat opposition with the Green Party and the Progressives. The non-aligned Maori Party won five seats.
In 2005, Labour won 49 seats to National’s 48 and Clark was able to form a government by relying on support from four smaller parties.
One of those, New Zealand First, didn’t make it back to the new parliament and leader Winston Peters, 63, a foreign affairs minister in the previous government, will leave politics after 27 years.
Source: Bloomberg News