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(Bloomberg) — New Zealanders have chosen a center-right government to manage mounting economic challenges in the aftermath of the pandemic, rejecting the left-leaning administration of Prime Minister Chris Hipkins.

Christopher Luxon will become the South Pacific nation’s new premier after his National Party won the biggest share of the vote in Saturday’s election. Hipkins conceded defeat, bringing the curtain down on six years of Labour Party rule.

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“The New Zealand people had a mood for change,” Luxon told reporters on Sunday. “We are going to deliver a strong and stable government that’s going to get things done.”

The election result lends weight to the global pattern of voters deserting the government in charge during Covid-19, a hurdle that ruling parties in the UK and Canada may face in elections over the next two years. Despite one of the lowest pandemic mortality rates in the world, New Zealanders resoundingly turned their backs on Labour — its support slumped to 27% from 50% three years ago. 

“There’s a global discontent at the moment towards all incumbents,” said Bryce Edwards, a political analyst at Victoria University of Wellington. “To some extent Labour has just been unlucky to be in charge of things while the mood has soured. It does relate to Covid, it does relate to the general state of the economy.”

Luxon must now negotiate with his ally the libertarian ACT Party, and possibly the nationalist New Zealand First Party, to agree on a governing arrangement that commands a majority in parliament. 

Those talks could take several weeks and may see ACT and New Zealand First winning policy concessions and ministerial posts from National in return for their support.

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Preliminary results show National won 39% of the vote, while ACT had 9% and New Zealand First got 6.5%. Labour bled support to parties on the right and left, with its ally the Green Party growing its share of the vote to 10.8% from 7.9% in 2020 and taking key electorates from Labour. 

Te Pāti Māori, which stands for the rights of the indigenous Māori people, doubled its number of seats in parliament to four.

Winston Returns

But the biggest winner among the smaller parties was New Zealand First, which returns to parliament after being ejected three years ago. For its leader, the 78-year-old maverick Winston Peters, it’s another remarkable comeback in a 44-year political career.

While National and ACT currently have a parliamentary majority between them, they may lose it when official results, which include special and overseas votes, are published on Nov. 3. That would see Peters holding the balance of power.

Peters told reporters on Sunday that the country is in “an economic and social crisis” and “some of the promises you heard in this campaign won’t be worth confetti.”

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The new government faces a challenging economic outlook, with the central bank forecasting a recession as it keeps interest rates high to bring inflation under control. Government debt has increased as Labour borrowed more to battle the pandemic and pay for the recovery from a devastating cyclone earlier this year.

National has promised tax cuts partially funded by removing a ban on the sale of expensive homes to foreigners and collecting a levy on each transaction. It also plans to strip the Reserve Bank of its dual mandate and return it to a sole focus on inflation. 

China Stance

Luxon, the former chief executive of Air New Zealand who entered politics only three years ago, has spoken of the need for New Zealand to build its international relationships with countries such as India and China, already its largest trading partner. 

While Luxon is unlikely to distance New Zealand from traditional western partners like the UK, US and Australia, he may be more pro-China than the Labour administration, said Robert Patman, professor of politics at the University of Otago in Dunedin.

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Former National Party prime minister John Key “has actually criticized the Labour government for some of its anti-Chinese rhetoric, and Luxon is something of a protege of John Key,” Patman said.

While the final shape of the new government remains uncertain, all three likely participants campaigned on cutting government spending, getting tougher on criminals and welfare beneficiaries, and halting moves to give indigenous Māori a bigger role in decision-making on local authorities.

All three also favor farmer-friendly policies, and could be expected to delay plans to tax agricultural greenhouse gas emissions.

The election result draws a line under former prime minister Jacinda Ardern’s five years in office, during which she won global praise for her crisis management and empathetic style of leadership. 

She was rewarded with a landslide election victory three years ago, but since then the economic results of her pandemic response have turned voters against Labour. Ardern stood down in January in favor of Hipkins.

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