New Zealand’s Luxon set to retain power with narrow majority

New Zealand's Prime Minister Christopher Luxon appears poised to retain his position after Saturday's election, but his coalition government will be governed by a razor-thin majority and may potentially lose crucial ministries to right-wing partners. Both the center-right National Party and the opposition Labour Party received less than 30% of the vote for the first time in their history, securing 32% and 27% of seats respectively.

Neither party achieved a majority. Preliminary data suggests Luxon's three-party coalition could govern with just a two-seat majority, which may diminish with the inclusion of overseas and special votes, which typically favor left-leaning parties. Should the majority vanish, Luxon may require the support of a fourth party, the centrist Opportunity Party, which is poised to make its parliamentary debut.

Westpac's chief economist, Kelly Eckhold, cautioned that any formed government would face challenges in enacting policies and would lack a robust mandate to govern. Luxon will preside over the absence of key National Party moderates who lost their seats, including Finance Minister Nicola Willis and Transport Minister Chris Bishop.

He may need to elevate members from coalition partners who prioritize more conservative economic and social policies. The New Zealand First party advocates for stricter controls on net migration and insists on controlling the country's immigration ministry in any future government. ACT Party leader David Seymour contends that National retaining the finance ministry is no longer viable, as they aim to reduce government debt through substantial cuts to public spending.

The weak performance by National and Labour mirrors a growing trend in developed nations, where major parties are losing ground to smaller parties. Jacinda Ardern was the sole Labour leader to secure a majority of seats in 2020, a first since 1993. Opportunity Party leader Qiulae Wong announced her intention to negotiate first with the party that secures the most seats in parliament, advocating for tax policy changes such as an annual NZ$19,400 universal basic income funded by a 1.75% annual land tax.

Despite two attempts by National Party lawmakers to oust him in the months preceding the election, Luxon managed to survive.