NZ poll deadlock threatens economy: New election, under new rules, likely within a year

AS LEADERS of New Zealand's four main parties began jockeying for position yesterday after Saturday's deadlocked general election result, they joined in assuring overseas financial markets that the country was not in a state of political crisis. All leaders pledged to work to restore stable government.

It will be at least 10 days before the next government of New Zealand is known.

Fears that the stalemate would hurt an economy struggling out of recession appeared justified. One bank took the unusual step of opening its dealing room on a Sunday in response to overseas requests and saw massive selling of the New Zealand dollar and government bonds.

The Prime Minister, Jim Bolger, whose conservative National Party's (NP) record majority was wiped out, urged foreign investors not to panic, saying the country would work through its political hiatus.

The NP won the largest number of seats - 49 - in the new parliament against 46 for the main opposition Labour Party. The NP had a 29-seat majority in the old House of Representatives. Two new minority parties, the NZ Alliance and New Zealand First, hold the balance of power with two seats each. With wafer-thin majorities in nine seats, the final outcome will not be known until 200,000 absentee votes are counted.

Mr Bolger indicated that he would lead a minority government if the election night result stood, but conceded he would need the co-operation of the other parties.

Mike Moore, Labour's leader, yesterday invited the Alliance leader, Jim Anderton, and Winston Peters, head of New Zealand First, to talks this week on a pre-Christmas legislative programme, including repeal of anti-union laws and abolition of hospital charges. Both support the proposals but ruled out a coalition with Labour and said Mr Moore's advances were premature.

Mr Moore also proposed joining forces to plan for another election in a year's time using a new form of proportional representation that voters backed in a referendum with Saturday's poll.

The new system, which will replace the Westminster model of first past the post. will give the minority parties more seats in parliament and make coalition governments a virtual certainty in the future.

If Saturday's election had been held under the new system, political experts said the vote would have resulted in 44 seats for National, 43 for Labour, 23 for the Alliance and 10 for New Zealand First. The parliament will be expanded from 99 seats to 120.

New Zealanders vote every three years and the new system is scheduled to be introduced at the 1996 poll. The closeness of the result makes an early election likely, but the Alliance and New Zealand First are unlikely to agree to one being held under the existing first-past-the-post system which could threaten the balance of power they now hold.

The main effect of the election will be to halt National's Thatcherite free-market policies and moves to 'redesign' the welfare state, including drastic reform of the health service. The three other parties are united in opposing health reform and creeping privatisation of the education system and state housing.

All four parties agree that measures to cut the 10 per cent unemployment rate is the top priority of whichever government eventually takes over.

Mark Lawson, page 15