Market barometer: Time runs out for Alliance's motley crew

Friday 16th June 2000

The Budget promised little for the sharemarket, which will be less concerned now about the government's numbers than its chances of survival in its present form. The Alliance is momentarily in the driving seat now, in that, as with the doomed National/New Zealand First coalition, the junior party is getting liquidated politically by association with the senior and must decide soon what to do next while it still has some residue of support in the left-wing anti-Labour vote.

Time is running out for Jim Anderton's motley crew. Pressure must be building for the Alliance to walk out over some straw argument, especially as Mr Anderton's pet project, the Kiwi bank, is not supported by Labour or the Greens. The Alliance is starting to look as though it has nothing distinctive to deliver voters, which spells its end as a political movement. Its lifeblood came from opposing Labour, not supporting it.

Labour keeps undermining the Alliance by self-portrayal as the firm hand on its rabid junior partner's choking collar, defining government policy as non-Alliance policy. The Alliance is not helped by leakage of its aborted plan to merge with Labour.

Ambivalence about its own political destiny betrays the Alliance's complete lack of any robust philosophical basis. The party resembles National these days in wanting power at any price.

The death throes of the Alliance will shake the government but could be good news for the sharemarket.

New Zealand could soon be back to where it was under National once New Zealand First disintegrated. As National was from 1997-99, Labour would be a minority caretaker government propped up by a ragtag bunch of small parties and independent opportunists. And then the basic theme would be steady-as-she-goes, don't-scare-the-horses do-nothingism. Perhaps we can expect legislation banning party-hopping to be stalled in the meantime.

Disturbing news for the economy comes from expected inflation of fruit and vegetable costs driven by bad weather and resulting shortage in Queensland, exacerbated by a time of weakness in the kiwi dollar.

Also, exporter PDL Holdings, which has markets here and in Asia and Australia, has projected significantly lower forward orders when we are being told to steel ourselves for rip roaring export-led recovery.

Asian economies are again suffering a run on their currencies and have largely failed to drive through structural reforms that could have averted their last collapse and the resulting recession for New Zealand. Asia may do us in again.

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