John Key resignation and the future of NZ

NZ prime minister John Key


John Key announced his resignation from being Prime Minister of NZ today. Citing family reasons, he becomes one of the few NZ prime ministers who resigned voluntarily before serving out the term.

Such an announcement caught the financial community by surprise, because shortly after his announcement, the NZD weakened compared to the USD.

The NZ sharemarket dropped 54 points.

What effects could his resignation have on the economy and on property?

First, let’s look at what the economy has been through during his leadership.

During 2008, the western world experienced a financial crisis. During 2008, several NZ finance companies collapsed but compared to US and Europe, NZ wasn’t hit too badly.

The property market did slump with house prices falling in many cities.

2011 was the Canterbury Earthquake and the Prime Minister had to deal with that crisis too.

During the first few years, Prime Minister Key steered the economy to a recovery, promoting tourists to come to New Zealand and forging trade deals with China.

From late 2012, the property market and the economy was showing signs of recovery particularly in Auckland.

These last four years (early 2013 to now) saw a surge in the property market, beginning with Auckland & Canterbury and then spreading to the neighbouring regions.

Particularly helped by the construction and tourism sector which made significant contributions to  GDP and helped offset the declining dairy sector.


What does the future hold?

On Investing

His surprise departure does create some uncertainty especially in the volatile sharemarket and foreign exchange markets. As far as the property market is concerned, due to long lead times for supply, as long as demand continues to outstrip supply, the property market will continue to perform. As mentioned in this previous post, you should watch for massive increases in supply or significant decreases in demand (hint: look at immigration policies). Nick Smith, recently announced he won’t introduce further immigration restrictions. This is good news for property investors. Nick Smith understands that immigration and influx of investment into NZ has made a good contribution to the NZ economy. Understandably he does not want to stop one of the contributing factors to a thriving economy.

It should be noted that property is generally politically neutral. The property market experienced a boom from 2003 to 2007 under the Labour Government. Similarly, the property experienced another boom from 2012-now under the National Party as government.

On politics

Resigning as a Prime Minister is not an easy decision to make.

However, John Key is not the first PM to voluntarily resign this year. David Cameron of Great Britain resigned following the Brexit referendum. Almost at the same time, as John Key resigning, Italian Prime Minister Renzi also announced his resignation.

As for the National Party, they still have a chance of being elected to a fourth term. John Key’s decision to allow his successor some time to lead the National Party and government before the election in November next year is very honourable. Few NZ leaders have done what John Key has done and still hand over during a time of prosperity.

His popularity has remained high throughout his 8 years of leadership. A lot of work goes on behind the scenes that the general public does not see. Even though great leaders have opponents and can attract critics, as a famous person once said “people only begin to appreciate what a great leader has done for them, after the leader has left them”.

Finally, Here’s many thanks to John Key for displaying strong leadership and steering New Zealand out of the recession and helping the economy recover again.

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