Election's impact will be slight

By Alan Clarke

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Photo / Fritha Tagg
Photo / Fritha Tagg

I am often asked if the election will affect investments, but after 26 years as an adviser, I can't remember any major investment upsets after an election in New Zealand.

What's the difference between Labour and National?

Not a lot - why? Because the politicians all think most voters are in the middle. There is no one on the left or right, they are all clamouring for the middle.

Hence the policies of National and Labour are not that far apart, and even at at election time they only play around the fringes with election promises .

Markets like certainty

Markets don't like change and they certainly don't like unwieldy coalitions.

Markets would much prefer a National-only majority or a Labour-only majority.

An unwieldy Labour+ Green+ NZ First + whoever coalition may unsettle the NZ sharemarket and the NZ dollar for a while.

And remember, it is far certain that National will sleepwalk to victory, with dirt flying on all sides, inflamed by Nicky Hager's book Dirty Politics.

And recent polls show 15 per cent of voters still haven't decided who to vote for. That's a lot of voters.

Tax increases

Markets also don't like tax increases either, especially offshore investors. They will take their money out of any country quickly if a big tax change may hit them.

Taxes are needed to send our MPs overseas. The trouble is they keep coming back.

Fortunately, little tax change is likely as neither Labour nor National want to scare away foreign money -- NZ needs foreign investment.

Third term governments are soon hated

It's hard to know why National wants to be re-elected, since 3rd term governments are soon hated. Something to do with MPs who are in power too long losing connection with reality and the voters.

Voters recently described National as okay, competent, stable, progressive, positive and greedy.

Among undecided voters, however, the word used most often about National was arrogant.

Electioneering - "It's the economy, stupid" - Bill ClintonMilk products and logs are our two biggest exports and the prices of both have fallen sharply. John Key and Bill English don't want you to notice, since it is election year. John and Bill well remember what Bill Clinton said: "You will get re-elected if the voters think the economy is good."

When you vote

Remember your MP is your employee. Give him/her a very clear job description.

Ask your MP to make your KiwiSaver tax free. If he/she says they can't, ask why their super scheme is three times what yours will be? Suggest they take a reduction so your KiwiSaver can be tax free. They are your employee, remember.

Labour is proposing a Capital Gains Tax (CGT)

This would mainly affect property investors, but is proposed at a rate of only 15 per cent - those people who pay no tax want people who don't pay enough tax to pay more.

Home bias

Understandably, investors like to invest in companies they know which will usually be close to home. This is known as "home bias" and is very common. However, we must be careful not to be top-heavy in NZ investments. Top heavy trucks, ships, and investors can capsize.

What to do to protect your investments

Same old same old: diversify widely, on and offshore, buy only the best quality, make sure all your investments are liquid at all times, and use disciplined rebalancing.

• Alan Clarke is a financial and retirement adviser and author. His second book, The Great NZ Work, Money & Retirement Puzzle is available at www.acfs.co.nz Alan is an independent authorised financial adviser (AFA) FSP26532; his disclosure statement is available on request and free of charge.

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