"The National Party didn't invent fiscal responsibility," said Grant Robertson in March as he unveiled a partnership with Green's committing to economic constraints.

While the man set to be New Zealand's finance minister is a strong advocate for a more socially conscious capitalism he has also worked hard, since taking on the portfolio in 2014, to reassure business that Labour is a party with a strong track record on the economy.

In the next few weeks he will need to tread a careful path as he seeks to meet the social expectations of the party faithful, while reassuring business that the sky will not fall.

In the short term at least the biggest headwind the economy will face is confidence - both business and consumer.


With house price growth already slowing, both measures have wobbled in latest surveys despite remaining at historically-high levels.

Business confidence amongst small firms eased in September, according to ANZ's quarterly Business Micro Scope survey.

A net 14 per cent of small businesses (down from 17 per cent in the June quarter) say they are confident about general business conditions for the year ahead.

Within that group, micro firms (0-5 employees) slipped by 4 points and intermediate-sized businesses dropped by 2 points.

Consumer confidence dropped in October from a three-year high.

The ANZ-Roy Morgan consumer confidence index fell four points to 126.2 in October, with the current conditions index dropping 3.3 points to 124 and the future conditions measure down 3.8 points to 127.8.

And broader business also fell according to the NZIER Quarterly Survey of Business Opinion. The third quarter fall followed a September fall in ANZ's monthly business confidence.

But ANZ's survey showed that beyond general confidence in the economy, expectations of firms' own activity held up. Forward-looking "own activity" expectations lifted, while employment and investment intentions remain at robust levels.


So there remains a strong base. The issue is the direction of the trend.

Robertson's challenge will be to sell his vision of a strong economic platform in the face of fears about policies which cut immigration, tighten tax treatment for property investment and tinker with the Reserve Bank Act.

As Westpac chief economist Dominick Stephens noted in a report after the new government announcement last week, much of the buoyant consumer confidence has been tied to a wealth effect from high house prices.

"Possible changes to the tax treatment of housing could have the biggest influence on our near-term GDP forecast," he wrote. "The irony for any Government is that taking action that materially reduces house prices, while probably good for society in the long run, would have a large impact on the short-term GDP outlook. Some consumer spending is essentially financed by rising house prices, and ending that cycle would cause the economy to take a near-term hit."

Westpac economist Dominick Stephens.
Westpac economist Dominick Stephens.

ASB chief economist Nick Tuffley also forecast short-term wobbles for the economy.

"The additional uncertainty provided by the modest change in government direction is likely to provide a short-term headwind to growth," he wrote. "The next few months will be key and it will be interesting to see how long the honeymoon period of the new government and the 2nd youngest NZ PM in history will last for."

The gloomy short term outlook was also forewarned by NZ First leader Winston Peters in his speech on Thursday night.

Peters will recall the cold shoulder Helen Clark's Labour Government received when it took office in 1999 and the so called "winter of discontent" that followed. He certainly seemed to be bracing for a negative reaction from big business to the new coalition.

But that needn't necessarily be so.

There is considerable support from the business and financial community for moves to curb housing speculation.

And running counter to fears around housing and immigration is the likelihood of a stimulatory boost from the left-leaning government's spending promises and the safety net that any falls in the dollar will deliver to the export economy.

Clearly this Government has been elected by people who expect a fundamental shift in economic management.

Robertson will be seeking to tackle structural issues which require long-term thinking. But if he can maintain confidence and economic growth in the short term then he will be better placed when his party moves to tackle more contentious business issues like employment law.

Reiterating his position on fiscal responsibility and a balanced budget would be a good start, given the uncertainties that coalition talks with NZ First throw into the mix.

Robertson, who turns 46 next week, has put considerable time and thought into considering the biggest issues facing modern capitalism.

He's well aware of the tensions between the free-market and social democracy and global concerns with issues like low inflation and lack of wage growth.

He believes in a more managed capitalism but is future focused in his thinking.

He does not reject all the reforms of the 1984 Labour Government.

"There were obviously things that had to happen in the New Zealand economy," he said of the era in a June interview. "It was clearly over regulated."

But he believes firmly that the reforms went too far.

"New Zealanders understand that we have to be careful and responsible with the economy, but they also want a fair go for people," he said.

We're not about to see capitalism upturned in this country, we are about to see the dial reset.

Robertson, as finance minister, will play a crucial role in that process. He'll need to get the technical stuff right, but perhaps more importantly he'll need to lead from the front and sell a prosperous vision for the country.