Labour just had a surprise win in New Zealand's month-old election

New Zealand Labour Party leader and now prime minister Jacinda Ardern. Photo: Phil Walter/ Getty Images.

New Zealand has a new Labour government after New Zealand First leader Winston Peters decided to form a coalition with them over the governing National Party.

The bombshell decision to back centre-left Labour ends nearly a decade in power for the National Party and ousts prime minister Bill English, who took over from John Key as leader in December last year.

NZ First held the balance of power following the September 23 election with nine seats, after the National Party won 56 seats and Labour formed an alliance with the Greens, giving them 54 seats.

The decision to back back Labour will make Jacinda Ardern the nation’s third female prime minister. Peters, 72, has been offered the deputy PM position as well some ministerial roles but has yet to accept. He was previously in the role from 1996 to 1998, having formed NZ First in 1993 after breaking away from the National Party. Peters first being elected to parliament in 1978, and had a three year break from politics after losing to his National rival in 2008. He lost his seat in 2005, but under New Zealand’s electoral system, was able to remain in parliament for the next term as a “list MP”. He returned in 2011 as support for NZ First increased to eight seats.

Ardern, 37, was a researcher for former PM Helen Clark and policy advisor to British Prime Minister Tony Blair before she entered parliament in 2008. She had only been leader of the opposition for seven weeks before New Zealand went the polls and is now Labour’s youngest prime minister.

Peters did not tell Arden before he announced his decision, saying he wanted the New Zealand people to know first.

The veteran MP said party had to chose between a “modified status quo” or change.

“Our perception was the people of this country did want change and we’ve responded to that,” he said.

The popularist politician said “capitalism must regain its responsible, its human face”.

Peters praised Ardern as an “extraordinary talent” who took Labor from a “hopeless position to a position where they’re in office and government today”.

His decision to abandon the party he’d backed previous under Jim Bolger 20 years ago was “extraordinarily disappointing” but “inevitable” flagging a potential change in monetary policy to make the Reserve Bank of NZ target the value of the country’s dollar.

The country’s prime minister-elect said NZ First will have four cabinet positions and a cabinet undersecretary role, while the Greens will also have ministerial roles.

Labour’s signature policy, Kiwibuild, for 100,000 affordable government-built homes over 10 years, with 50% of them in Auckland, will proceed. Ardern said she will also move to ban foreigners buying existing homes in her first 100 days.

“We don’t just allow the economy to be carried by housing price inflation and population growth,” she said.

Arden also plans to visit Australia “as soon as possible”.

After Australian deputy prime minister Barnaby Joyce became embroiled in country’s dual citizenship controversy in August, putting is political future in doubt, Prime Minister Malcolm Turnbull accused the opposition of trying to “steal government by entering into a conspiracy with a foreign power”.

It was the height of the New Zealand election campaign and Australian Foreign Minister Julie Bishop weighed in against NZ Labour saying “I would find it very difficult to build trust with members of a political party that had been used by the Australian Labor Party to seek to undermine the Australian government”.

Ardern responded at the time that her party valued its relationship with the Australian government but it was “high regrettable” that Bishop “has chosen to make false claims about the New Zealand Labour Party”.

Today, Australian Labor leader Bill Shorten congratulated Arden saying “New Zealanders have again provided an inspiration for women and girls around the world”.

“I look forward to building and strengthening the connection between our two nations – and I trust the Government shares this commitment,” he said.

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