With the US midterm election hanging in the balance, what could the potential results mean for New Zealand's economy?
Results for the midterm elections are rolling in with the Democrats performing better than expected, with control of the Senate hinging on three races that remained too close to call on Thursday morning (NZ time).
The Georgia US Senate race between Democratic incumbent Raphael Warnock and Republican Herschel Walker will go to a December 6 runoff, Edison Research projected. That means it could be weeks until control of that chamber is known unless Democrats hold off challengers in Nevada and Arizona.
Republicans are however looking likely to take the House of Representatives.
CNN has called 203 House of Representative seats for the Republicans and 187 for the Democrats, with a majority of 218 needed.
Milford Asset Management portfolio manager Will Curtayne told AM on Thursday the impressive performance of the Democrats could have negative impacts on inflation in New Zealand.
"Democrats are a little bit more inclined to spend money to help, either support the economy in a recession through giving free cheques or as inflation bites, they may do various policies to help people get through inflation," Curtayne told AM co-host Ryan Bridge.
"Ironically, giving people money to help fight inflation just creates more inflation, so that would have implications for the market if the Democrats were able to keep doing that, where inflation stays higher and we keep getting these problems that we've got with interest rates going higher, that cause all the sort of volatility we've seen in share markets that also cause mortgage rates to go higher and our house prices as we're seeing, to start going lower."
But with the Republicans looking likely to claim the House of Representatives, Curtayne said it will become harder for US President Joe Biden to get anything done.
"What we've seen so far in the House of Representatives, it does look like the Republicans have won that one, so that means at minimum, we're going to have a split Congress," he said.
"[So] that means it's going to be a little bit more difficult, [for Biden] to get stuff done."
Curtayne said the midterm results will have a mixed outcome on New Zealand's economy.
"On one hand, it may actually help inflation cool off and help us with supermarket prices eventually. On the other hand, there are some other side-on effects," Curtayne told AM.
"We do think that the Republicans taking the House means that they will take a harder-line approach on China and they have been more reluctant to give more and more money to Ukraine to support the war. We think even the Republicans would continue to support Ukraine, but they may not do it in such a large way as they have been doing."
The potential reduction in support for Ukraine could have an impact on energy prices, Curtayne said.
"At the end of the day, the support of the Ukraine war, unfortunately, has started to wane a little bit as people have to deal with the consequences of higher for longer energy prices," he said.
"So it would come down to whether with less support, can Ukraine continue to fight a strong war if they don't get much support from the rest of the world? It will be much more difficult for them to keep defending their nation."
Watch the full interview with Will Curtayne above.
