Economy brings cheer for Bolger as poll approaches: New Zealanders are looking for stability after years of financial turmoil, writes David Barber from Wellington

NEW ZEALAND yesterday announced the lowest inflation rate in the world and a fall in unemployment. With an election just over three weeks away, the news may give a boost to Jim Bolger's conservative National Party government, which has until now been running level with the opposition Labour Party.

The economy, and who is best equipped to manage it, is virtually the only issue in the campaign for the 6 November election. Both main parties support the country's anti- nuclear policy, which has angered the United States. So far, however, politicans have failed to excite the voters. Even financial markets, notorious for favouring conservative governments, do not seem fazed at the prospect of a change in government.

Peter Halligan, a share analyst, said the market was anticipating a National victory, but there would be little reaction if Labour won, 'as policies wouldn't really change'. The share market hit a 45-month high yesterday.

The announcement that annual inflation fell to 1.5 per cent in September, while unemployment fell 1.9 per cent, is good news for an economy still struggling out of recession. New Zealand, once the most protected and over-regulated country outside the Eastern Bloc, has been through a decade of economic turmoil. David Lange's Labour goverment began it in the 1980s with a free-market reform programme that drew the admiration of a former adviser to Lady Thatcher, who said it had moved more quickly and more brutally to liberalise the economy than she would have dared.

The pain, in terms of collapsed companies and redundancies, was enormous and after six years, which saw Labour so divided it had three prime ministers within 14 months, the party was dumped in a landslide at the 1990 election.

If voters thought the National Party was going to call a halt to reform they were wrong. It stepped up the pace, slashing government spending, cutting benefit payments and radically reshaping the country's 50-year-old welfare system. Instead of halving unemployment, as it promised, it had risen 27 per cent before yesterday's improvement.

There have been gains. Apart from low inflation, mortgage interest rates are the lowest in 22 years. The economy, stagnant for years, is growing: Mr Bolger says he just needs more time to cement the gains in place and get the jobless working.

The pain remains, however. Charities report record handouts of food parcels to poverty-stricken families and schools say they are feeding hungry pupils. Labour's leader, Mike Moore, says the economic recovery benefits only the rich, has created a 'dog-eat-dog' society and has introduced the 'English disease of class war' to New Zealand.

Striving to distance himself from the Lange years and accusing the government of wanting to 'Americanise a once-free national health system', Mr Moore says Labour has returned to its traditional role as guardian of the poor, oppressed and disadvantaged.

Even if it retains power, the National Party is unlikely to win two- thirds of parliament's 97 seats, as last time. But Labour's chances are threatened by two minority parties with similar anti-government policies, splitting the opposition vote. The NZ Alliance is led by Jim Anderton, a former Labour MP, and New Zealand First by rebel National cabinet minister, Winston Peters.

Both are pinning their hopes, not so much on this election but on a simultaneous referendum that is expected to end the Westminster system of voting at the next poll in 1996 in favour of proportional representation. That is likely to see minority parties get many more members into parliament, raising the prospect of coalition governments.