Cost of living issues are expected to dominate this weekend’s election in New Zealand, but the outcome could also determine whether Wellington maintains its cautious approach to US President Donald Trump or pursues a more independent foreign policy, analysts have said.

With the major parties locked in a close contest ahead of Saturday’s vote, the next government’s approach to Washington, as well as its defence priorities, could hinge on the smaller parties needed to form a coalition.

Robert Patman, a professor of international relations at New Zealand’s University of Otago, said a key issue at stake was whether Wellington would continue its so far unsuccessful “softly-softly” approach to the second Trump administration.

“Or whether it pragmatically recognises that the Trump administration is unlike previous administrations and opts for closer relations with a new constellation of middle and small powers,” Patman said, citing similar moves by Canadian Prime Minister Mark Carney. New Zealanders will head to the polls amid mounting concerns over living costs, unemployment and healthcare, with both major parties promising to address the country’s economic difficulties.

Prime Minister Christopher Luxon’s centre-right National Party came to power in 2023 on a promise to “build the economy” and has governed in coalition with the ACT and New Zealand First (NZ First) parties.

National has emphasised economic management, restoring a budget surplus and expanding the country’s retirement savings scheme. The main opposition, the centre-left Labour party led by former prime minister Chris Hipkins, has focused on reducing living costs, improving healthcare and transport, and investing in housing, jobs and public services.

A 1News Verian poll published on Tuesday placed National at 30 per cent and Labour at 29 per cent, pointing to a closely fought election in which smaller parties could play a decisive role.

Under New Zealand’s mixed-member proportional electoral system, parties generally need at least 5 per cent of the party vote or an electorate seat to enter parliament, making coalition negotiations crucial to determining who governs.

Patman said a significant shift in Wellington’s approach to Washington was unlikely if the current National-led coalition were re-elected, given what he described as the broadly pro-Trump orientation of NZ First and ACT.

However, if a Labour-led coalition involving the Greens and the Opportunity Party came to power, Wellington could adopt a much more measured approach and “realign foreign policy to sit more consistently with New Zealand values and interests”, Patman said.

New Zealand has largely maintained a careful, muted diplomatic posture towards major US foreign policy and security shifts under Trump, according to analysts.

When Washington rolled back reciprocal tariffs on New Zealand exports, Wellington maintained a non-confrontational response and prioritised behind-the-scenes diplomacy.

Patman pointed to Canada as a possible model for how Wellington could navigate an increasingly unpredictable international environment.

In a landmark address at the World Economic Forum in Davos in January, Carney argued that the traditional post-war, US-led international rules-based order had collapsed and been replaced by great-power bullying and the weaponisation of trade.

To shield Canada from what he calls a “geopolitical rupture”, Carney has shifted foreign policy to prioritise closer relations with middle and small powers.

Apart from pursuing an unprecedented “associate membership” framework with the European Union, Ottawa has spearheaded the Partners for Multilateralism initiative alongside Brazil, the EU, Kenya, India and Australia.

David Capie, a professor of international relations at Victoria University of Wellington, said the election had mainly focused on affordability issues, with the economy struggling and people feeling the impact of higher energy prices.

With both main parties polling poorly, whoever emerged the winner on Saturday night would need coalition partners to form a government, Capie noted.

“The wild card is the emergence of a new centrist party – Opportunity – which has said it could work with either National or Labour,” Capie said.

“If it gets above the 5 per cent threshold and into parliament, it could well hold the balance of power.”

Capie warned that the polls, currently too close to call, might not produce clear results on Saturday night. “Negotiations to form a government could potentially take weeks.”Opportunity, led by Qiulae Wong, is campaigning independently and positioning itself to hold the balance of power as a potential “kingmaker”.

Richard Shaw, professor of politics at Massey University’s College of Humanities and Social Sciences, said if the present government was returned to power, National would still be the largest party but was likely to have fewer seats at the cabinet table.

“This means that the anti-immigration policies of NZ First, and the anti-Maori policies of both the ACT and NZ First parties will have greater salience than was previously the case,” Shaw said.

NZ First advocates strict reforms designed to reduce non-essential immigration and prioritise New Zealand citizens. ACT and NZ First have also sought to dismantle race-based policies and ethnic prioritisation in addressing structural inequities, leading indigenous advocacy groups to slam their agendas as “anti-Maori”.

Last month, NZ First released a new policy titled “Defence, Security and Protection of the Realm”, which calls for a six-year reform plan to rebuild the New Zealand Defence Force.

Apart from proposing a massive funding surge aimed at expanding military capabilities to match a more demanding strategic environment, the policy also suggested rapidly growing the country’s military forces to over 20,000 personnel.

Shaw said if the right-wing bloc formed the next government, NZ First could have more seats in parliament and therefore more leverage.

“Winston Peters will almost certainly retain responsibility for foreign affairs,” Shaw said, referring to the NZ First leader and New Zealand’s foreign minister.

Still, it was difficult to see potential coalition partners lining up to reverse some of the commitments already made, Shaw said.

These include scrapping the current frigate procurement programme, which involves spending an estimated NZ$6 billion (US$3.4 billion) to NZ$8 billion upfront, while redirecting funds towards uncrewed air, surface and undersea drones, and a second amphibious warship.

Patman said even if the present coalition were re-elected, it was doubtful whether defence expenditure would increase beyond the current 2 per cent.

National and Labour were also unlikely to accept NZ First’s defence posture, which de-emphasised maritime security, Patman added.

If the current coalition retains power, Capie expects the Defence Capability Plan – a 15-year strategic blueprint unveiled in April 2025 to rebuild and modernise the defence force – to move forward.

Apart from upgrading strike capabilities, missile systems, naval and aerial fleets, the NZ$12 billion plan over the first four years will also further invest in uncrewed and drone surveillance vehicles as well as space technology.

“If there were a change of government, defence would be one area where you will see renewed debate,” Capie said. “There are a lot of different interests at play for New Zealand, including meeting our commitment as a treaty ally to Australia.”