By Ana Nicolaci da Costa
WELLINGTON (Reuters) - New Zealand Prime Minister Bill English said on Monday it could take weeks for the country to form a new government after a weekend general election left a nationalist minor party in the role of kingmaker.
The uncertainty around the make-up of the new government weighed on the New Zealand dollar, with the currency down 0.45 percent at $0.7306 midmorning, after falling as low as $0.7290.
The incumbent National Party took 46 percent of the vote on Saturday, well ahead of the challenging Labour Party's 35.8 percent, but New Zealand's proportional representation system means neither won enough seats in parliament to govern alone.
National secured 58 seats ahead of a possible coalition of 52 seats between Labour, which experienced a surge in popularity under new leader Jacinda Ardern, and the Green Party. That left both still needing NZ First's nine seats to reach the 61 seats required to form a government.
English said he had not yet spoken to NZ First's leader Winston Peters, a veteran maverick politician who has served as a cabinet minister in both previous National and Labour governments, but said it was likely talks would take "two to three weeks."
Peters, an outspoken critic of New Zealand's recent immigration boom, has previously backed the party with the largest number of votes.
While both National and Labour are expected to adhere to fiscal prudence, they will likely differ on monetary policy, trade and immigration.
Some expect Labour's plans to cut migration and renegotiate some trade policies will hurt two key sources of growth for New Zealand's small, open economy.
There is also some concern about what NZ First will demand in return for supporting the winning party. Peters has lobbied for more currency intervention by the central bank, which would weigh on the Kiwi, the world's 11th most traded currency.
"We now wait to find out who is going to form a coalition with NZ First and that may take some weeks," said Stuart Ive, dealer at OM Financial.
A final tally of the election results are due on Oct. 7, when "special votes", which will make up 15 percent of the total and which includes overseas votes, are released. English remains as prime minister in the interim.
(Reporting by Ana Nicolaci da Costa. Editing by Jane Wardell and Michael Perry)