Could Democrats' mid-term victory be good news for NZ wallets?

Could the Democrats decisive win in the United States mid-term elections be good for New Zealand households' finances?

The Democrats rode a wave of support to take control of both chambers of the Congress.

The price of oil has dropped on the expectation that it might prompt an end to the US conflict in Iran.

Otago University economist Murat Ungor said Brent had already been falling on the hopes of a peace deal and it had now dropped below US$95 a barrel, the lowest in about two months.

"The result probably adds to expectations of de-escalation, because it raises the political cost of a prolonged war, but markets are pricing probabilities. Oil is still far above its pre-war level, and a Hormuz-related disruption could reverse this quickly.

"If lower prices hold, the benefits are significant for oil-importing economies like New Zealand: lower fuel and transport costs, softer inflation pressure, and less reason for central banks to keep policy tight. For New Zealand, the exchange rate will matter as much as the oil price in determining what reaches the pump."

Mike Jones, chief economist at BNZ said the drops seen so far would indicate that lower fuel costs could be ahead.

"As always, the question is whether the former can be sustained. That's a big call to make given the volatility we've seen across financial markets recently. For the sake of consumer confidence and spending we're certainly hoping so."

Westpac chief economist Kelly Eckhold said it was possible that the price of 91 could fall to about $3.35 a litre based on the current fall in oil prices.

But he said there were limits on how far it would go because US President Donald Trump still had control of foreign policy.

"There is a chance that it's good news for us. One of the themes that seems to be coming out of the commentary, even amongst the Republicans in America, is the sense that the war was deeply unpopular with voters.

"And that was an important reason why they have had such a rout, and that they need to probably stop it. So to the extent to which Trump listens to that, and then perhaps tries to find a more conciliatory way of bringing things back to closer to a more normal situation, then yeah, that could be helpful."

But he said it would not be easy.

"This is not just simply a case of the United States and Iran making some agreements between each other. There's a whole lot of regional players that have been affected by this and will continue to be affected if, for example, people have to be paying tolls to the Iranian authorities.

"And obviously, there are players like Israel that have security concerns about Iran, and may be concerned if things like sanctions get dropped against Iran, or assets are unfrozen. And the Iranians have had seven criteria that they've consistently said that they need to be overcome for them to be comfortable with reopening the strait."

Eckhold said policies such as tariffs were also unpopular and could be up for review, which could affect New Zealand exporters.

Ungor said a more divided Congress was likely to constrain fiscal decisions and increase oversight.

"Though much of trade and foreign policy sits with the executive, so I wouldn't expect a dramatic shift in tariffs. Markets tend to welcome fewer abrupt policy changes, but gridlock brings its own risks, particularly around budgets and funding.

"Overall, the election has added to the case for de-escalation, but the outlook still depends mainly on what happens with Iran, US inflation and trade policy."

Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make and spend money