2011 Election Update #24

2011 Election Update #24

26 April 2011

FOR IMMEDIATE RELEASE

www.ipredict.co.nz

Key Points:

• Brash’s Act leadership bid expected to fail

• New Brash party expected to be set up, and forecast to win 5.3% of the party vote

• Epsom result uncertain but “other” favoured over National or Hide

• New left-wing party now a near certainty

• Labour now expected to win Ikaroa-Rawhiti and Labour’s probabilities of winning Hauraki-Waikato, Te Tai Tonga and West Coast-Tasman strengthen

• National expected to win New Plymouth

• John Key forecast to govern alone

Commentary:

Don Brash’s bid to become leader of the Act Party is expected to fail, this week’s snapshot from New Zealand’s online predictions market, iPredict, suggests. Instead, the market indicates that Dr Brash will establish a new party which will achieve MMP’s 5% threshold and appears favoured in Epsom. Act is forecast to leave Parliament, the Maori Party to be down to 3 seats and UnitedFuture to be up to 2 seats. Despite these developments, John Key’s National is forecast not to need the new Brash party, the Maori Party or UnitedFuture and will be able to govern alone. This week’s snapshot was taken at 1.41 pm today.

Economic Context

Recession fears have remained constant over the last week, with the probability the economy will be in a recession in the June, September and December 2011 quarters remaining steady at 22%, 15% and 12% respectively. Expectations for negative growth in the March 2011 quarter also remain relatively steady with just a 24% probability growth will be above 0% for that quarter (down from 26% last week).

Growth forecasts are also mostly unchanged and remain low. Growth for each of the next five quarters to be reported is expected to be -0.2% for the March 2011 quarter (steady compared with last week); 0.2% for the June 2011 quarter (steady); 0.6% for the September 2011 quarter (steady); 0.7% for the December 2011 quarter (steady); and 0.6% for the March 2012 quarter (up from 0.5% last week).

Unemployment forecasts also remain steady. Unemployment is expected to be 6.9% in the March 2011 quarter (up from 6.8% last week); 6.7% in the June 2011 quarter; 6.3% in the September 2011 quarter; 6.4% in the December 2011 quarter; and 6.5% in the March 2012 quarter.

Inflation expectations are also relatively unchanged. Annual inflation is expected to be 5.2% for the June 2011 quarter (steady); 4.9% for the September 2011 quarter (down from 5.0% last week); 3.0% for the December 2011 quarter (down from 3.4% last week); and 3.1% for the March 2012 quarter (steady).

Petrol price rises continue to be forecast, although the strength of expectations continues to ease. The probability that unleaded petrol will exceed $2.20 per litre in 2011 is 90%, from 89% last week and 90% the week before; the probability it will exceed $2.30 per litre is 50%, down from 52% last week, 54% the week before and 60% three weeks ago; and the probability it will exceed $2.40 per litre is now down to 28%, down from 30% last week, 34% the week before, 35% three weeks ago and 40% four weeks ago. The probability it will go above $2.50 per litre is just 23%, down from 24% last week.

The market continues to expect that Reserve Bank Governor Alan Bollard will leave the OCR at 2.50% for most of the year before raising it to 2.75% on 8 December. There remains a 98% probability he will leave it unchanged on 28 April (steady compared with last week); a 95% probability he will leave it unchanged on 9 June (up from 90%); an 89% probability he will leave it unchanged on 28 July (up from 86%); an 87% probability he will leave it unchanged on 15 September (down from 88%); a 70% probability he will leave it unchanged on 27 October (steady) and a 48% probability he will increase it to 2.75% on 8 December (down from 50%).

Expected yields for 90-day bank bills are largely unchanged from last week. The expected 90-day rate on 1 June 2011 is 2.54% (down from 2.55% last week), the expected 90-day rate on 1 September 2011 is 2.77% (up from 2.76% last week) and on 1 December 2011 is 2.96% (down from 2.97% last week).

Average floating-rate mortgages continue to be expected to stay low. The probability they will reach 6.50% in 2011, from the 5.90% reported by the Reserve Bank for March 2011, is 18%, steady compared with last week, and up from 17% the week before.

There is a 66% probability that a Current Account surplus will be reported for the year ending March 2011 and just a 28% probability that Fitch Ratings will announce a downgrade of New Zealand’s long term currency rating before 1 July.

Election Date, Parties & Personnel

The market continues to indicate a 97% probability that the election will be held on Saturday 26 November. All current leaders of parliamentary parties are expected to remain in their positions until then. This includes Act Leader Rodney Hide, who has a 45% chance of departing prior to the election, up from 24% last week and 7% the week before, but still below a 50% probability of departing. The probability that Dr Brash will become leader of Act before the next election is just 35%.

However, at least two new parties are expected to be registered prior to the next election. The probability of a new party being registered involving at least two of Independent MP Hone Harawira, Unite National Secretary Matt McCarten and former Green MP Sue Bradford has leapt to 91%, up from 27% last week. The probability of a new party being registered involving Dr Brash is now 58%, up from just 8% last week.

Key Electorate Contests

Epsom is now expected to be won by a candidate other than Mr Hide or a National candidate. Mr Hide now has just a 25% probability of winning the seat, down from 50% last week and 67% the week before. The probability Epsom will be won by a National candidate (other than Mr Hide if he stood for National) is down to 34%, compared with 48% last week and 31% the week before. The most probable outcome now is that it will be won by “neither National, nor Rodney Hide when standing for National or ACT”. Given the electorate’s history as being safe National, iPredict has assumed that the market appears to be indicating Dr Brash’s new party is most likely to win the seat.

iPredict continues to forecast that UnitedFuture Leader Peter Dunne will be re-elected, with a 53% probability he will retain the seat, down from 55% last week. He remains well ahead of a National candidate (23% probability, down from 26% last week, 27% the week before and 28% three weeks ago) or a Labour candidate (22% probability, up from 20% last week, 19% the week before and 17% three weeks ago).

The probability Winston Peters will be returned to Parliament is steady at 31%. The probability he will stand in Epsom is up to 20%, compared with 17% last week.

In the Maori electorates, there has been a change in the forecast winner in Ikaroa-Rawhiti. Last week, the market indicated a 53% probability it would be won by the Maori Party. This week, the market indicates Labour is ahead with a 47% probability of winning the seat, compared with 45% for the Maori Party and 7.5% for another party.

Similarly, the probabilities that Labour will win Hauraki-Waikato and Te Tai Tonga have increased to 76% and 58% respectively, up from 72% and 52% last week. The Maori Party remains favoured in Tamaki-Makaurau (73% probability, down from 74% last week), Te Tai Hauauru (77% probability, steady), and Waiariki (82% probability, steady).

Mr Harawira continues to be favoured in Te Tai Tokerau (74% probability, steady).

In marginal seats other than those mentioned above, there has been a change of forecast winner in New Plymouth. Last week, there was a 52% probability it would be won by Labour’s Andrew Little. This week, there is a 53% probability it will be retained by National’s Jonathan Young.

In other seats where the projected winner has less than a 75% probability of winning, Auckland Central has a 72% probability of being retained by National’s Nikki Kaye (up from 71% last week), Waitakere a 58% probability of being retained by National’s Paula Bennett (down from 66% last week); and West Coast-Tasman a 52% probability of being won by Labour’s Damien O'Connor from National’s Chris Auchinvole (up from 50% last week).

Waimakariri is no longer a marginal seat, as defined by iPredict, with a 76% probability of being retained by Labour’s Clayton Cosgrove, up from 74% last week and 73% over the previous month.

Overall, National is expected to win 40 electorate seats (up from 39 last week), Labour 24 (steady), the Maori Party 3 (down from 4 last week), UnitedFuture and Mr Harawira’s party 1 each (steady) and Dr Brash’s party 1 (up from 0 last week). The Act Party is no longer expected to win an electorate seat.

Party Vote, Election Result and Alternative Scenarios

There have again been material changes in forecast party vote shares over the last week. Forecast vote shares are now: National 47.5% (down from 48.0% last week), Labour 28.9% (down from 29.7% last week and 31.9% the week before), the Greens 6.5% (down from 7.2%), Dr Brash’s party 5.3% (new to market), New Zealand First 4.2% (up from 3.8%), Act 3.1% (down from 4.0%), UnitedFuture 1.6% (down from 2.4%), the Maori Party 1.5% (down from 1.9%), Mr Harawira’s party 1.1% (steady), the New Citizen Party 0.7% (steady) and the proposed Reform New Zealand Party 0.4% (steady).

Based on this data, and the electorate results above, Parliament would be as follows: National 62 MPs, Labour 38 MPs, Greens 8 MPs, Dr Brash’s party 7 MPs, the Maori Party 3 MPs, UnitedFuture 2 MPs and Mr Harawira’s party 1 MP, for a total of 121 MPs. A government would be required to have the support of 61 MPs on confidence and supply so that Mr Key’s National Party could govern alone.

Overall, the market indicates an 86% probability there will be a National Prime Minister after the election (steady compared with last week).

Miscellaneous

In the Rodney electorate, where the National Party’s selection process was scrapped and started again, the race appears to have narrowed. Mark Mitchell remains favoured with 53% probability, bit this is down from 66% probability last week. Brent Robinson is second-favourite, with 39% probability of being selected, up from 34% last week.

The probability New Zealanders will elect to retain the MMP voting system in the referendum to be held on Election Day remains steady at 80%.

iPredict is owned by Victoria University of Wellington. Details on the company and its stocks can be found at www.ipredict.co.nz The company is providing full election coverage this year, with contract bundles for the party vote and for every electorate race in the country now available for trading, along with other contract bundles on a wide range of economic, political and social issues. The weekly political snapshot is taken at a random time each week to avoid market manipulation by political parties or activists.

ENDS