IPREDICT LTD
2011 ELECTION UPDATE #32
30 June 2011
FOR IMMEDIATE RELEASE
www.ipredict.co.nz

Key Points:

* Mana Party looks secure in Te Tai Tokerau for General Election
* Act and UnitedFuture improve hold on Epsom and Ohariu
* National firms up its support in New Plymouth
* OCR likely to increase in December and March 2012
* John Key remains overwhelmingly favoured to remain PM
* MMP remains favoured despite launch of anti campaign

Commentary:

John Key continues to be strongly favoured to remain Prime Minister after this year's General Election, though the National Party's forecast party vote has fallen slightly compared with last week, according to this week's snapshot from New Zealand's prediction market, iPredict. New Zealand First has once again reached MMP's 5% threshold and Hone Harawira's Mana Party has improved its probability of a win in Te Tai Tokerau at the General Election, following its by-election win on 25 June, as forecast by iPredict. The forecast for New Plymouth has improved for National, and the forecast for Ohariu has improved for Peter Dunne's UnitedFuture.

Economic Context

The likelihood of a recession before the end of the year has reduced further, and there is now a less than 14% probability of a recession for each of the next three quarters. The probability the economy will be in a recession in the June quarter is 8% (down from 9% last week), the September quarter 12% (steady compared with last week) and the December quarter 13% (down from 14% last week).

Expectations for GDP growth in the yet-to-be-reported March 2011 quarter have increased to 0.3% (up from 0.2% last week). However the medium-term growth forecasts have cooled marginally in the later quarters, with growth of 0.5% expected for the June 2011 quarter (steady), 0.7% for the September 2011 quarter (steady), 0.7% for the December 2011 quarter (down from 0.8% last week), and 0.6% for March 2012 quarter (down from 0.7% last week).

Forecast unemployment has improved slightly in the short-term. Unemployment is now expected to be 6.6% in the June 2011 quarter (down from 6.8% last week), 6.4% in the September 2011 quarter (steady), 6.3% in the December 2011 quarter (steady) and 6.4% in the March 2012 quarter (steady).

Inflation expectations have remained steady in the last week. Annual inflation is expected to be 5.2% in the June 2011 quarter (steady), 4.7% in the September 2011 quarter (steady), 2.6% in the December 2011 quarter (steady) and 2.7% in the March 2012 quarter (steady).

The market continues to indicate strongly that petrol prices will be capped at a maximum price of $2.30 this year. The probability that unleaded petrol will exceed $2.30 per litre in 2011 is 26% (down from 29% last week); the probability it will exceed $2.40 per litre is 12% (down from 13% last week); and the probability it will go above $2.50 per litre is 10% (down from 11% last week).

The market expects Reserve Bank Governor Alan Bollard to increase the OCR to 2.75% in December, compared with last week when he was expected to wait until 2012. A further increase to 3.00% is expected in March.

The expected 90-day bank bill rate on 1 September 2011 is 2.76% (up from 2.67% last week) and 2.89% for 1 December 2011 (up from 2.86% last week).

There is a 68% probability that average floating-rate mortgages will reach 6.00% by the end of the year, down from a 70% probability last week, but just an 11% probability that they will reach 6.50% in 2011, down from 15% last week.

The market is predicting the Current Account deficit for the year to March 2011 will be 5.03% of GDP (steady compared with last week and down from a surplus of 1.09% of GDP the week before). The market is predicting a deficit of 4.90% of GDP for the year ending June 2011 (4.98% last week and a surplus of 1.08% of GDP the week before), 4.51% of GDP for the year ending September 2011 (4.49% last week and 0.6% the week before), and 3.34% of GDP for the year ending December 2011 (3.32% last week a and 1.54% the week before).

There is just a 0.4% probability that Fitch Ratings will announce a downgrade of New Zealand's long term currency rating before 1 July (compared with last week).

Election Date, Parties & Personnel

The probability the election will be held on Saturday 26 November is steady at 96%, and all current leaders of parliamentary parties have at least a 92% probability of remaining in their positions until then. The most vulnerable now is Maori Party Co-Leader Dr Pita Sharples, but with just an 8% probability of being replaced prior to the election.

Key Electorate Contests

Act bounced back in Epsom this week, with an 86% probability (compared with 79% last week and 86% the week before) that the seat will be won by a candidate other than a National candidate or incumbent Act MP Rodney Hide.

In Ohariu, United Future's Peter Dunne has again strengthened his position, with a 76% chance of being re-elected (up from 69% last week and 65% the week before). Labour's Charles Chauvel is second favoured at 13%, ahead of National MP Katrina Shanks, who has an 11% probability of winning the electorate.

The market appears to be in two minds about New Zealand First. While the market indicates it will reach the 5% threshold this week (up from 4.7% last week), it indicates that Winston Peters still only has a 26% probability of returning to Parliament.

As forecast by iPredict in last week's update, Hone Harawira's Mana Party won the Te Tai Tokerau by-election. Expectations he will win the seat in the General Election have risen to 81% (compared with 70% last week and 52% the week before).

Maori Party Co-Leader Pita Sharples is expected to retain Tamaki-Makaurau (70%, steady), Tariana Turia is expected to retain Te Tai Hauauru (76% steady), and Maori Party MP Te Ururoa Flavell is expected to retain Waiariki (76%, down from 77% last week).

For the Labour Party, Nanaia Mahuta is expected to retain Hauraki-Waikato (73%, steady) and Labour's position in Ikaroa-Rawhiti (currently Parekura Horomira's seat) has weakened slightly (70% probability, down from 72% last week, having risen from 53% the week before).

Te Tai Tonga remains forecast to change hands, with a 68% probability it will be won by Labour's Rino Tirikatene from the Maori Party's Rahui Katene, up from 66% last week.

In marginal electorates other than those mentioned above, the probability National's Jonathan Young will retain New Plymouth is up to 68%, up from 53% last week and 52% the week before. There is a 77% probability that National's Nikki Kaye will retain Auckland Central, up from 76% last week. National's Paula Bennett remains only marginally favoured to retain Waitakere (53% probability, up from 52% last week) and Labour's Damien O'Connor is expected to win back West Coast-Tasman for Labour (53% probability, down from 55% last week).

With no changes to forecast winners in electorate seats over the last week, National continues to be expected to win 40 electorate seats, Labour 24, the Maori Party 3, and Act, United Future and the Mana Party 1 each.

Party Vote, Election Result and Alternative Scenarios

National's forecast party vote has decreased this week, while Labour's forecast vote share has increased slightly. Forecast party vote shares are now: National 44.5% (down from 45.5% last week but up from 43.5% the week before), Labour 31.4% (up from 31.0% last week but down from 33.6% the week before), the Greens 7.2% (down from 7.3% last week), Act 4.6% (up from 4.2% last week), New Zealand First 5.0% (up from 4.7% last week) UnitedFuture 2.2% (up from 2.0% last week), the Maori Party 1.9% (up from 1.8% last week), the Mana Party 2.0% (up from 1.4% last week), the New Citizen Party 0.6% (steady) and the proposed Reform New Zealand Party 0% (steady).

Based on this data, and the electorate results above, Parliament would be as follows: National 54 MPs, Labour 38 MPs, the Greens 9 MPs, New Zealand First 6 MPs, Act 6 MPs, the Maori Party 3 MPs, UnitedFuture 3MPs and the Mana Party 2 MPs. There would be 121 MPs, requiring a government to have the support of 61 MPs on confidence and supply, so that John Key's National Party would have the numbers with the support of the Act Party and either the Maori Party or UnitedFuture. It would also be possible to have a Labour/Greens/UnitedFuture/New Zealand First/Maori Party/Mana Party Government

Given the market predicts only a 26% chance that Winston Peters will return to Parliament, iPredict has also analysed what might happen should New Zealand First not win 5% of the vote. Under this scenario, Parliament would be as follows: National 57 MPs, Labour 40 MPs, the Greens 9 MPs, Act 6 MPs, the Maori Party, UnitedFuture and Mana parties 3 MPs each. There would be 121 MPs, requiring a government to have the support of 61 MPs on confidence and supply. John Key's National Party would require the support of the Act Party or both the UnitedFuture and the Maori parties.

Overall, however, the market continues to indicate an 87% probability there will be a National Prime Minister after the election (steady compared with last week).

MMP Referendum and Miscellaneous

The probability New Zealanders will elect to retain the MMP voting system in the referendum to be held on Election Day is steady at 78%, despite the launch of a campaign against the system.

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. This week's was taken at 8:22 am today.

ENDS

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