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iPredict Ltd: Economic & Political Newsletter: 21 March 2012

iPredict Ltd: Economic & Political Newsletter

21 March 2012

Hot Topics

The 6000 traders on New Zealand’s online predictions market, iPredict, see a Liberal National Party win in Queensland as close to a dead cert with the party expected to win as many as 68 of the 89 seats in the State Parliament. Traders have somewhat less confidence that party leader (outside of Parliament) Campbell Newman, will win Ashgrove, although give him a 77% probability of doing so. The Coalition remains favoured for the next Australian federal election.

In New Zealand, early trading indicates a 94% probability that Police will launch an investigation into the unfolding ACC scandal that has already seen Cabinet Minister Nick Smith resign. Stocks have been launched on who will replace Dr Smith in Cabinet and can be traded at https://www.ipredict.co.nz/app.php?do=browse&cat=1

Despite the ACC scandal, National appears to have gained ground over Labour in the last week. Labour’s predicted vote share has fallen 3.3 points to 34.5%, while National’s predicted vote-share is up 2.5 points to 42.6%. However, once the clear coalition partners of ACT, Greens, and Mana are factored in, the Labour/Green/Mana grouping would have 56 MPs against National/Act’s 56 MPs, making New Zealand First the kingmaker in the next election, and Labour’s David Shearer remains favoured to lead the next Government.

In other New Zealand matters, the Auckland Council is no longer expected to announce a new bin for glass recycling before 2014, while Pengxin’s bid for Crafar Farms is now expected to become unconditional in May. Expectations for Fonterra’s payouts have fallen again, with the company now expected to pay just $6.78 per kilogram of milk solids in 2011/12 and $6.33 in 2012/13. As accurately forecast by iPredict, formal rationing of Marmite has begun in New Zealand.

In the United States, Mitt Romney is expected to win the Republican Party race in Illinois, while Rick Santorum is expected to win Missouri and Louisiana. iPredict continues to forecast that Democrat Barack Obama will be re-elected President in November.

New Zealand Economic Forecasts

Contracts have been extended out to December 2013 for GDP growth, unemployment, Inflation, and the current account deficit. Commentary on these stocks will be included as trading increases at https://www.ipredict.co.nz/app.php?do=browse&cat=5

Short-term New Zealand growth prospects have remained steady this week, with growth expected to be 0.7% for the December 2011 quarter, 0.5% for the March 2012 quarter, 0.6% for the June 2012 quarter, and now 0.5% for the September 2012 quarter.

Forecast unemployment is unchanged this week, with the market still predicting unemployment of 6.4% for the March 2012 quarter and 6.3% for the June 2012 quarter.

Inflationary expectations have remained steady over the past week. Inflation is forecast to be 1.6% for the March 2012 quarter, 1.5% for the June 2012 quarter and 1.7% for the September 2012 quarter.

91 unleaded petrol is expected to cost $2.21 per litre at the end of March, falling to $2.20 per litre at the end of April and remaining steady at $2.20 per litre at the end of May.

The Reserve Bank of New Zealand is expected to hold off increasing the Official Cash Rate until October 2012 where it will rise to 2.75%, and again in January 2013 to 3.00%, earlier and greater increases compared with last week.

With Fonterra announcing lower expectations for milk solids before retentions, Fonterra payouts continue to fall. The 2011/12 Fonterra payout is now expected to be $6.78 per kilogram, down 8c over the week The forecast payout for 2012/13 has plummeted 43c to $6.33, forecast 2013/14 payout has slipped 4c to $7.38, and forecast payout for 2014/15 has slipped 4c to $7.42.

Current account deficit expectations are 4.22% of GDP to December 2011, up 0.40 points on last week, and 4.29% to March 2012, up 0.02 points on last week.

International Economic Forecasts

World growth expectations remain steady at 3.09% for the 2012 year.

There is a 27% probability that at least one Euro member will depart the single currency in 2012.

There continues to be a 40% probability the US Senate will formally approve a resolution of ratification of the Trans Pacific Partnership by July 2015.

International Politics

In Australia, iPredict traders forecast that Prime Minister Julia Gillard will remain leader of the Labor Party (58% probability) until the next federal election which must be held by 30 November 2013.

At the election, first preferences are forecast to be: Labor 33.9% (steady), Liberal 31.0% (steady), Greens 112% (steady), Queensland Liberal National 9.4% (up from 8.3%), Australian National 5.2% (up from 4.2%) and Family First 4.2% (steady). On a two-party preferred basis, the Coalition is forecast to win 51.7% of the vote and Labor 48.3%, and the Coalition has a 73% probability of forming the next Federal Government (steady compared with last week).

In Queensland, which goes to the polls on 24 March, first preferences are expected to be Liberal National 47.5% (up from 47.0%), Labor 29.7% (down from 30%), the Greens 9.0% (steady), and all others 14.0%. The Liberal National party is predicted to win 68 seats, Labour 17 seats, and all others 4 seats. There is a 98% probability Liberal National will win the election (up from 90% probability last week) and a 77% probability its leader Campbell Newman will enter Parliament via the Ashgrove seat, up from 70% probability last week.

In China, Wen Jiabao is not expected to remain the Premier of the People's Republic of China through to 1 January 2013. Yang Jiechi is expected to remain Minister of Foreign Affairs and Chen Deming to remain Commerce and Trade Minister. However, Zhou Xiaochuan is expected to be replaced as Governor of the People's Bank of China by year’s end, as is Xie Xuren as Minister of Finance.

Rick Santorum is expected to win the Missouri and Louisiana Caucus and Primary. Overall, Romney has a 92% chance of being the Republican Party nominee, however Barack Obama is expected to win the presidential election.

In the UK, the Conservative / Liberal Democrat coalition is expected to survive 2012 (77% probability).

In France, however, there is a 68% probability Francois Hollande will win the presidential election over incumbent Nicolas Sarkozy.

In Syria, Bashar al-Assad is expected to remain in power until at least 1 June 2012. Contracts for 1 July, 1 August and 1 September will be launched next week.

There is a 27% probability Israel will launch an airstrike against Iran in 2012, down from 35% last week and a 13% probability North Korea will detonate an atomic device down from 14% last week.

Science and Climate Change

There is a 40% probability average global temperatures will be hotter in 2012 than in 2011 and a 10% probability 2012 will be the hottest year on record.

NZ Issues

Early trading suggests there is a 94% probability that Police will launch an investigation into the ACC scandal.

The market now indicates that Pengxin Group’s bid for Crafar farms will become unconditional between 28 April and 2 June 2012.

Despite claims in the media that officers may need to be laid off and stations closed, funding for the New Zealand Police is expected to be increased by 2.8% in this year’s Budget.

The defence force isn’t expected to announce an outsourcing of their payroll administration before 2013.

The Auckland Council is no longer expected to add a new bin for glass collection, and the market doesn’t believe there will be an increase in the waste levy rate.

New Zealand Politics

For the next New Zealand general election, due in 2014, party vote forecasts are: National 42.6% (up from 40.1%), Labour 34.5% (down from 37.8%), Greens 9.1% (down from 9.5%), NZ First 5.1% (up from 5.2%), Conservative 2.7% (steady), Act 1.7% (steady), Maori Party 1.4% (steady), Mana Party 1.2% (down from 1.3%), and UnitedFuture 0.7% (steady).

In electorate contests, the Maori Party is expected to win only win two electorate seats, and the Mana and Act parties one each, while the Green, New Zealand First, Conservative and UnitedFuture parties are not expected to win any seats.

Based on these results, Parliament would consist of: National 54 MPs, Labour 43 MPs, the Greens 11 MPs, New Zealand First 6 MPs, the Maori, Act and the Mana Party 2 MPs each, UnitedFuture would have no MPs. There would be 120 MPs, requiring 61 to govern.

The National/Act group would have 56 MPs as would the Labour/Green/Mana group, so that either could form the next government with the support of New Zealand First. Overall, there is a 55% probability Labour will form a Government after the next General Election, with a 42% probability David Shearer will be Prime Minister by 1 January 2015.

Grant Robertson and Judith Collins are favoured should there be a vacancy in the leadership of the Labour and National parties, respectively.

In New Zealand mayoral races, Bob Parker is set to lose Christchurch and Celia Wade-Brown to lose Wellington Peter Beck, Lianne Dalziel and Aaron Keown are expected to stand for the Christchurch mayoralty Dave Cull in Dunedin, Tim Shadbolt in Invercargill, Len Brown in Auckland, Julie Hardaker in Hamilton and Jono Naylor in Palmerston North all look safe.

iPredict is owned by Victoria University of Wellington. Details on the company and its stocks can be found at www.ipredict.co.nz. The weekly snapshot is taken at a random time each week. This week’s was taken on the afternoon of Wednesday 21 March.


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