IPREDICT LTD
NEW ZEALAND ELECTION NEWSLETTER #3:
13 July 2012
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Key Points:

• Government expected to go full term
• Election now 50/50 after National recovers fractionally
• No recession or fiscal surplus before election
• King to run for Wellington mayoralty and Jones to be criticised by Auditor-General
• MMP review expected to propose reducing threshold to 4% and abolishing one-seat rule
• Turia and Sharples both picked to step down as Maori Party co-leaders
• Banks highly vulnerable as Act leader but no Epsom by-election before election

Introduction
This is the third newsletter summarising forecasts by the 7100 registered traders on New Zealand’s online predictions market, iPredict, of the results of the next New Zealand General Election. Anyone else wants to trade can do so by signing up for free at https://www.ipredict.co.nz/app.php?do=register.
The newsletter will be produced periodically, with greater frequency as we move closer to the election, which must be held by 24 January 2015.
Each newsletter will provide a snapshot of market forecasts, taken at a random time to avoid manipulation by political parties and activists. Today’s was taken at 9.15 am (New Zealand Time).
Election Date
The election is now overwhelmingly expected to be held in the fourth quarter of 2014 (85% probability, up from 75% three weeks ago) with less than a 10% chance it will be held in 2012 or 2013.
Economic Context
Traders believe there is a 30% chance of a recession before the next General Election, down from 31% three weeks ago. There has been a small increase in confidence that the Government will achieve its target of fiscal surplus by 2014/15, to 22% up from 20% three weeks ago, however a deficit of between 0.5% and 0.75% of GDP continues to be been as most likely. Stocks on New Zealand’s short-term economic prospects can be found at https://www.ipredict.conz/app.php?do=browse&cat=5 with stocks on its longer-term prospects available at https://www.ipredict.co.nz/app.php?do=browse&cat=885.
Political Developments
Confidence that the Government will complete the sale of 49% of the shares in Mighty River Power has fallen in recent weeks. New stocks have been launched today asking whether or not at least 100,000,000 shares in Mighty River Power will be sold by the end of Q3 2012 and Q4 2012 respectively. Privatisation of Christchurch City Council assets is not expected.
The Auditor-General is expected, with 80% probability, to criticise the probity of Shane Jones' decision to give Bill Liu citizenship, but Mr Jones is not expected to resign from parliament in the near future.
Tim Shadbolt, Dave Cull, Julie Hardaker, Jono Naylor and Len Brown are expected to be re-elected mayors of Invercargill, Dunedin, Hamilton, Palmerston North and Auckland respectively, while re-election is not expected for either Christchurch’s Bob Parker or Wellington’s Celia Wade-Brown.
Annette King is expected to stand for the Wellington mayoralty and there is a 73% probability of a by-election in her Rongotai electorate before the next General Election. Aaron Keown is strongly expected to stand for the Christchurch mayoralty.
A by-election is not expected in the Epsom electorate before the next General Election and Kim Dotcom appears safe from extradition until 1 January 2014 at the earliest.
A deal between the New Zealand Government and SKYCITY Entertainment to build a National Convention Centre in exchange for regulatory changes is expected to be announced before November 2012. It is strongly expected to involve 350 or more new pokie machines
A split purchasing age for alcohol is expected, with 86% probability.
Former ACC Minister Nick Smith is not expected to be re-appointed a minister this year.
Nobody is expected to be found to have been responsible for leaking Michelle Boag’s email to Judith Collins on ACC matters to the media.
National’s Aaron Gilmore and Labour’s Carol Beaumont are both expected back in parliament before the next election, suggesting resignations of at least one National and one Labour list MP are expected this parliamentary term.
Election Rules
There is now a 90% probability (up from 80% three weeks ago) that the MMP review’s initial proposal paper will recommend reducing the threshold for seats in parliament from the current 5% to 4% and just a 10% probability (down from 29% three weeks ago) that it will recommend keeping the one-seat rule which waives the 5% threshold for additional list MPs. The paper is not expected to recommend a ban on candidates standing as both electorate and party list candidates.
Party Leaders
Most party leaders continue to appear safe until the election. The leader of the NZ First Party is expected to be Winston Peters (92% probability), Peter Dunne is expected to lead UnitedFuture (87% probability), Prime Minister John Key is expected to lead National (86% probability), Russel Norman and Metiria Turei are expected to remain Green Party co-leaders (82% and 81% probability respectively), Hone Harawira is expected to remain leader of the Mana Party (81% probability), and Opposition Leader David Shearer is expected to remain leader of the Labour Party (70% probability).
Both Maori Party co-leaders, however, appear set to depart. There is just a 45% probability Pita Sharples will be male co-leader on nomination day and just a 27% probability Tariana Turia will be female co-leader. There is a 57% probability Te Ururoa Flavell will be a Maori Party co-leader on nomination day.
Act Party leader John Banks remains highly vulnerable, with just a 24% probability he will be keep his job through to nomination day.
Were there a change in National’s leadership, Judith Collins continues to be favoured, while Grant Robertson continues to be favoured should there be a leadership change in Labour.
Electorate Contests
Despite questions over its leadership, the Maori Party continues to be expected to win two electorates at the next election and the Mana Party one electorate. None of the Green, NZ First, Conservative, UnitedFuture and Act parties is expected to win an electorate seat.
Party Vote
National’s forecast party vote has risen back above 40% after dropping below that point for the first time three weeks ago. The following party vote shares are now expected at the next election: National 40.1% (up from 39.7% three weeks ago), Labour 35.4% (steady), Greens 10.0% (down from 10.3%), NZ First 5.1% (steady), Conservatives 4.0% (steady), Act 1.5% (steady), the Maori Party 1.4% (steady), Mana 1.2% (steady), UnitedFuture 1.1% (steady) and the Aotearoa Legalise Cannabis Party 0.5% (steady).
Seats in Parliament
Under the electorate and party vote forecasts above, and assuming a 5% threshold for seats, iPredict is forecasting the following Parliament: National 51 seats (steady compared with three weeks ago), Labour 45 seats (steady), Greens 13 seats (steady), NZ First 7 seats (steady), Maori Party 2 seats (steady) and Mana Party 2 seats (steady). Parliament would consist of 120 MPs, requiring a group of parties to have 61 seats to govern.
However, were the MMP threshold reduced to 4%, Parliament would be as follows: National 50 seats (up from 49 three weeks ago), Labour 44 seats (steady), Greens 12 seats (down from 13), NZ First 6 seats (steady), Conservatives 5 seats (steady), the Maori Party 2 seats (steady) and Mana 1 seat (steady). This Parliament would also consist of 120 MPs, requiring a group of parties to have 61 seats to govern.
Formation of Government
Under the 5% threshold scenario above, no plausible National-led government would be possible. A Labour/Green/NZ First government would have 65 seats and a Labour/Green/Maori/Mana government would have 62 seats.
Under the 4% threshold scenario above, however, a National-led government would have 61 seats with the support of the NZ First and Conservative parties. Including the Maori Party would give the government the support of 63 MPs. A Labour/Green/NZ First government would have 62 seats. A Labour/Green/Maori Party/Mana combination would have only 59 seats and could not govern.
In most scenarios, therefore, NZ First’s support continues to be critical and iPredict traders believe there is a 66% probability that the NZ First Party will indeed hold the balance of power, up from 65% three weeks ago. If it does so, traders believe there is a 49% probability it will back a National-led government (up from 48%), a 32% probability it will back a Labour-led government (steady) and a 19% it will choose to choose to sit on the cross-benches giving neither a National-led nor Labour-led government support on confidence and supply (down from 20%).
As at 9.15 am this morning, there was a 50% probability of a National prime minister (up from 49% three weeks ago) and a 50% probability of a Labour prime minister (steady).
Miscellaneous
iPredict is owned by Victoria University of Wellington and operates under New Zealand law under the Futures Contracts (iPredict Limited) Declaration and Exemption Notice 2008. iPredict traders warrant and undertake that they are 18 years of age or older and will comply will all laws in the jurisdictions in which they are present.
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