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Ipredict Ltd 2014 Election Update #1

IPREDICT LTD
2014 ELECTION UPDATE #1
Wednesday 15 January 2014
FOR IMMEDIATE RELEASE
www.ipredict.co.nz 

Key Points:

•       Election expected in Q4 2014, most probably in November
•       Growing economy expected, but with rising interest rates
•       Only National, Labour and Greens to reach 5% threshold
•       Maori, Conservative, Mana and UnitedFuture parties to win electorate seats but Act to miss out
•       Very slight advantage to John Key as head of a National/Conservative/UnitedFuture government

Commentary:

This is the first iPredict Update for the 2014 New Zealand General Election with forecasts based on trading by the more than 7000 registered iPredict traders.  As in 2011, the newsletter will be based on a market snapshot taken at a random time, initially weekly and then daily during the election campaign.

The first snapshot, which was taken at 9.32 am today, suggests a very slight advantage to incumbent prime minister John Key, most probably leading a National/Conservative/UnitedFuture government, with or without the Maori Party.

Economic Context

Growth is expected to be strong duing the year.  There is a 98% probability growth in the December 2013 quarter will be reported to have been more than 0.5% and a 48% probability it will be above 1%.  The probability of growth exceeding 1% in the March 2014 quarter is 90%, in the June 2014 quarter 87%, in the September 2014 quarter 60% and the December 2014 quarter 82%.

Unemployment is expected to have been below 6.5% in the December 2014 quarter and to fall below 6.0% in the March 2014 quarterbut remain above 5.5% through to the end of the year.

The current account deficit is expected to remain between 2% and 4% of GDP through the year.

There is an 80% probability there will be a fiscal surplus in 2014/15.

Inflation is expected to remain below 2% until the September 2014 and December 2014 quarters, with a 52.5% probability it will exceed 2% in each of those quarters.

Interest rates will clearly be on the rise by the election.  There is a 99% probability the Reserve Bank will raise the Official Cash Rate(OCR) in 2014.  There is a 68% probability the OCR will be raised by 25 basis points on 13 March and an 89% probability there will be rises of at least 75 basis points during the year.  There is a 43% probability interest rate rises could be at least 100 basis points through the year.  

The Reserve Bank’s restrictions on high loan-to-value ratio mortgages will stay in place through 2014, with 90% probability.

Election Date & Personnel

There is an 80% probability the election will be held in the fourth quarter of 2014, and a 55% probability it will be held in November.

All current party leaders, except for retiring Act leader John Banks and retiring Maori Party co-leader Tariana Turia are overwhelmingly expected to remain in their roles until nomination day.  There is a 71% probability Jamie Whyte will be the next leader of the Act Party.  

If there were a change of leader in either the National or Labour parties, Judith Collins and Grant Robertson are currently favourites to take the role in their party, with 40% and 45% probability respectively.  

Labour’s Ruth Dyson and Trevor Mallard are expected to retire at the election, and there is a 47% probability that National’s Murray McCully will join them.

Electorate Contests

Contract bundles for every electorate will be launched progressively through the year.  Currently, the market indicates that theMaori PartyMana and UnitedFuture will each win one electorate seat.  The Conservative Party sits on a knife-edge, with a 53% probability it will win one electorate seat.  The GreensNZ First and Act are not expected to win electorate seats.

Party Vote

Of the major parties, National is expected to win 43.0% of the party vote, the Labour Party 34.5% and the Green Party 9.5%.  

No other parties are expected to reach the 5% threshold under the MMP electoral system.  The Conservative and NZ First parties are both expected to win 4.6% of the party vote, the Maori Party 1.5%, Act 1.3%, Mana 0.7%, UnitedFuture 0.6% and the Aotearoa Legalise Cannabis Party 0.3%.  

Stocks for the proposed Civilian and Kim Dotcom parties will be launched in the near future.

Election Result & Alternative Scenarios

Based on the party vote forecasts and the electorate results above, Parliament would be as follows: National 54 MPs, Labour 44 MPs, Greens 12 MPs, the Conservative Party 6 MPs, the Maori Party 2 MPs, UnitedFuture 1 MPs and Mana 1 MP, for a total of 120 MPs.  A government would be required to have the support of 61 MPs on confidence and supply.

Under this scenario, National, the Conservative Party and UnitedFuture could form a government with 61 MPs.  Were the Maori Party involved, such a government would be supported by 63 MPs.

Were the Conservative Party not to win an electorate seat, a Labour/Green/Maori Party/Mana government could be formed with 62 MPs.

Overall, the market indicates a very narrow advantage to National, with a 53.3% probability of a National prime minister after the next election and a 45.1% probability of a Labour prime minister.

Miscellaneous

iPredict Ltd is owned by Victoria University of Wellington.  Details on the company and its stocks can be found at www.ipredict.co.nz. The weekly political update is prepared by Exceltium Ltd on a pro bono basis. 

ENDS

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