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iPredict Election Update

iPredict Election Update

Key Points:
Mana now forecast to win 2 seats and Maori Party only 1
National reaches new high of 76% probability of forming next government but will require support or acquiescence of NZ First, which holds balance of power
Labour falls below 30% forecast party vote but could still govern with all of the Green, NZ First, Mana and Maori parties
Flavell in tight race for Waiariki electorate
Nash looking strong in Napier
Growth forecasts ease but Current Account Deficit forecasts improve

Commentary:

The probability National will lead the next government has reached a new high of 76% although it would need the support or acquiescence of NZ First, according to the combined wisdom of the more than 7000 registered traders on New Zealand’s online predictions market, iPredict. A fall in support for the Maori Party, who are now in a tight battle to retain Co-Leader Te Ururoa Flavell’s Waiariki seat, combined with increased support for Mana and NZ First, mean National would require Winston Peters’ formal support, or be dependent on his party sitting on the cross-benches, in order to govern. Meanwhile, although Labour’s support under Leader David Cunliffe has now fallen below 30%, it would still be in a position to form a government comprising the Green, New Zealand First, Maori and Mana parties.

Economic Context
Growth expectations have eased marginally this week. Statistics NZ is expected to report on 19 June growth of 1.1% in the March 2014 quarter (steady), while the market forecasts growth of 1.0% in the June quarter (down from 1.2% last week), 1.2% in the September quarter (steady) and 1.2% in the December quarter (steady). Annual growth for 2014 is now forecast to be 4.5% (down from 4.7% last week).
Expectations for the unemployment rate are broadly stable. Unemployment continues to be expected to be 5.8% in the March 2014 quarter, 5.7% in the June quarter, 5.5% in the September quarter (down from 5.6% last week) and 5.5% in the December quarter.

Following last week’s announcement of an improved current account deficit of 3.4% of GDP in the year to December 2013, the current account deficit is now expected to be 3.1% in the March 2014 quarter (down from 3.3% last week), 3.4% in the June quarter (down from 3.5% last week), 4.0% in the September quarter and 4.0% in the December quarter (both steady).

There remains a 94% probability of a fiscal surplus in 2014/15, (steady), however, the surplus in 2014/15 is now expected to be 0.62% of GDP (up from 0.49% last week). The surplus forecast for 2015/16 is expected to be 0.93% of GDP and 2.0% of GDP for 2016/17 (both steady).

Inflationary expectations are broadly steady, with annual inflation expected to remain around the Reserve Bank’s 2% target midpoint and within the 1-3% band. Annual inflation to the end of the March quarter is expected to be 1.6% (steady) and will rise to 1.9% in the June quarter (steady), 1.9% in the September quarter (down from 2.0% last week) and 2.1% in the December quarter (steady).

The market is forecasting a further 25 basis point increase at the next OCR Review on 24 April. Compared with the rate of 2.5% at the start of the year, the market is pricing that the OCR will be up 46 basis points in April (down from 48 points last week), 64 in June (down from 68), 79 in July (down from 81), 90 in September (down from 92), 99 in October (down from 101) and 112 in December (down from 113).
Other Issues
New Zealand’s chances of being elected to the UN Security Council for 2015-16 remain unchanged at 39%. The probability New Zealand will sign a Free Trade Agreement with South Korea before 1 December 2014 also remains steady at 47%.

The probability the US Congress will ratify the yet-to-be-signed Trans Pacific Partnership (TPP) agreement before 1 July 2015 is steady at 2.5%, with there now being a 37.8% probability a deal will be ratified by the US Congress by 1 July 2017 (up fractionally from 37.5% last week).
Party Vote
All current party leaders, except for Maori Party co-leader Tariana Turia, are strongly expected to remain in their roles until nomination day with at least 95% probability.

A party vote turnout of 74.7% is forecast (down slightly from 75% last week), marginally up from the 74.2% turnout in 2011.

Of major parties, National has gained ground this week, and is expected to win 44.80% of the party vote, up from 43.74% last week. Labour has fallen to 29.7%, down from 31.71% last week, while the Green Party’s expected vote has improved to 11.30%, up from 9.74% last week.
Of smaller parties, NZ First has continued its recent increases in support, and is now expected to narrowly reach the 5% threshold under the MMP electoral system when parties’ likely support is adjusted to sum to 100%. Winston Peters’ party is expected to win 5.18% of the party vote, up from 5.07% last week and 4.97% the week before.

The Conservative Party has fallen this week to 2.97% (down from 3.88% last week).

Act remains below 2%. The party is now forecast to win 1.73% of the party vote, compared with 1.69% last week, 1.72% the preceding week, 2.18% three weeks ago, and 2.86% four weeks ago.
Mana’s forecast party vote continues to rise and is now 1.25%, up from 1.09% last week, 0.96% two weeks ago, and 0.40% three weeks ago.

The Maori Party is forecast to receive 1.06% (up from 1.19%), while the Internet Party is up to 0.96% (from 0.89%). UnitedFuture is now on 0.58% (up from 0.50%), Aotearoa Legalise Cannabis Party on 0.29% (down from 0.30%), and the Civilian Party and Democrats for Social Credit on 0.10% each (both steady).
Electorate Contests
The Conservative Party now has just a 33% probability of winning at least one electorate seat (down from 35%). Its expected representation remains just 0.37 MPs.

Of electorate bundles launched so far, the Conservatives are not expected to win any specific electorate, with just a 15% probability of winning East Coast Bays, (steady), a 14% probability of winning Upper Harbour (up from 12% last week), and a 12% probability of winning Rodney (steady).

Mana has an 86% probability of winning at least one electorate seat (down from 90% last week), while the Maori Party now has a 79% probability of winning at least one seat (down from 82% last week). Mana’s expected electorate representation is 1.21 electorate MPs, down from 1.28 last week. The expected Maori Party representation has also fallen, with the party now expected to have 0.96 electorate MPs, down from 1.11 last week.

The Mana Party appears most likely to retain the Te Tai Tokerau electorate, with 83% probability leader Hone Harawira will win the seat (down from 90% last week). However, Mana has made significant gains this week in the Waiariki electorate currently held by Maori Party Leader Te Ururoa Flavell. Mr Flavell now has just 52.5% probability of winning the seat, (down from 71% last week), with the Mana Party trailing narrowly with 45% probability. The probability the Maori Party will retain Tariana Turia’s Te Hauauru electorate has continued to slip to 18.2%, down from 23.2% last week. Pita Sharples’ Tamaki Makaurauelectorate remains safe for Labour with 90% probability it will be won by that party.

UnitedFuture and Act remain fairly secure. UnitedFuture has a 82% probability of winning at least one seat (up from 78% last week) and has expected electorate MP representation of 0.84 MPs, steady. Its probability of winning Peter Dunne’s Ohariu electorate is 80%, down from 83% last week. Act has a 72% probability of winning at least one electorate seat (down from 77% last week) and its expected electorate representation is 0.73 MPs, down from 0.77 last week. It has a 67% probability of winning Epsom (down from 71% last week).

The Greens and NZ First continue not to be expected to win electorate seats.

The four other most marginal seats are Napier, Rotorua and Waimakariri and Port Hills. Labour has strengthened its position in Napier, where it now has 67% probability of picking up the seat from National (up from 59% last week), in Waimakariri where it has 71% probability (up from 69%), and in Port Hills where it has 80.2% probability of retaining the seat (up from 79%). National’s support in Rotorua has continued to slip this week, although it is still expected to hold the electorate with 69% probability (down from 71% last week).
Election Result & Alternative Scenarios
Based on the party vote forecasts and the electorate results above, Parliament would be as follows: National 56 MPs (steady), Labour 37 MPs (down from 40 last week), the Greens 14 MPs (up from 12), NZ First 7 MPs (up from 6), Act 2 MPs (steady), Mana 2 MPs (up from 1), the Maori Party 1 MPs (down from 2) and UnitedFuture 1 MP (steady). Parliament would have 120 MPs and a government would be required to have the support of 61 MPs on confidence and supply.
Under this scenario, the current National/Act/Maori Party/UnitedFuture governing arrangement would fall 1 seat short of the 61 MPs needed for a majority. National would therefore require NZ First’s support or acquiescence to govern, either through a coalition or a confidence and supply arrangement (63 seats), or by NZ First abstaining on confidence and supply.
A Labour-led government would also be possible, however it would require the support of all of the Green, NZ First, Mana and Maori parties (61 seats). This means NZ First retains the balance of power.

Should NZ First have the balance of power after the election, iPredict’s bundle of stocks forecasting NZ First’s decision-making indicates there is now a 37.3% probability it would provide confidence and supply to a National-led government (up from 36% last week) and a 26.4% probability it would not give confidence and supply to anyone. This would favour the biggest bloc, which is currently forecast to consist of National/Maori Party/Act/UnitedFuture. This means there is a 63.7% NZ First would act in a way that would lead to a National-led government. There is a 35.2% probability NZ First would provide confidence and supply to a Labour-led government (down from 50% last week),
Overall, National has a 76% probability of leading the next government, its highest level since the last election, and up from 73% last week, 72% the week before and 65% three weeks ago.

Post Election Developments
The market continues to indicate a 78% probability that David Cunliffe will depart as leader of the Labour Party by the end of 2015 (steady compared with last week). There is an 82% chance he will depart by the end of 2016 (up from 80% last week, steady the week before, and 77% three weeks ago).

Grant Robertson’s chances of succeeding Mr Cunliffe have improved to 55%, up from 50% last week. Shane Jones is remains second favourite with 20% probability, up from 17% last week. Support for both Jacinda Ardern and Andrew Little has fallen, and they now have 11% and 9% respectively.

In National, there is a 29% probability John Key will depart as leader before the end of 2015 (down from 37% last week), a 55% probability he will depart by the end of 2016 (down from 60%) and a 77% probability he will depart by the end of 2017 (down from 80%).

Steven Joyce remains the favourite to succeed Mr Key as National Party leader, with 35.4% probability (up from 32.5% last week). Judith Collins remains second favourite with 26.9% probability (up from 22% last week), just ahead of Simon Bridges who is on 20% probability (up from 19% last week).

Labour’s chances of winning the 2017 election remain steady this week, with a 55% probability they will be successful.

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 and is based on a snapshot taken at a random time each week. This week’s was taken at 8.21 am today.

ENDS

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