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iPredict Election Update: NZ First to hold balance of power

iPredict 2014 Election Update: NZ First to hold balance of power


Key Points:

NZ First to hold balance of power and decide whether National or Labour governs

National’s forecast party vote down and Labour’s up

Hamilton East now deadlocked between National and Labour

Growth forecasts improve

Other major economic forecasts unchanged

Commentary:

Winston Peters and the NZ First Party will decide whether New Zealand has a National or Labour-led Government after September’s election, according to the combined wisdom of the 7000 registered traders on New Zealand’s online predictions market, iPredict. With 61 seats required to govern, a National/Act/United Future and NZ First government would hold 63 seats, while a Labour/Green/Internet Mana and NZ First coalition would have 62 seats. Hamilton East is the country’s tightest electorate with voters now split 50:50 between National incumbent David Bennett and Labour challenger Cliff Allen, while National has made significant gains and narrowly trail Labour MP Phil Twyford who has just 52.5% probability of retaining the seat. Growth expectations have improved marginally this week, while forecasts for unemployment, inflation, New Zealand’s current account deficit and fiscal surplus are all unchanged.

Economic Context

Growth expectations have improved narrowly this week. Growth in the March 2014 quarter is now expected to be 1.1% (up from 1.0% last week), 1.0% in the June quarter (steady), 1.1% in the September quarter (steady) and 1.1% in theDecember quarter (steady). Forecast annual growth for 2014 is now 4.4% (up from 4.3%).

Unemployment expectations are also unchanged this week. Unemployment is expected to be 5.7% in the June quarter (steady compared with last week), 5.5% in the September quarter (steady) and 5.5% in the December quarter (steady).

Forecasts for New Zealand’s current account deficit are unchanged and the deficit is expected to be 3.1% for the March 2014 quarter (steady compared with last week), 3.3% in the June quarter (steady), 3.9% in the September quarter(steady) and 3.9% in the December quarter (steady).

The probability of a fiscal surplus in 2014/15 remains 84% (steady compared to last week). The surplus forecast for 2014/15 is 0.43% of GDP (steady), while the forecast for the 2015/16 surplus is 0.974% of GDP (steady), and the forecast surplus for 2016/17 remains 2.00% of GDP (steady).

Inflationary expectations remain below the Reserve Bank’s 2% target midpoint through 2014. Annual inflation to the end of the June quarter is expected to be 1.6%, (steady compared to last week), 1.6% in the September quarter (steady) and 1.7% in the December quarter (steady).

The market is forecasting an 88% probability that the Reserve Bank will increase the Official Cash Rate (OCR) by 25 basis points at its next review on 12 June (up from 84% last week). Compared with the rate of 2.5% at the start of 2014, the market is pricing that the OCR will be up 72 basis points in June (up from 71), 83 in July (up from 82), 89 in September (down from 90), 99 in October (down from 100), 108 in December (steady), 113 in January 2015 (down from 117) and 128 in March 2015 (down from 133).

Other Issues

There is now just a 10% probability Judith Collins will lose all her ministerial portfolios before parliament is dissolved on 14 August, down from 19% last week and 25% two weeks ago.

New Zealand’s chances of being elected to the UN Security Council for 2015-16 has increased to 37% (up from 30%, last week, but short of the 53% recorded three weeks ago). The probability Helen Clark will be appointed the next UN Secretary General has fallen to 27%, down from 31% last week. The probability New Zealand will sign a Free Trade Agreement with South Korea before 1 December 2014 is unchanged at 52%.

The probability the US Congress will ratify the yet-to-be-signed Trans Pacific Partnership (TPP) agreement before 1 July 2015 is 11% (steady), and there remains a 35% probability a deal will be ratified by the US Congress by 1 July 2017, (steady).

Party Vote

All current party leaders, except for Maori Party co-leader Tariana Turia and NZ First Leader Winston Peters, are strongly expected to remain in their roles until nomination day with at least 95% probability. The probability Mr Peters will lead NZ First on nomination day has risen to 94% from 93% last week. The party vote turnout is expected to be 78.3% (up from 76.9% last week), up from the 74.2% turnout in 2011.

Of major parties, National is expected to win 42.6% of the party vote, down from 44.68% last week. Labour has made significant gains and is up to 32.3%, from 28.71% last week, while the Green Party is down fractionally to 10.20%, from 10.24% last week.

Of smaller parties, NZ First is expected to win 5.1% of the party vote, down from 5.7% last week. The Conservative Party’s forecast party vote is down slightly to 3.6% from 3.8% last week, and remains short of the 5% threshold required for parliamentary representation unless it wins an electorate seat. Act is steady on 2.3%, as is UnitedFuture on 0.5%.

The Internet Mana alliance is expected to win 2.0%, down from 2.6% last week, while support for the Maori Party is 0.9%, down from 1.0% last week, and the Aotearoa Legalise Cannabis Party has fallen to 0.2%, down from 0.32% last week.

Electorate Contests

Act’s probability of winning at least one electorate seat is 83%, steady compared to last week, and its expected electorate representation is unchanged on 0.83 MPs. The market is pricing that it has an 84% probability of winning Epsom(down from 85%).

The Conservative Party’s probability of winning at least one seat is 35%, steady, although its expected electorate representation has fallen to 0.35 MPs from 0.37 last week. The Conservatives are not expected to win any specific electorate. Their probability of winning East Coast Bays is 29% (down from 31% last week), their probability of winning Rodney remains 11% (steady), although they have again fallen behind both National and Labour in Upper Harbour where they have just a 7% probability of victory, down from 8% last week.

UnitedFuture prospects have shifted marginally this week. It has a 78% probability of winning at least one seat (down from 79% last week) and has expected electorate MP representation of 0.79 MPs (up from 0.76). Its probability of winning Peter Dunne’s Ohariu electorate remains 79% (steady).

In the Maori electorates, following its announcement of a formal alliance with the Internet Party, Mana has a 71% probability of winning at least one seat (down from 75% last week) and its expected electorate representation is 1.0 electorate MPs (steady). The Maori Party now has a 60% probability of winning a seat (up from 53% last week) and its expected electorate representation has increased to 0.71 MPs (up from 0.61 MPs).

Mana’s probability of winning Te Tai Tokerau is 71%, down from 75% last week, and the probability it will win Waiariki has fallen to 40% (down from 45% last week) behind Maori Party Leader Te Ururoa Flavell on 57% probability (up from 53% last week). The probability the Maori Party will retain Tariana Turia’s Te Hauauru electorate remains 17% (steady), with Labour favoured to win with 83% probability (steady).

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

The six most marginal general seats, excluding Waiariki, East Coast Bays and Te Tai Tokerau are now Hamilton East, Te Atatu, Palmertson North, Port Hills, Tamaki Makaurau and Waimakariri.

In Hamilton East, support for Labour candidate Dr Cliff Allen has slipped (down from 55% last week) and Dr Allen is now deadlocked with National incumbent MP David Bennett on 50% probability.

In Te Atatu, Labour’s Phil Twyford now has just a 53% probability of holding the seat (down from 65% last week).

In Palmerston North, Labour’s Ian Lees-Galloway has continued to edge ahead and has a 57% probability (up from 53% last week) of retaining the seat from National candidate and Palmerston North Mayor Jono Naylor who has 40% probability (down from 48%).

In Port Hills, Labour’s Ruth Dyson continues to have a 69% probability of holding the seat (steady).

In Tamaki Makaurau, Labour’s Peeni Henare has a 71% probability of winning the seat currently held by retiring Maori Party MP Dr Pita Sharples, while in Waimakariri, Labour’s Clayton Cosgrove has a 73% probability of winning the seat from National’s Matthew Doocey.

Election Result & Alternative Scenarios

Based on the party vote forecasts and the electorate results above, a Parliament would include: National 53 MPs, Labour 40 MPs, the Greens 13 MPs, NZ First 6 MPs, Act 3 MPs, Internet Mana 3 MPs and the Maori Party and UnitedFuture 1 MP each. 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, National would require the support of NZ First to form a government. National, NZ First and Act would together hold 62 seats, with United Future and the Maori Parties each able to provide an additional seat. Labour would also be able to govern under this scenario. Labour, Greens, NZ First and Internet Mana would together hold 62 seats, with the Maori Party able to provide an additional seat if required. NZ First would therefore hold the balance of power and choose which major party governs.

iPredict’s bundle of stocks forecasting NZ First’s decision-making should it hold the balance of power indicates Mr Peters would support a National-led Government. There is now a 50% probability he would give confidence and supply to National (down from 53% last week) and a 39.7% probability he would give confidence and supply to Labour (up from 35.5% last week). There is a 10.0% probability he would give confidence and supply to neither (down from 10.5% last week), which would favour the larger bloc, which the market indicates would be National-led.

Overall, National now has a 73% probability of leading the next government, down from 74% last week.

Post Election Developments

David Cunliffe’s position as Labour leader remains unchanged. There remains a 70% probability he will depart as leader by the end of 2015, steady compared to last week, a 75% chance he will depart by the end of 2016, steady, and an 85% probability he will step down by the end of 2017, down from 87% last week.

Grant Robertson continues to be strongly favoured to succeed Mr Cunliffe. He has a 60% probability of being the next Labour leader (down from 65% last week), followed by Jacinda Ardern on 18% (up from 14%) and Andrew Little on 10% (down from 13%).

In National, John Key now has a 54% probability of departing as leader by the end of 2015 (up from 53% last week), a 70% probability of departing by the end of 2016 (up from 69%) and an 86% probability he will depart by the end of 2017 (up from 85%).

Steven Joyce remains favoured to succeed Mr Key as National Party leader, with 42% probability (down from 47% last week), followed by Judith Collins on 16% probability (down from 17% last week) and Simon Bridges on 8% (steady).

Labour’s chances of winning the 2017 election are steady on 53%.

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 10.12 am yesterday.

ENDS

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