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Inflationary And Interest-Rate Expectations Continue to Fall

IPREDICT LTD

NEW ZEALAND WEEKLY ECONOMIC & POLITICAL UPDATE

Thursday 11 December 2014

FOR IMMEDIATE RELEASE

www.ipredict.co.nz

INFLATIONARY AND INTEREST-RATE EXPECTATIONS CONTINUE TO FALL

Forecast annual inflation has reached new lows and the Official Cash Rate is now not expected to reach 3.75% in 2015, according to the combined wisdom of the 8000+ registered traders on New Zealand’s predictions market, iPredict. The forecast fiscal deficit for 2014/15 is up to 0.14% of GDP but growth forecasts remain steady. Labour’s forecast party vote had edged up but National still has a 55% probability of leading the next government after an election expected in 2017.

Politics:

John Key is expected to remain National leader until at least the end of 2016 (74% probability, up from 70% last week) and has a 44% probability of remaining National leader until at least the end of 2017 (steady compared with last week)

• Paula Bennett remains favourite to become National Party leader if a vacancy arises (26% probability, steady compared with last week), followed by Steven Joyce (25%, steady) Jonathan Coleman (12%, steady) and Simon Bridges (7%, steady)



• Stocks on Andrew Little’s longevity as leader of the Labour Party will be launched in the near future

• Even money on Judith Collins being appointed to Cabinet before next election (50.0% probability, down from 50.3% last week)

Next election expected in 2017 (90% probability, down from 93% last week)

• Forecast party vote shares at next election:

o National 45.7% (steady compared with last week)

o Labour 31.8% (up from 31.5% last week)

o Greens 11.0% (down from 14.7% last week)

o NZ First 7.0% (steady compared with last week)

o Others 4.6% (up from 1.1% last week)

• National expected to win 2017 General Election (55% probability, steady compared with last week)

Economics:

• Quarterly GDP growth expected to be:

o 0.7% of GDP in the September quarter (steady compared with last week)

o 0.8% in the December quarter (steady compared with last week)

o 1.0% in the March 2015 quarter (steady compared with last week)

o 1.1% in the June 2015 quarter (steady compared with last week)

• Unemployment expected to be 5.3% in the December quarter (steady compared with last week)

• Unemployment stocks for 2015 will be launched in the near future

• Current account deficit expected to be 2.4% of GDP in the September quarter (down from 2.5% last week) and 3.7% of GDP in the December quarter (down from 3.8% last week)

• Annual inflation expected to be:

o 0.6% to end of December quarter (down from 0.8% last week)

o 0.7% to end of March 2015 quarter (down from 1.0% last week)

o 1.4% to end of June 2015 quarter (down from 1.6% last week)

o 1.9% to end of September 2015 quarter (down from 2.0% last week)

o 2.0% to end of December 2015 quarter (not reported last week)

• Official Cash Rate priced to be:

o 3.495% on 29 January (steady compared with last week)

o 3.501% on 12 March (down from 3.512% last week)

o 3.488% on 30 April (down from 3.538% last week)

o 3.495% on 11 June (down from 3.589% last week)

o 3.536% on 23 July (down from 3.634% last week)

o 3.588% on 10 September (down from 3.692% last week)

o 3.645% on 29 October (down from 3.749% last week)

o 3.708% on 10 December 2015 (down from 3.811% last week)

o OCR stocks out to June 2016 will be launched in the near future

• Fiscal balance expected to be:

o -0.14% of GDP in 2014/15 (down from -0.11% last week)

o 0.95% of GDP in 2015/16 (steady)

o 1.98% of GDP in 2016/17 (steady)

o 2.37% of GDP in 2017/18 (steady)

Foreign Affairs/Constitution:

• The Trans-Pacific Partnership is not expected to be ratified by the US Congress before 1 July 2017 (only 29% probability it will be, steady compared with last week)

• Helen Clark’s prospects of being the next UN Secretary General are 29% (up from 27% last week)

• There is a 19% probability New Zealand will become a republic by 2020 (steady compared with last week)

Notes:

• iPredict Ltd is owned by Victoria University of Wellington. Details on the company and its stocks can be found atwww.ipredict.co.nz.

• The weekly economic and 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 1.02 pm today.

ENDS


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