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iPredict Ltd 2011 Election Update #25

iPredict Ltd 2011 Election Update #25

6 May 2011


Key Points:
* Economic growth expectations edge upwards, with 0.1% growth expected even in the March 2011 quarter
* Unemployment and inflation expectations steady but unleaded petrol no longer expected to exceed $2.30/litre in 2011
* Act to win Epsom and break 5% threshold, and Mana Party to have second MP
* National's Chris Auchinvole back ahead in West Coast-Tasman by a whisker
* Labour's Carmel Sepuloni and Shane Jones putting pressure on National's Paula Bennett and the Maori Party's Pita Sharples in Waitakere and Tamaki-Makaurau
* John Key could govern with one of Act, the Maori Party or UnitedFuture
* If New Zealand First returns to Parliament, Key could become dependent on Act

Economic growth expectations have edged upwards, this week's snapshot from New Zealand's online prediction market, iPredict, indicates. The market also indicates that the Act Party will win Epsom along with 7% of the party vote for a total of nine MPs after the next election, and the new Mana Party will win a second seat in Parliament. Under the actual market forecast, Prime Minister John Key would be able to govern with just one of the Act, Maori or UnitedFuture parties, but if New Zealand First broke the 5% threshold Mr Key would need either Act or both of the Maori Party and UnitedFuture. This week's iPredict snapshot was taken at 9.09 am today.

Economic Context:
Recession fears have eased over the last week, with the probability the economy will be in a recession in the June quarter falling to 14% (from 22% last week) and to 13% for the September quarter (from 15% last week). The probability the economy will be in a recession in the December quarter remains steady at 12%.

Expectations for growth have also improved, with positive growth in the March 2011 quarter forecast for the first time since the stock launched. Growth for each of the next five quarters to be reported is expected to be 0.1% for the March 2011 quarter (up from -0.2% last week), 0.4% for the June 2011 quarter (up from 0.2% last week), 0.7% for the September 2011 quarter (up from 0.6% last week), 0.7% for the December 2011 quarter (steady) and 0.7% for the March 2012 quarter (up from 0.6% last week).

Unemployment forecasts have remained mostly steady. Unemployment is expected to be 6.7% in the June 2011 quarter (steady), 6.3% in the September 2011 quarter (steady), 6.3% in the December 2011 quarter (down from 6.4% last week), and 6.4% in the March 2012 quarter (down from 6.5% last week).

Inflation expectations are also relatively unchanged. Annual inflation is expected to be 5.3% for the June 2011 quarter (up from 5.2% last week), 4.9% for the September 2011 quarter (steady), 3.0% for the December 2011 quarter (steady), and 2.8% for the March 2012 quarter (down from 3.1% last week).

Petrol price rises continue to be forecast, although with prices now not expected to exceed $2.30 per litre for unleaded petrol. The probability that unleaded petrol will exceed $2.20 per litre in 2011 is 98%, up from 90% last week and 89% the week before, but the probability it will exceed $2.30 per litre is down to 42%, from 50% last week, 52% the week before and 54% three weeks ago. The probability it will exceed $2.40 per litre is now down to 21%, from 28% last week, 30% the week before and 34% three weeks ago. The probability it will go above $2.50 per litre is just 15%, down from 23% last week.

The market is now expecting Reserve Bank Governor Alan Bollard to leave the OCR at 2.50% through to at least January 2012. There is now a 98% probability he will leave it unchanged on 9 June (up from 95% last week and 90% the week before), a 98% probability he will leave it unchanged on 28 July (up from 89% last week and 86% the week before), an 89% probability he will leave it unchanged on 15 September (up from 87% last week), a 70% probability he will leave it unchanged on 27 October (steady) and a 50% probability he will leave it unchanged on 8 December (compared with last week's 48% probability that he would increase it to 2.75%).

Expected yields for 90-day bank bills are largely unchanged from last week. The expected 90-day rate on 1 June 2011 is 2.50% (down from 2.54% last week), the expected 90-day rate on 1 September 2011 is 2.74% (down from 2.77% last week) and on 1 December 2011 is 2.98% (up from 2.96% last week).

Average floating-rate mortgages continue to be expected to stay low. The probability they will reach 6.50% in 2011, from the 5.90% reported by the Reserve Bank for March 2011, is 16%, down from 18% the last two weeks.

There is an 83% probability that a Current Account surplus will be reported for the year ending March 2011, up from 66% last week, and just a 22% probability that Fitch Ratings will announce a downgrade of New Zealand's long term currency rating before 1 July (down from 28% last week).

Election Date, Parties & Personnel
The market indicates a 95% probability that the election will be held on Saturday 26 November, down from 97% last week. All current leaders of parliamentary parties have more than an 89% probability of remaining in their positions until then. The most vulnerable is Labour Leader Phil Goff, but he has just an 11% probability of being replaced prior to the election.

Key Electorate Contests
There is a 73% probability Epsom will be won by a candidate other than a National candidate or incumbent Act MP Rodney Hide. Given the history of the electorate, this strongly suggests it will be won by an Act Party candidate other than Mr Hide.

There is now a 58% probability that UnitedFuture Leader Peter Dunne will be re-elected in Ohariu, up from 53% last week. Labour is second-favoured, with a 23% probability of winning the seat, up from 22% last week, 20% two weeks ago, 19% three weeks ago and 17% four weeks ago.

The probability Winston Peters will be returned to Parliament is 30%, down from 31% the last two weeks. The probability he will stand in Epsom is down to 15%, from 20% last week.

In the Maori electorates, there have been no changes in forecast winners, but the probability Maori Party Co-Leader Pita Sharples will retain Tamaki-Makaurau has fallen markedly. Dr Sharples now has a 66% probability of retaining his seat, down from 73% last week and from 78% four weeks ago. "Other" - assumed to be the Mana Party - has a 24% probability of taking the seat, and the Labour Party a 21% probability.

Ikaroa-Rawhiti appears to be the most tightly contested electorate in the country, more so even than West Coast-Tasman or New Plymouth. Favoured is the yet-to-be-selected Labour Party candidate, but with just a 45% probability of prevailing. The Maori Party candidate, Na Rongowhakaata Raihania, has a 43% probability of taking the seat while "other" - assumed to be the Mana Party - has a 13% probability of winning.

Labour continues to be expected to retain Hauraki-Waikato (76% probability, steady) and pick up Te Tai Tonga (58% probability, steady). The Maori Party is expected to retain Te Tai Hauauru (77% probability, steady) and Waiariki (80% probability, down from 82% last week). Hone Harawira is expected to retain Te Tai Tokerau for his Mana Party (73% probability, down from 74% last week).

In marginal electorates other than those mentioned above, there has been a change of forecast winner in West Coast-Tasman, with National's Chris Auchinvole now having a 50% probability of retaining his seat. There is a 48% probability it will be won by Labour's Damien O'Connor.

New Plymouth also remains highly marginal, with there continuing to be 53% probability it will be retained by National's Jonathan Young over Labour's Andrew Little.

Waitakere is moving into highly marginal territory. There is now just a 55% probability it will be retained by National's Paula Bennett over Labour's Carmel Sepuloni, down from 58% last week and 66% two weeks ago.

The only other electorate where the projected winner has less than a 75% probability of winning is Auckland Central, where National's Nikki Kaye has a 71% probability of retaining the seat (down from 72% last week) over Labour's Jacinda Ardern.

Overall, National is expected to win 41 electorate seats (up from 40 last week), Labour 23 (down from 24 last week), the Maori Party 3 (steady), and the Act, Mana and UnitedFuture parties 1 each.

Party Vote, Election Result and Alternative Scenarios

There have been material changes in forecast party vote shares since last week's update. Forecast vote shares are now: National 46.0% (down from 47.5% last week and 48.0% the week before), Labour 29.3% (up from 28.9% last week), Act 7.0% (up from 3.1% last week), the Greens 6.9% (up from 6.5% last week), New Zealand First 4.8% (up from 4.2% last week), UnitedFuture 1.6% (steady), the Maori Party 1.5% (steady), the Mana Party 1.3% (up from 1.1% last week), the New Citizen Party 0.7% (steady) and the proposed Reform New Zealand Party 0.6% (up from 0.4% last week).

Based on this data, and the electorate results above, Parliament would be as follows: National 59 MPs (down from 62 last week), Labour 37 MPs (down from 38 last week), Act 9 MPs (up from none last week), the Greens 9 MPs (up from 8 last week), the Maori Party 3 MPs (steady), UnitedFuture 2 MPs (steady) and the Mana Party 2 MPs (up from 1 last week). There would be 121 MPs, requiring a government to have the support of 61 MPs on confidence and supply, so that Mr Key's National Party could govern with the support of one of the Act, Maori or UnitedFuture parties. There would be no politically plausible combination that would allow Labour to govern.

Because New Zealand First is again close to MMP's 5% threshold to win seats in Parliament, iPredict has also analysed what would happen if that party won 5% of the party vote and all other party votes were held constant. Under such a scenario, Parliament would be as follows: National 56 MPs, Labour 36 MPs, Act 8 MPs, the Greens 8 MPs, New Zealand First 6 MPs, the Maori Party 3 MPs, UnitedFuture 2 MPs and the Mana Party 2 MPs. There would be 121 MPs, requiring a government to have the support of 61 MPs on confidence and supply. There would continue to be no politically plausible combination that would allow Labour to govern, but the National Party would have a number of options including governing with Act alone, governing with both the Maori and UnitedFuture parties but not Act, governing with all three of these current support parties, or governing with New Zealand First despite Mr Key's pledge not to do so.

Overall, the market continues to indicate an 86% probability there will be a National Prime Minister after the election (steady compared with the last two weeks).

iPredict this week launched contracts on a Te Tai Tokerau by-election. There is a 39% probability that either the by-election will not be held or that it would be won by a candidate from other than the Mana, Maori or Labour parties. Given the history of the seat, iPredict has assumed that the market is indicating a 39% probability that the by-election will not be held. If the by-election is held, there is approximately an 83% probability it would be won by the Mana Party.

The probability New Zealanders will elect to retain the MMP voting system in the referendum to be held on Election Day remains steady at 80%.

iPredict is owned by Victoria University of Wellington. Details on the company and its stocks can be found at www.ipredict.co.nz The company is providing full election coverage this year, with contract bundles for the party vote and for every electorate race in the country now available for trading, along with other contract bundles on a wide range of economic, political and social issues. The weekly political snapshot is taken at a random time each week to avoid market manipulation by political parties or activists.


© Scoop Media

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