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iPredict Update #42: Nats still on course to govern alone

iPredict Update #42: Nats still on course to govern alone

Key Points:

* National still on course to govern alone * Labour remains below 30% * Tamaki-Makaurau becoming too close to call * Economic indicators remain steady * Fonterra payout forecast to be $8.14 in 2010/11 and then fall within the $7-$8 range for the following four seasons


The race between Maori Party Co-Leader Dr Pita Sharples and Labour's Shane Jones in Tamaki-Makaurau is rapidly becoming too close to call, this week's snapshot from New Zealand's prediction market, iPredict, suggests. Over the past two weeks, Dr Sharples' probability of retaining the seat has increased from 42% to 47%, while Mr Jones' probability of winning the seat has slipped from 55% to 50%. John Key's National Party remains forecast to govern alone with 61MPs, while the Labour Party opposition continues to track below 30%. In commerce, key economic indicators (Fonterra payout, GDP, unemployment, inflation and OCR) have remained largely unchanged.

Economic Context

Expectations for GDP growth have remained steady this week. Growth over the next four quarters is expected to be 0.8% for the June quarter 0.6% for the September quarter, 0.6% for the December quarter and 0.6% for the March 2012 quarter. Forecast unemployment has also remained steady and is expected to be 6.4% in the September quarter, 6.2% in the December quarter and 6.2% in the March 2012 quarter.

Inflation expectations are also steady. Annual inflation is expected to be 5.0% in the September quarter, 2.8% in the December quarter and 2.6% in the March 2012 quarter.

The market continues to indicate strongly that petrol prices will be capped at a maximum price of $2.30 this year, with just a 16% probability that unleaded petrol will exceed $2.30 per litre in 2011. The market is also indicating that the probability fuel prices will drop below $1.90 per litre in 2011 is 20%.

Fonterra's final payout for the 2010/11 financial year is predicted to be $8.14 per kilogram of milk solids before retentions (down from $8.15 last week). The payout in 2011/12 is expected to be $7.40, the 2012/13 payout $7.76, the 2013/14 payout $7.41 and the 2014/15 payout $7.41.

Market expectations of OCR movements are steady. The market indicates that Reserve Bank Governor Alan Bollard will hold off an increase in the OCR until December, when it will rise to 2.75%, and then again in March 2012 to 300%, and in April to 3.25%.

Having forecast last week that the 90-day bank bill rate for 1 September 2011 would be 2.90%, iPredict was just fractionally above the actual 1 September result of 2.89%. The expected 90-day bank bill rate for 1 December is 3.12% (up from 3.09% last week).

The market's expectations for the Current Account deficit have again shifted this week, with the market forecasting the deficit will be 4.94% of GDP for the year to June (down from 5.21% last week), 4.69% of GDP for the year to September (up from 4.68% last week), and 4.15% of GDP for the year to December (steady).

Parties & Personnel

All current leaders of parliamentary parties have at least an 89% probability of remaining in their positions until the election. The most vulnerable remains Labour Party leader Phil Goff, but with the market forecasting just an 11% probability he will be replaced prior to the election (down from 15% last week). There is a 31% probability (down from 34% last week) that there will be changes to the top ten of Labour's party list, announced on 10 April 2011, when it is registered with the Electoral Commission.

Key Electorate Contests

Act remains on course for victory in Epsom, although has fallen back slightly this week, with the market forecasting an 86% probability that the seat will be won by a candidate other than a National candidate or incumbent Act MP Rodney Hide (down from 89% last week).

In Ohariu, the odds of United Future's Peter Dunne retaining the seat has improved this week, and he now has a 77% probability of being re-elected (up from 73% last week).

New Zealand First remains fractionally below MMP's 5% threshold, with a forecast 4.9% vote share (up from 4.1% last week). Despite this, Party leader Winston Peters has just a 21% probability of returning to Parliament (down from 23% last week).

Expectations that Mana Party leader Hone Harawira will retain the Te Tai Tokerau seat in the General Election remained steady at 85% this week.

In Tamaki-Makaurau, Labour's Shane Jones retains the support of the market in what is predicted to be a tight race. Mr Jones has a 50% probability of being elected (down from 52% last week), still ahead of Maori Party Co-Leader Dr Pita Sharples who has a 47% chance of being re-elected (up from 45% last week).

Maori Party co-Leader Tariana Turia is still expected to retain Te Tai Hauauru (93%, up from 90% last week), and her colleague Te Ururoa Flavell is expected to retain Waiariki (83%, up from 79% last week).

For the Labour Party, Nanaia Mahuta is expected to retain Hauraki-Waikato (86%, up from 85% last week) and Labour's position in Ikaroa-Rawhiti (currently Parekura Horomira's seat) has improved slightly (81%, up from 79% last week).

Te Tai Tonga remains forecast to change hands, with a 74% probability it will be won by Labour's Rino Tirikatene from the Maori Party's Rahui Katene (steady on 24%).

In marginal electorates other than those mentioned above, the probability National's Jonathan Young will retain New Plymouth has increased to 74% from 72% last week. There is a 79% probability that National's Nikki Kaye will retain Auckland Central (steady), a 77% likelihood National's Paula Bennett will retain her Waitakere seat (up from 76% last week), and National is again forecast to retain Maungakiekie (90%, steady), Otaki (89%, up from 88%), and Tamaki (96%, steady). In the Te Atatu electorate, Labour's Phil Twyford has a 73% likelihood of winning the seat (steady), Damien O'Connor is expected to win back West Coast-Tasman for Labour (57%, up from 53% last week), while the chance Iain Lees-Galloway will be re-elected in in Palmerston North has risen to 73% (up from 70% last week).

On a seat-by-seat basis, National is expected to win 40 electorate seats, Labour 25, the Maori Party 2, and Act, United Future and the Mana Party 1 seat each.

Party Vote, Election Result and Alternative Scenarios

Forecast party vote shares are now: National 48.0% (steady) Labour 29.3% (down from 29.7% last week), the Greens 8.0% (down from 9.0% last week), New Zealand First 4.9% (up from 4.1% last week), Act 3.9% (down from 4.2% last week), UnitedFuture 1.4% (down from 1.7% last week), the Maori Party 1.4% (down from 1.5% last week), the Mana Party 1.3% (steady), the Conservative Party 0.9% (steady), and the New Citizen Party 0.4% (steady)

Based on this data, and the electorate results above, Parliament would be as follows: National 61 MPs, Labour 38 MPs, the Greens 10 MPs, Act 5 MPs, and the Maori Party, UnitedFuture and the Mana Party 2 MPs each. There would be 120 MPs, requiring a government to have the support of 61 MPs on confidence and supply, meaning John Key's National Party could govern alone.

Given New Zealand First's proximity to MMP's 5% threshold, iPredict has also analysed what might happen should New Zealand First win 5.0% of the vote. Under this scenario, Parliament would be as follows: National 58 MPs, Labour 35 MPs, the Greens 10 MPs, New Zealand First 6 MPs, Act 5 MPs, and the Maori Party, UnitedFuture and the Mana Party 2 MPs each. There would be 120 MPs, requiring a government to have the support of 61 MPs on confidence and supply meaning John Key's National Party would require the support of the Act Party or the Maori Party and UnitedFuture to govern.

Overall the market indicates a 94% probability there will be a National Prime Minister after the election (up from 93% last week).

MMP Referendum and Miscellaneous

The probability New Zealanders will elect to retain the MMP voting system in the referendum to be held on Election Day has increased to 85% (up from 83% last week).

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. This week's was taken at 8:46am today.


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