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iPredict 2011 Election Update 51

8 November 2011

Key Points:

* National Party could govern with UnitedFuture
* John Banks set to claim Epsom
* Simon Bridges' majority prospects recover following Rena
* Unemployment and Fonterra payout set to worsen
* Growth and inflation improves marginally


John Key's National Party is now expected to gain 60 seats in this year's election, allowing it to govern with just the UnitedFuture Party, this week's snapshot from New Zealand's online prediction market, iPredict, suggests. Another coalition option for Mr Key would be the Act Party, with the party's Epsom candidate, John Banks, improving his chances of winning the seat. Elsewhere, after dipping following last month's Rena disaster, National's Tauranga MP Simon Bridges' probability of increasing his majority has recovered to 87%. In economics, growth and inflation figures have improved, while forecast for unemployment and future Fonterra payouts have worsened.

Economic Context

Expectations for GDP growth have improved fractionally since the last snapshot. Growth is expected to be 0.6% for the September 2011 quarter (steady), 0.6% for the December 2011 quarter (steady), 0.5% for the March 2012 quarter (up from 0.4% last week), and 0.5% in the June 2012 quarter (steady).

Following the release of September quarter unemployment of 6.6%, compared with iPredict's of 6.4%, future unemployment expectations moved up. Unemployment is now forecast to be 6.5% in the December quarter (up from 6.2% last week), 6.3% in the March 2012 quarter (up from 6.2% last week), and 6.2% in the June 2012 quarter (steady).

In contrast, inflation expectations have improved this week, with annual inflation expected to be 2.5% for the December quarter (down from 3.1% last week), 2.5% in the March 2012 quarter (down from 2.6% last week), 2.6% in the June 2012 quarter (up from 2.5% last week), and 2.5% in the September 2012 quarter (steady).

iPredict marginally underestimated petrol prices for the week ending 28 October 2011, which turned out to be $2.09 per litre, compared with iPredict's forecast last week of $2.03. Future petrol price expectations have moved this week, being $2.07 for the week ending 25 November (down from $2.08 last week) and $2.10 for the week ending 30 December (up from $2.08 last week).

Fonterra's expected final payouts has reduced marginally this week. Fonterra's final payout for 2011/12 is expected to be $6.94 (down from $6.97 last week), the 2012/13 payout $7.72 (down from $7.74 last week), the 2013/14 payout $7.42 (steady) and the 2014/15 payout $7.42 (steady).
OCR forecasts remain unchanged, suggesting that the Reserve Bank Governor Alan Bollard will hold off an increase the OCR till April 2012 when it will rise to 2.75%.

The expected 90-day bank bill rate for 1 December is 2.75% (down from 2.80% last week).

Current account deficit expectations improved slightly this week. The market predicts a deficit of 4.14% of GDP for the year to September (steady), 322% of GDP for the year to December (steady) and 3.35% of GDP in the year to March 2012 (down from 3.37% last week).

Key Electorate Contests

Act is looking safer in Epsom. While the party still has a 90% probability of a reduced majority in Epsom, it is now predicted to win with a 68.7% probability (up from 52.9% last week), with National's Paul Goldsmith further behind with a 28.2% probability (down from 43.4% last week). Labour's David Parker continues to have just a 1.7% probability of winning the seat.

West Coast-Tasman continues to be a close, with Labour's Damien O'Connor still forecast to win the electorate with a 51.7% probability (steady). National's Chis Auchinvole is close behind on a 48.3% probability (steady).

In Ohariu, the odds of United Future's Peter Dunne retaining the seat have reduced this week with the market forecasting he has an 81% probability of being re-elected (down from 83% last week).

In other vital contests, expectations that Mana Party leader Hone Harawira will retain his Te Tai Tokerau seat have increased markedly this week, from 80% to 88% probability.

The probability Maori Party co-leader Pita Sharples will win Tamaki-Makaurau has also improved markedly this week from 76% to 86% probability, with Labour's Shane Jones at 14%, down from 24% last week.

Maori Party co-Leader Tariana Turia is still expected to retain Te Tai Hauauru (86%, down from 89%). However her colleague Te Ururoa Flavell's chances of retaining Waiariki have reduced markedly, from 80% 62%.

For the Labour Party, Nanaia Mahuta is expected to retain Hauraki-Waikato (89%, up from 85%) and Labour's hold on Ikaroa-Rawhiti has improved (87%, from 82% last week).

Te Tai Tonga remains forecast to change hands, with a 72% probability, up from 70% last week, that it will be won by Labour's Rino Tirikatene from the Maori Party's Rahui Katene.

In marginal electorates other than those mentioned above, the probability National's Jonathan Young will retain New Plymouth is 83% (up from 73% last week). There is a 73% probability that National's Nikki Kaye will retain Auckland Central (down from 75% last week) and an 82% likelihood National's Paula Bennett will retain her Waitakere seat (down from 83% last week). In the Te Atatu electorate, Labour's Phil Twyford has an 80% likelihood of winning the seat (up from 78% kast week), and Iain Lees-Galloway has a 69% probability of victory in Palmerston North (up from 66% last week).

In terms of majorities, the probability that National will beat last election's majority in Tauranga 87% (up from 80% last week), in Rangitata is 81% (steady), in in Clutha Southland 78% (steady), and in Helensville 69% (up from 65% last week). Seats where National is forecast to suffer reduced majorities are Ilam (84%, compared with 83% last week), Rodney 77% (from 78% last week), Rangitikei 76% (steady), North Shore 65% (from 60% last week) and the Bay of Plenty 60% (steady).

The probability that Labour will beat last election's majority in Wigram is 66% (from 53% last week), and in Dunedin South 52% (steady). Labour's majority is expected to decrease in Te Atatu 84% (down from 88%), in New Lynn 84% (up from 81%), in Mt Roskill 66% (up from 55% last week), in Manurewa 60% (up from 52%) and in Hutt South, 60% (up from 52%).

After announcing that he will not be standing in any electorate, New Zealand First leader Winston Peters now has just a 13% probability of returning to Parliament (down from 17% last week).

On a seat-by-seat basis, National is expected to win 40 electorate seats, Labour 24, the Maori Party 3, United Future and the Mana Party 1 seat each, and Act 1 seat.

Party Vote, and Election Results

Forecast party vote shares are now: National 48.5% (up from 46.5% last week), Labour 28.5% (down from 31.0% last week), the Greens 11.3% (up from 11.1% last week), New Zealand First 4.1% (down from 4.2% last week), Act 3.7 % (up from 3.1% last week), the Mana Party 2.3% (up from 1.3% last week), the Maori Party 1.4% (up from 1.2% last week), UnitedFuture 1.0% (down from 1.2% last week), the Conservative Party 1.4% (up from 1.0% last week).

Based on this data, and the electorate results above, Parliament would be as follows: National 60 MPs, Labour 35 MPs, the Greens 14 MPs, Act 5 MPs, the Maori Party 3 MPs, the Mana Party 3 MPs, and UnitedFuture with just 1 MP. There would be 121 MPs, requiring a government to have the support of 61 MPs on confidence and supply. John Key's National Party would be able to govern with its choice of the Act Maori, UnitedFuture or Green parties.

Overall, the market indicates a 92% probability there will be a National Prime Minister after the election (up from 90% last week).

There is a 23% probability that a Green Party MP will be a minister in the next government.

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 decreased to 90% (from 87% last week).

Regardless of the result of the 2011 election, the probability that there will be a National Prime Minister in the 2014 election is 58% (down from 60% last week), the chances that there will be a Labour Prime Minister is 40% (up from 39%), and the probability of a Prime Minister from another party is 2% (down from 5% 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 11:42am today.


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