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IPREDCT LTD Economic & Political Newsletter #3

20 February 2012

Key Points:

Gillard gone by 1 July
IMF world growth expected to be 3.2% for 2012
Bashar al-Assad to remain Syrian dictator until at least June
Shanghai Pengxin to secure Crafar farms in April
NZX and Kiwi Dollar both expected to be up for the week on Friday
New Zealand Labour to win 2014 election with NZ First or Maori Party holding balance of power

Hot Topics
Initial trading by the 6000 registered traders on New Zealand’s online predictions market, iPredict, suggests Julia Gillard has a 62% probability of surviving as Australian Prime Minister through to the end of March, with rival Kevin Rudd having just a 26% probability of having the job by then, and leading outsider Bill Shorten having a 6% chance of gaining the top job.
Ms Gillard’s longer term prospects are less positive, however, with the market suggesting a 55% probability of her departing as Labor Party leader by 1 July 2012, and a 77% chance of departing before the next Federal election.
Meanwhile, the International Monetary Fund is currently expected to report world growth for 2012 to be 3.2% in 2012, compared with 3.8% in 2011.
Gold is expected to be $1,704.70 USD per troy ounce on 1 March 2012. Apple’s NASDAQ share price is expected to equal or exceed $600 USD in the 2012 year. Images recorded by NASA’s Curiosity rover are expected to be released in 2012 while Lamborghini is expected to announced commercial production of a four door vehicle in 2012
Shanghai Pengxin Group’s offer on New Zealand’s Crafar Farms is now not expected to be settled until April. New Zealand economic forecasts have remained broadly steady this week with a slight increase in growth expectations for the December 2011 quarter. This week, the NZX is expected to rise above 3289.002 points by week’s end and the Exchange Rate is expected to exceed US$08332 on Friday.
David Shearer’s Labour Party remains favoured to win the 2014 New Zealand election.
New Zealand Economic Forecasts
New Zealand growth prospects have improved this week with growth now expected to be 0.6% for the December 2011 quarter, 0.5% for the March 2012 quarter and 0.4% for the June 2012 quarter.
Forecast unemployment has remained unchanged this week. Unemployment is forecast to be 6.4% for the March 2012 quarter and 6.3% for the June 2012 quarter.
Inflationary expectations for the September 2012 quarter have fallen 0.1% this week. Inflation is now forecast to be 1.6% for the March 2012 quarter, 1.6% for the June 2012 quarter and 2.0% for the September 2012 quarter.
The Official Cash Rate is not expected to be increased until December 2012 at the earliest.
Petrol prices are set to fall with the market now predicting there is an 80% probability that 91 unleaded petrol prices will drop to between 210 and 218 cents for the week ended 24 February 2012.
Fonterra’s final payout has moved for all tracked periods this week. There was a $0.06 decrease on last week for the 2011/12 financial year with the market now predicting $7.10 per kilogram of milk solids before retentions. The payout in 2012/13 has remained steady at $7.11, the 2013/14 payout has increased $0.04 to $7.42, and the 2014/15 payout has increased $0.07 to $7.46.
Current account deficit expectations are 4.18% of GDP to December 2011, and 4.09% to March 2012.
International Economic Forecasts
World growth is expected to be 3.18% for the 2012 year.
There is now a 37% chance at least one Euro member will depart the single currency in 2012.
The Reserve Bank of Australia is expected to reduce its cash rate from by 25 points to 4.00% at its meeting on 6 March 2012 meeting.
Gold is expected to trade at US$1,704.70 per troy ounce on 1 March 2012.
There is only a 40% probability the US Senate will formally approve a resolution of ratification of the Trans Pacific Partnership by July 2015.
International Politics
As discussed above, Julia Gillard is still expected to be Prime Minister to the end of March; however iPredict forecasts she now has a 55% probability of departing as PM before 1 July. There is also a 77% probability she will be gone by the next Federal election.
In the US, Barrack Obama has a 68% probability of being re-elected US President, defeating Mitt Romney who has a 74% chance of being the Republican nominee. Romney has an 81% chance of winning the Arizona Primary, while Rick Santorum has a 53% chance of winning the Michigan Primary.
In the UK, the Conservative / Liberal Democrat coalition is expected to survive 2012.
In France, however, there is a 74% probability Francois Hollande will win the presidential election over incumbent Nicolas Sarkozy.
In Syria, Bashar al-Assad is expected to continue serving as President by 1 June 2012.
There is a 30% probability Israel will launch an airstrike against Iran in 2012 and a 20% probability North Korea will detonate an atomic device.
Science and Climate Change
There is a 63% probability average global temperatures will be hotter in 2012 than in 2011 and a 12% probability 2012 will be the hottest year on record. There is only a 23% probability the OPERA experiment showing neutrinos exceeding light speed will be replicated in 2012. There is am 86% probability that there will be a formal announcement of the iPad 3 in March 2012.
New Zealand Politics
There is a 56% probability Labour will form a Government after the next General Election, with a 40% probability David Shearer will be Prime Minister by 1 January 2015.
Party vote forecasts are: National 42.1%, Labour 34.5%, Greens 9.5%, NZ First 5.1%, Conservative 2.7%, Act 1.7%, Maori Party 1.4%, Mana Party 1.3%, and UnitedFuture 0.6%.
The Maori Party is expected to win 3 electorate seats and the Mana Party 1 seat. UnitedFuture has a 63% probability of winning an electorate seat and Act a 52% probability. The Greens, New Zealand First and Conservative parties are not expected to win electorate seats.
Under these electorate and party vote results, the New Zealand Parliament would consist of: National 52 MPs, Labour 43 MPs, the Greens 12 MPs, New Zealand First 6 MPs, the Maori Party 3 MPs, Act and the Mana Party 2 MPs each, and UnitedFuture 1 MP. There would be 121 MPs, requiring 61 to govern.
David Shearer’s Labour Party could form a Government with the support of the Greens, New Zealand First, and either of the Maori, Mana, or UnitedFuture parties. Alternatively, John Key’s National Party could mathematically pull together a Government with the support of NZ First, Act and UnitedFuture.
Grant Robertson and Judith Collins are favoured should there be a vacancy in the leadership of either the Labour or National parties.
iPredict is owned by Victoria University of Wellington. Details on the company and its stocks can be found at www.ipredict.co.nz.

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