iPredict Election Update #39

iPredict says:

Key Points:

*             National could govern with one partner

*             Maori Party gets stronger in key electorates

*             Key economic indicators remained largely unchanged

Commentary:

John Key’s National Party will be able to form a government with their choice of Act, the Maori Party or UnitedFuture, accordingto this week’s snapshot from New Zealand’s prediction market, iPredict.  The frontrunner in almost every electorate has also strengthened their position this week, with Dr Pita Sharples’ seat of Tamaki-Makaurau enjoying the most significant rise.  In economics, key indicators (GDP growth, unemployment, OCR, and Current Account Deficit) have all remained unchanged, with the exception being inflation which is now lower in the short-term than previously expected.

Economic Context

Expectations for GDP growth have remained steady this week.  Growth over the next four quarters is expected to be 0.7% for the June quarter, 0.6% for the September quarter, 0.5% for the December quarter and 0.6% for the March 2012 quarter.  Forecast unemployment has also remained steady.  Unemployment 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 have decreased slightly in the short term.  Annual inflation is expected to be 4.9% in the September quarter (down from 5.0% last week), 2.8% in the December quarter (down from 2.9% last week) and 2.6% in the March 2012 quarter (steady).

The market continues to indicate strongly that petrol prices will be capped at a maximum price of $2.30 this year, with just an 18% probability that unleaded petrol will exceed $2.30 per litre in 2011.  A new stock launched this week indicates that the probability fuel prices will drop below $1.90 per litre in 2011 is 21%.

Market expectations of OCR movements have remained steady this week.  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 3.00%, and in April to 3.25%.

The expected 90-day bank bill rate for 1 September 2011 is 2.94% (up from 2.91% last week) and for 1 December 2011 is 3.08% (up from 3.07% last week).

There is a 66% probability that average floating-rate mortgages will reach 6.00% by the end of the year, down from a 68% probability last week, but just an 11% probability that they will reach 6.50% in 2011, steady compared with last week.

The market’s expectations for the Current Account deficit remain steady, with an indication that the deficit will be- 4.82% of GDP for the year to June, 4.69% of GDP for the year to September, and 4.28% of GDP for the year to December.

Parties & Personnel

All current leaders of parliamentary parties have at least a 93% probability of remaining in their positions until the election.  The most vulnerable is Labour Party leader Phil Goff, but with just a 7% probability of being replaced prior to the election (down from 9% last week).

Key Electorate Contests

Act has a marginally strengthened position in Epsom this week with a 90% probability (up from 89% last week) that the seat will be won by a candidate other than a National candidate or incumbent Act MP Rodney Hide.

In Ohariu, United Future’s Peter Dunne has a 76% probability of being re-elected (up from 73% last week).

New Zealand First remains below MMP’s 5% threshold, with a forecast 4.9% vote share (steady compared with last week).  Party leader Winston Peters has just a 22% probability of returning to Parliament (steady).

Expectations that Mana Party leader Hone Harawira will retain the Te Tai Tokerau seat in the General Election have improved significantly to 90% (up from 83% last week).

Expectations that Maori Party Co-Leader Pita Sharples will retain Tamaki-Makaurau have improved markedly from 52% last week, to 63% this week.  Co-Leader Tariana Turia is still expected to retain Te Tai Hauauru (82%, up from 79% last week), and Te Ururoa Flavell is expected to retain Waiariki (76%, up from 73% last week).

For the Labour Party, Nanaia Mahuta is expected to retain Hauraki-Waikato (80%, up from 78% last week) and Labour’s position in Ikaroa-Rawhiti (currently Parekura Horomira’s seat) has decreased slightly (74%, down from 76% last week).

Te Tai Tonga remains forecast to change hands, with a 76% probability it will be won by Labour’s Rino Tirikatene from the Maori Party’s Rahui Katene (steady).

In marginal electorates other than those mentioned above, the probability National’s Jonathan Young will retain New Plymouth has increased to 72% from 68% last week.  In the Te Atatu electorate, Labour’s Phil Twyford has a 70% likelihood of winning the seat, down from 73% last week.  There is an 80% probability that National’s Nikki Kaye will retain Auckland Central (down from 81% last week).  The likelihood that National’s Paula Bennett will retain her Waitakere seat remains steady at 73%, and Labour’s Damien O’Connor is expected to win back West Coast-Tasman for Labour (52%, steady).

With no changes to forecast winners in electorate seats over the last week, National continues to be expected to win 40 electorate seats, Labour 24, the Maori Party 3, and Act, United Future and the Mana Party 1 each.

Party Vote, Election Result and Alternative Scenarios

Forecast party vote shares are now: National 45.0% (down from 46.0% last week), Labour 32.3% (up from 30.6% last week), the Greens 7.2% (up from 7.0% last week), New Zealand First 4.9% (steady), Act 4.2% (down from 5.5% last week), UnitedFuture 2.3% (up from 2.0% last week), the Maori Party 1.7% (down from 1.8% last week), the Mana Party 1.7% (steady), the Conservative Party 0.7% (steady), the New Citizen Party 0.4% (steady), and the proposed Reform New Zealand Party 0.0% (steady) .

Based on this data, and the electorate results above, Parliament would be as follows: National 58 MPs, Labour 41 MPs, the Greens 9 MPs, Act 5 MPs, the Maori Party and UnitedFuture 3 MPs each, 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.  John Key’s National Party could govern with the support of Act, the Maori Party or UnitedFuture.

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 54 MPs, Labour 39 MPs, the Greens 9 MPs, New Zealand First 6 MPs, Act 5 MPs, the Maori Party and UnitedFuture 3 MPs each, the Mana Party 2 MPs. 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 require the support of the Act Party and either the Maori Party or UnitedFuture.

Overall the market indicates a 91% probability there will be a National Prime Minister after the election (down 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 is 80%, down 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 12:40pm today.