2011 Election Update #40

2011 Election Update #40

26 August 2011

www.ipredict.co.nz

Key Points:

• For the first time, Labour’s Shane Jones forecast to beat the Maori Party’s Pita Sharples in Tamaki-Makaurau

• Fonterra’s final 2010/11 payout forecast to be $8.14/kgMS

• Maori and Mana Parties forecast to have two MPs each

• Ten Green MPs now expected

• Economic indicators remain steady

Commentary:

For the first time, Labour’s Shane Jones is forecast to win Maori Party co-leader Pita Sharples’ Tamaki-Makaurau seat, according to this week’s snapshot from New Zealand’s prediction market, iPredict. As a result, the Maori Party is expected to hold just two seats, the same number of MPs as the Mana Party is forecast to secure. The Green Party has strengthened its numbers, and is now expected to have 10 MPs after the election, up from nine last week. In economics, iPredict has launched contracts forecasting Fonterra’s final payout per kilogram of milk solids for the 2010/11 financial year (before retentions), which is expected to be $8.14. All other economic indicators (GDP growth, unemployment, OCR, inflation, and Current Account) have remained broadly the same.

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 increased slightly in the short term. Annual inflation is expected to be 5.0% in the September quarter (up from 4.9% last week), 2.8% in the December quarter (steady) 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 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 26%.

New stocks released this week forecast Fonterra’s final payout for the 2010/11 financial year to be $8.14 per kilogram of milk solids before retentions. New stocks forecasting Fonterra’s payout for the 2011/12 season were launched today, and stocks for 2012/13, 2013/14 and 2014/15 will be launched progressively over coming days.

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 2.93% (down from 2.94% last week) and for 1 December 2011 is steady at 3.08%.

Expectations for average floating-rate mortgages have remained steady this week, with a 66% probability that the average floating rate will reach 6.00% by the end of the year, but just an 11% probability that they will reach 6.50% in 2011.

The market’s expectations for the Current Account deficit have also remained mostly steady this week, with the market indicating the deficit will be 4.82% of GDP for the year to June, 4.69% of GDP for the year to September, and 4.24% of GDP for the year to December (down from 4.28% last week).

Parties & Personnel

All current leaders of parliamentary parties have at least a 91% probability of remaining in their positions until the election. The most vulnerable is Labour Party leader Phil Goff, but with just a 9% probability of being replaced prior to the election (up from 7% last week). There is a 35% probability that there will be changes to the top ten of Labour’s party list, announced on 10 April 2011, when it is finally registered with the Electoral Commission.

Key Electorate Contests

Act has a marginally weakened position in Epsom this week, with an 89% probability (down from 90% 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 77% probability of being re-elected (up from 76% last week).

New Zealand First remains below MMP’s 5% threshold, with a forecast 4.7% vote share (down from 4.9% last week). Party leader Winston Peters has just a 23% probability of returning to Parliament (up from 22% last week).

Expectations that Mana Party leader Hone Harawira will retain the Te Tai Tokerau seat in the General Election have decreased to 86% (down from 90% last week).

Labour’s Shane Jones is now predicted to win the Tamaki-Makaurau electorate. The market’s expectation that Pita Sharples will retain his seat has deteriorated markedly from 63% last week to just 42% this week, while Shane Jones has a 55% probability of winning the seat.

Maori Party co-Leader Tariana Turia is still expected to retain Te Tai Hauauru (82%, steady), and Te Ururoa Flavell is expected to retain Waiariki (73%, down from 76% last week).

For the Labour Party, Nanaia Mahuta is expected to retain Hauraki-Waikato (79%, steady) and Labour’s position in Ikaroa-Rawhiti (currently Parekura Horomira’s seat) has increased slightly (76%, up from 74% 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 decreased to 66% from 72% last week. In the Te Atatu electorate, Labour’s Phil Twyford has a 72% likelihood of winning the seat, up from 70% last week. There is a 74% probability that National’s Nikki Kaye will

retain Auckland Central (down from 80% 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 (53%, up from 52% last week).

With a change in forecast winners in electorate seats in the last week, National is expected to win 40 electorate seats, Labour 25 (up from 24 electorates last week), the Maori Party 2 (down from 3 electorates last week), 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 45.0% (steady), Labour 32.7% (up from 32.3% last week), the Greens 7.6% (up from 7.2% last week), Act 4.9% (up from 4.2% last week), New Zealand First 4.7% (down from 4.9% last week), the Maori Party 1.7% (steady), UnitedFuture 1.3% (down from 2.3% last week), the Mana Party 1.3% (down from 1.7% last week), the Conservative Party 0.9% (up from 0.7% last week), 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 57 MPs, Labour 41 MPs, the Greens 10 MPs, Act 6 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. John Key’s National Party could govern with the support of Act, or the Maori Party and 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 6 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. 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 92% probability there will be a National Prime Minister after the election (up from 91% 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 83%, steady compared with 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 8:42am today.

ENDS