Ipredict Ltd

Australian Election Newsletter #2:

22 June 2012

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Key Points:

• Federal election still expected in Q1 2013

• Growth of 0-0.5% expected in next three quarters and unemployment to be 5-5.5% through to September 2012

• Further interest rate cut expected before inflation begins rising in December quarter

• Gillard weaker and Rudd gaining ground for ALP leadership

• Abbott safe as Liberal leader against Turnbull

• Coalition to beat ALP 52% to 48% on two-party preferred basis and win 87 seats in House, including Blair (Qld) and Richmond (NSW)

• 82% probability of Liberal Prime Minister

• New contracts available today forecasting results for Bass (Tas), Boothby (SA), Cowan (WA), Dobell (NSW) and Franklin (Tas)

Introduction

This is the second newsletter summarising forecasts by the 7000 registered traders on New Zealand’s online predictions market, iPredict, of the results of the next Australian Federal Election. Anyone else who wants to trade can do so by signing up for free at https://www.ipredict.co.nz/app.php?do=register.

The newsletter will be produced periodically, with greater frequency as we move closer to the election, which must be held by 30 November 2013.

Each newsletter will provide a snapshot of market forecasts, taken at a random time to avoid manipulation by political parties and activists. Today’s was taken at 11.50 am (New Zealand Time).

In addition, bundles of contracts for races in different electoral divisions will be launched before each newsletter. The five launched today are for Bass (Tas), Boothby (SA), Cowan (WA), Dobell (NSW) and Franklin (Tas). These can be traded at https://www.ipredict.co.nz/app.php?do=browse&cat=318.

Election Date

There continues to be no precise consensus among iPredict’s 7000 traders of when the next Australian Federal Election will be held.

There is a 31% probability it will be held in Q2 2013, a 27% probability it will be held in Q1 2013, a 20% probability it will be held in Q4 2012 and a 9% probability it will be held in Q4 2013.

When all prices are analysed, the best estimate is an election in Q1 2013.

Economic Context

Between now and the forecast election, iPredict traders expect the Australian economy to grow by between 0-0.5% in each of the June 2012, September 2012, and December 2012 quarters.

The unemployment rate is expected to lie between 5.0-5.5% through to September while inflation is expected to be between 1-2% in the June quarter, 1-2% in the September quarter and 2-3% in the December quarter.

Expectations of further interest rate cuts are quite high, with a 26% probability the Reserve Bank of Australia will cut the cash rate by 25 points on 3 July and a 42% probability of a 25 point cut on 7 August.

Party Leaders

There is only now only a 31% probability (down from 34% ten days ago) that Prime Minister Julia Gillard will be leader of the Australian Labor Party (ALP) on nomination day for the next Federal Election, suggesting a 69% probability she will be deposed before then.

Former Prime Minister Kevin Rudd has emerged as the clear front-runner to replace her, with a 39% probability he will be ALP leader on nomination day, up from 27% ten days ago. Other contenders are Employment and Workplace Relations Minister Bill Shorten (16% probability, down from 17%) and Defence Minister Stephen Smith (13% probability, down from 16%). However, there is only a 1.5% probability Ms Gillard will depart as Prime Minister this month.

Risks to Opposition Leader Tony Abbott are not as acute. The market indicates an 82% he will be leader of the Liberal Party on nomination day (down from 83% ten days ago) and an 18% probability the leader will be former leader Malcolm Turnbull (up from 17%)

Forecast Outcome

There have been no changes in forecast first preference votes over the last ten days. The ALP continues to be expected to win 37% of first preferences and the Green Party 12%. The Liberal Party continues to be expected to win 31% of first preferences, the Liberal National Party of Queensland 10% and the Australian National Party 9%.

On a two-party preferred basis, the Liberal/National Coalition continues to be expected to win 52% of the vote and the ALP 48%.

The Coalition has a 53% probability of picking up Blair (Qld) from ALP incumbent Shayne Neumann, and a 60% probability of taking Richmond (NSW) from ALP incumbent Justine Elliot.

The ALP’s Anna Burke has a 55% probability of holding Chisholm (Vic) and Warren Snowdon a 50% probability of holding Lingiari (NT) for the party.

The Coalition’s Ken Wyatt has a 71% probability of holding Hasluck (WA).

Across the commonwealth, the market currently expects the following House of Representatives: ALP 55 seats, Liberals 51 seats, Liberal National Party of Queensland 19 seats, National Party 15 seats, Katter’s Australian Party 3 seats, the Greens 1 seat, the Northern Territory Country Liberal Party 1 seat and the National Party of Western Australia 1 seat. In addition, two of Tony Windsor, Rob Oakeshott, Andrew Wilkie, Peter Slipper and Craig Thomson are expected to retain their seats and two other MPs are expected to be elected either as independents or for parties not named above.

The Liberal/National Coalition would therefore have a clear majority of 87 seats in the 150-seat House of Representatives.

Overall, the market believes there is an 82% probability there will be a Liberal Prime Minister after the next election (up from 80% ten days ago) and an 18% probability there will be an ALP Prime Minister (steady).

Miscellaneous

iPredict is owned by Victoria University of Wellington and operates under New Zealand law under the Futures Contracts (iPredict Limited) Declaration and Exemption Notice 2008. iPredict traders warrant and undertake that they are 18 years of age or older and will comply will all laws in the jurisdictions in which they are present.

ENDS

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