IPREDICT LTD
2014 ELECTION UPDATE #1
Wednesday 15 January 2014
FOR IMMEDIATE RELEASE
Key Points:
•Election expected in Q4 2014, most probably in November
•Growing economy expected, but with rising interest rates
•Only National, Labour and Greens to reach 5% threshold
•Maori, Conservative, Mana and UnitedFuture parties to win electorate seats but Act to miss out
•Very slight advantage to John Key as head of a National/Conservative/UnitedFuture government
Commentary:
This is the first iPredict Update for the 2014 New Zealand General Election with forecasts based on trading by the more
than 7000 registered iPredict traders. As in 2011, the newsletter will be based on a market snapshot taken at a random
time, initially weekly and then daily during the election campaign.
The first snapshot, which was taken at 9.32 am today, suggests a very slight advantage to incumbent prime minister John
Key, most probably leading a National/Conservative/UnitedFuture government, with or without the Maori Party.
Economic Context
Growth is expected to be strong duing the year. There is a 98% probabilitygrowth in the December 2013 quarter will be reported to have been more than 0.5% and a 48% probability it will be above 1%. The probability of growth
exceeding 1% in the March 2014 quarter is 90%, in theJune 2014 quarter 87%, in theSeptember 2014 quarter 60% and theDecember 2014 quarter 82%.
Unemployment is expected to have been below 6.5% in theDecember 2014 quarter and to fall below 6.0% in theMarch 2014 quarterbut remain above 5.5% through to theend of the year.
Thecurrent account deficit is expected to remain between 2% and 4% of GDP through the year.
There is an 80% probability there will be afiscal surplus in 2014/15.
Inflation is expected to remain below 2% until theSeptember 2014 andDecember 2014 quarters, with a 52.5% probability it will exceed 2% in each of those quarters.
Interest rates will clearly be on the rise by the election. There is a 99% probability the Reserve Bank willraise the Official Cash Rate(OCR) in 2014. There is a 68% probability the OCR will be raised by 25 basis points on13 March and an 89% probability there will be rises of at least 75 basis points during the year. There is a 43% probability
interest rate rises could be at least 100 basis points through the year.
The Reserve Bank’s restrictions onhigh loan-to-value ratio mortgages will stay in place through 2014, with 90% probability.
Election Date & Personnel
There is an 80% probability the election will be held in thefourth quarter of 2014, and a 55% probability it will be held inNovember.
All current party leaders, except for retiring Act leader John Banks and retiring Maori Party co-leader Tariana Turia
are overwhelmingly expected toremain in their roles until nomination day. There is a 71% probability Jamie Whyte will be thenext leader of the Act Party.
If there were a change of leader in either the National or Labour parties,Judith Collins andGrant Robertson are currently favourites to take the role in their party, with 40% and 45% probability respectively.
Labour’s Ruth Dyson and Trevor Mallard areexpected to retire at the election, and there is a 47% probability that National’sMurray McCully will join them.
Electorate Contests
Contract bundles for every electorate will be launched progressively through the year. Currently, the market indicates
that theMaori Party,Mana andUnitedFuture will each win one electorate seat. TheConservative Party sits on a knife-edge, with a 53% probability it will win one electorate seat. TheGreens,NZ First andAct are not expected to win electorate seats.
Party Vote
Of themajor parties, National is expected to win43.0% of the party vote, the Labour Party34.5% and the Green Party9.5%.
Noother parties are expected to reach the 5% threshold under the MMP electoral system. TheConservative andNZ First parties are both expected to win 4.6% of the party vote, the Maori Party1.5%, Act1.3%, Mana0.7%, UnitedFuture0.6% and the Aotearoa Legalise Cannabis Party0.3%.
Stocks for the proposed Civilian and Kim Dotcom parties will be launched in the near future.
Election Result & Alternative Scenarios
Based on the party vote forecasts and the electorate results above, Parliament would be as follows: National 54 MPs,
Labour 44 MPs, Greens 12 MPs, the Conservative Party 6 MPs, the Maori Party 2 MPs, UnitedFuture 1 MPs and Mana 1 MP, for
a total of 120 MPs. A government would be required to have the support of 61 MPs on confidence and supply.
Under this scenario, National, the Conservative Party and UnitedFuture could form a government with 61 MPs. Were the
Maori Party involved, such a government would be supported by 63 MPs.
Were the Conservative Party not to win an electorate seat, a Labour/Green/Maori Party/Mana government could be formed
with 62 MPs.
Overall, the market indicates avery narrow advantage to National, with a 53.3% probability of a National prime minister after the next election and a 45.1% probability of a Labour
prime minister.
Miscellaneous
iPredict Ltd is owned by Victoria University of Wellington. Details on the company and its stocks can be found atwww.ipredict.co.nz. The weekly political update is prepared by Exceltium Ltd on a pro bono basis.
ENDS