IPREDICT LTD
2011 ELECTION UPDATE #47
14 October 2011
www.ipredict.co.nz

Key Points:

• Rena disaster may cost National 5 MPs and a reduced majority in Bay of Plenty
• Greens up for fifth week in a row with 14 MPs now expected
• Labour back above 30% and Damien O'Connor ahead in West Coast-Tasman
• Act weakens in Epsom while Sharples' hold on Tamaki-Makaurau strengthens
• National could govern with Greens, Act or Maori Party
• Alan Bollard now expected to hold off OCR increase till April 2012
• Macroeconomic indicators remain steady
• Fonterra's forecast 2011/12 payout falls slightly

Commentary:

The Rena grounding has hurt National and helped Labour and the Greens, iPredict's first weekly snapshot since the disaster suggests. According to the online predictions market with its 5000 registered traders, National's forecast party vote has plunged from 50% last week to just 46% this week, potentially costing it five MPs compared with last week, while its Bay of Plenty MP, Tony Ryall, is now expected to suffer a reduced majority. Labour is up from 28.5% to 31.0%, which would give them 39 MPs, while the Greens are also big winners from the disaster, increasing their forecast party vote for the fifth week in a row to 11.1% which would deliver them 14 MPs. In economics, Reserve Bank Governor Alan Bollard is now expected to hold off a rise in the OCR till April 2012, while most other economic indicators (GDP Growth, Unemployment, Inflation, and Current Account Deficit) have remained steady.

Economic Context

Expectations for GDP growth have remained steady this week. Growth is expected to be 0.6% for the September 2011 quarter, 0.6% for the December 2011 quarter and 0.4% for the March 2012 quarter.

Expected unemployment has also remained steady this week. Unemployment remains forecast 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 also remained steady this week, with annual inflation expected to be 5.0% in the September quarter, 2.8% in the December quarter and 2.6% in the March 2012 quarter.

For the week ending 30 September 2011, the market was predicting petrol prices to be $2.06, just shy of the released figure of $2.10 per litre. Other petrol price expectations have moved this week, being $2.08 (down from $2.09) for the week ending 28 October 2011, $2.10 (up from $2.08) for the week ending 25 November and $2.07 (up from $2.06) for the week ending 30 December.

Fonterra's expected final payouts have moved this week. Fonterra's final payout for the 2011/12 is expected to be $7.33 (down from $7.36 last week), the 2012/13 payout $7.74 (steady), the 2013/14 payout $7.42 (up from $7.41 last week) and the 2014/15 payout $7.43 (up from $7.39 last week).

Predictions of an OCR increase have eased further this week. The market predicts that the Reserve Bank Governor Alan Bollard will hold off an increase in the OCR till April 2012, when it will rise to 2.75%, and then again in June to 3.00%.

The expected 90-day bank bill rate for 1 December is 2.90% (down from 2.95% last week).

Current Account deficit expectations have remained steady this week. The market predicts a deficit of 3.95% of GDP for the year to September and 3.13% 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 now Maori Party Co-leader Tariana Turia, but with the market forecasting just a 7% probability she will be replaced prior to the election.

There is a 10% probability (down from 18% last week) that there will be changes to the top ten of the Labour Party list, announced on 10 April 2011, when it is registered with the Electoral Commission. There is a 10% probability that a Minister will depart before the election.

Annette Sykes continues to be forecast to be the highest ranked person on the Mana Party list other than Party Leader Hone Harawira (86% probability down from 88% last week).

Key Electorate Contests

The forecast winner in the highly marginal West Coast-Tasman has changed again. Labour's Damien O'Connor has again snuck ahead, with a 50% probability of winning the seat (up from 45% last week), while National's Chris Auchinvole has a 48% probability of prevailing (down from 55% last week)

In other electorates, the probability that National will beat last election's majority in Tauranga is 81% (down from 89%), in Rangitata 80% (steady), in Clutha Southland 78% (steady), in Helensville 69% (steady), in North Shore 45% (down from 52%), in Bay of Plenty 45% (down from 50%), in Rangitikei 26% (steady), in Rodney 22% (steady) and in Ilam just 19% (steady).

The market is predicting that Labour faces reduced majorities in a number of safe seats. The probability that Labour will decrease its majority in New Lynn is 88%, in Te Atatu 80%, in Hutt South 60%, and in Wigram, Dunedin South, and Manurewa 52%. Labour Leader Phil Goff looks set to maintain his majority in Mt Roskill.

Act is also expected to reduce its 2008 majority in Epsom with a just a 17% probability it will increase (down from 26% last week). The chances of the party winning the seat at all have also dropped markedly to 66% from 80% last week.

In Ohariu, the odds of United Future's Peter Dunne retaining the seat have remained steady this week with the market forecasting he has an 83% probability of being re-elected.

New Zealand First remains below MMP's 5% threshold, with a forecast 4.7% vote share (up from 3.6%). Party leader Winston Peters has a 17% probability of returning to Parliament (up from 15% last week).

Expectations that Mana Party leader Hone Harawira will retain the Te Tai Tokerau seat in the General Election have remained steady at 80% this week.

The probability Maori Party co-leader Pita Sharples will win Tamaki-Makaurau has improved markedly this week. Dr Sharples now has a 75.7% probability or retaining his seat (up from 59.9% last week) over Labour's Shane Jones at 25.6% (down from 41.7% last week).

Maori Party co-Leader Tariana Turia is still expected to retain Te Tai Hauauru (89%, down from 93% last week), and her colleague Te Ururoa Flavell is expected to retain Waiariki (79%, up from 77% last week).

For the Labour Party, Nanaia Mahuta is expected to retain Hauraki-Waikato (82%, down from 86% last week) and Labour's hold on Ikaroa-Rawhiti is now at 80% probability (up from 77% last week).

Te Tai Tonga remains forecast to change hands, with a 70% probability it will be won by Labour's Rino Tirikatene from the Maori Party's Rahui Katene (up from 68% last week).

In marginal electorates other than those mentioned above, the probability National's Jonathan Young will retain New Plymouth is 83% (steady). There is a 73% probability that National's Nikki Kaye will retain Auckland Central (up from 72% last week) and an 84% likelihood National's Paula Bennett will retain her Waitakere seat (up from 83% last week). In the Te Atatu electorate, Labour's Phil Twyford has a 72% likelihood of winning the seat (down from 76% last week), and Iain Lees-Galloway has a 68% probability of victory in Palmerston North (down from 70% last week).

On a seat-by-seat basis, National is expected to win 40 electorate seats (down from 41 seats last week), Labour 24 (up from 23 last week), the Maori Party 3 and Act, United Future and the Mana Party 1 seat each.

Party Vote, and Election Results

Forecast party vote shares are now: National 46.0% (down from 50.0% last week) Labour 31.0% (up from 28.5% last week), the Greens 11.1% (up from 10.7% last week), New Zealand First 4.7% (up from 3.6% last week), Act 3.1% (down from 3.2% last week), UnitedFuture 1.6% (up from 1.1% last week), the Maori Party 1.2% (down from 1.4% last week), the Mana Party 1.1% (up from 1.0% last week), the Conservative Party 1.0% (up from 0.9% last week), and the New Citizen Party 0.5% (steady).

Based on this data, and the electorate results above, Parliament would be as follows: National 58 MPs, Labour 39 MPs, the Greens 14 MPs, Act 4 MPs, the Maori Party 3 MPs, UnitedFuture 2 MPs, and the Mana party just 1 MP. 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 be able to govern with any one of the Greens, Act or Maori Party.

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 56 MPs, Labour 37 MPs, the Greens 13 MPs, New Zealand First 6 MPs, Act 4 MPs, the Maori Party 3 MPs, UnitedFuture 2 MPs, and the Mana Party just 1 MP. There would be 122 MPs, requiring a government to have the support of 62 MPs on confidence and supply meaning John Key's National Party would require the support of the Greens, or Act and one of the Maori or UnitedFuture parties.

Overall the market indicates a 92% probability there will be a National Prime Minister after the election (down from 95% last week).

MMP Referendum and Miscellaneous

As iPredict forecast, the original version of the Video Camera Surveillance (Temporary Measures) Bill was not passed with a Bill not involving retrospectivity being passed instead.

The probability New Zealanders will elect to retain the MMP voting system in the referendum to be held on Election Day has increased to 87%, up from 85% 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 7:55am today.

ENDS

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