IPREDICT LTD

NEW ZEALAND ELECTION NEWSLETTER #1:

18 June 2012

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Key Points:

• Election expected in 2014

• Key, Shearer, Norman, Turei, Peters, Dunne and Harawira all safe as party leaders

• Banks likely to lose Act leadership

• Maori Party leadership finely balanced

• Maori and Mana parties to win electorates, but Greens, NZ First, UnitedFuture and Act to miss out

• National’s support to fall to 40.6% with Labour up to 34.1%

• 65% probability NZ First will hold balance of power

• Final outcome too close to call

• Decision over 5% or 4% threshold may be important

Introduction

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

The newsletter will be produced periodically, with greater frequency as we move closer to the election, which must be held by 24 January 2015.

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 1.45 pm (New Zealand Time).

Election Date

The election is overwhelmingly expected to be held in 2014, with a 90% chance of being held that year There is just a 5% probability it will be held in 2012 and a 5% probability it will be held in 2013. Stocks will be launched this afternoon forecasting which quarter in 2014 the election is most likely to be held.

Election Rules

New Zealand’s system of Mixed Member Proportional (MMP) representation is being reviewed. Traders believe there is a 69% probability the review’s initial proposal paper will recommend reducing the threshold for seats in parliament from the current 5% to 4%. The paper is not expected to recommend a ban on candidates standing as both electorate and party list candidates.

Party Leaders

Prime Minister and National Party Leader John Key, Opposition and Labour Party Leader David Shearer, Green Party co-Leaders Russel Norman and Metiria Turei, NZ First Party Leader Winston Peters, UnitedFuture Leader Peter Dunne and Mana Party Leader Hone Harawira are all expected to lead their parties into the next election.

Act Party Leader John Banks has just a 25% probability of leading his party into the next election.

The situation is more finely balanced for the Maori Party, with a 48% probability co-Leader Pita Sharples and a 45% probability co-Leader Tariana Turia will lead the party into the next election.

Were there a change in National’s leadership, Judith Collins is favoured, while Grant Robertson is favoured should there be a leadership change in Labour.

Electorate Contests

The Maori Party is expected to won two electorates at the next election, the Mana Party one electorate, and the Green, NZ First, Conservative, UnitedFuture and Act parties no electorate seats.

Party Vote

The following party vote shares are expected at the next election: National 40.6%, Labour 34.1%, Greens 10.7%, NZ First 5.1%, Conservatives 4.0%, Act 1.5%, the Maori Party 1.4%, Mana 1.2%, UnitedFuture 1.1% and the Aotearoa Legalise Cannabis Party 0.5%.

Seats in Parliament

Under the electorate and party vote forecasts above, and assuming a 5% threshold for seats, iPredict is forecasting the following Parliament: National 52 seats, Labour 43 seats, Greens 14 seats, NZ First 7 seats, Maori Party 2 seats and Mana Party 2 seats. Parliament would consist of 120 MPs, requiring a group of parties to have 61 seats to govern.

However, were the MMP threshold reduced to 4%, Parliament would be as follows: National 51 seats, Labour 42 seats, Greens 13 seats, NZ First 6 seats, Conservatives 5 seats, the Maori Party 2 seats and Mana 1 seat. This Parliament would also consist of 120 MPs, requiring a group of parties to have 61 seats to govern.

Formation of Government

Under the 5% threshold scenario above, a 61-seat-strong National-led government would be feasible with the support of the NZ First and Maori parties. A 64-seat-strong Labour-led government would also be feasible with the support of the Green and NZ First parties, as would a 61-seat-strong Labour-led government with the support of the Green, Maori and Mana parties

Under the 4% threshold scenario above, a 62-seat strong National-led government would be feasible with the support of the NZ First and Conservative parties. A 61-seat-strong Labour-led government would be feasible with the support of the Green and NZ First parties.

In most scenarios, therefore, NZ First’s support would be critical and iPredict traders believe there is a 65% probability that the NZ First Party will indeed hold the balance of power. If it does so, traders believe there is a 48% probability it will back a National-led government, a 32% probability it will back a Labour-led government and a 20% it will choose to choose to sit on the cross-benches giving neither a National-led nor Labour-led government support on confidence and supply.

Overall, the market regards the final outcome as too close to call, with a 50% probability of a National prime minister and a 50% probability of a Labour prime minister.

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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