iPredict Election Update #48: Labour Government Possible?

Key Points:

* Growth and current account forecasts slip
* Epsom now marginal, making a Phil Goff-led government more plausible, even without Hone Harawira
* National’s Simon O’Connor tipped for Tamaki
* Greens still riding the crest of Rena’s waves while National and Labour sink
* Alan Bollard now expected to increase OCR in March 2012
* Fonterra’s forecast 2011/12 payout increases slightly


Act’s chances in Epsom have dropped to marginal levels, making it just possible that Phil Goff could be our next Prime Minister, according to this week’s snapshot by New Zealand’s online prediction market, iPredict. With John Banks hovering at just over 50% chance of winning Epsom, and New Zealand First nearing MMP’s 5% threshold, a Phil Goff-led government isn’t out of the question. The stocks on National’s Tamaki selection suggest that Simon O’Connor is most likely to be the party’s candidate, while the Greens are still predicted to get a record 14 MPs. In economics, Reserve Bank Governor Alan Bollard is now expected to raise the OCR in March 2012, GDP and Current Account forecasts have worsened, while Fonterra’s forecast 2011/12 payout has increased slightly.

Economic Context

Expectations for GDP growth have deteriorated this week. Growth is expected to be 0.5% for the September 2011 quarter (down from 0.6% last week), 0.6% for the December 2011 quarter (steady) and 0.4% for the March 2012 quarter (steady).

Expected unemployment has 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 improved slightly this week, with annual inflation expected to be 5.0% in the September quarter (steady), 2.8% in the December quarter (steady) and 2.5% in the March 2012 quarter (down from 2.6% last week).

Expected petrol prices have lifted slightly this week, being $2.08 for the week ending 28 October 2011 (steady), $2.10 for the week ending 25 November (steady) and $2.08 for the week ending 30 December (up from $2.07 last week).

Fonterra’s expected final payouts have moved this week. Fonterra’s final payout for the 2011/12 is expected to be $7.35 (up from $7.33 last week), the 2012/13 payout $7.74 (steady), the 2013/14 payout $7.42 (steady) and the 2014/15 payout $7.42 (down from $7.43 last week).

This week’s snapshot suggests an earlier OCR rise than last week’s. The market now predicts that the Reserve Bank Governor Alan Bollard will increase the OCR in March 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 2.80% (down from 2.90% last week).

Current Account deficit expectations have increased this week. The market predicts a deficit of 4.08% of GDP for the year to September (up from 3.95% last week) and 3.18% of GDP for the year to December (up from 3.13% last week).

Parties & Personnel

The selection for the safe blue seat of Tamaki is underway after National’s Allan Peachey stood down. The market predicts that Simon O’Connor is the lead contender with 63%, next is Mark Thomas at 17%, Denise Krum 10%, Toni Millar 6%, and Seby Reeves at 5%.

All current leaders of parliamentary parties have at least a 94% 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 6% probability she will be replaced prior to the election (down from 7% last week).

There is a 12% probability (up from 10% 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 (89% probability up from 86% last week).

Key Electorate Contests

In other electorates, the probability that National will beat last election’s majority in Rangitata is 81% (up from 80% last week), in Tauranga 79% (down from 81% last week), in Clutha Southland 78% (steady), in Helensville 69% (steady), in Bay of Plenty 43% (down from 45% last week), in North Shore 40% (down from 45% last week), in Rangitikei 24% (down from 26% last week), in Rodney 22% (steady) and in Ilam just 18% (down from 19% last week).

The probability that Labour will decrease its majority in Te Atatu is 88% (up from 80% last week), in New Lynn is 87% (down from 88% last week), in Hutt South 58% (down from 60% last week), in Manurewa 52% (steady), and Dunedin South (50% down from 52% last week). Labour Leader Phil Goff looks set to increase his majority in Mt Roskill (57% up from 50% last week), as with Labour’s Megan Woods in Wigram (52% from up from 48% last week).

Act now has an 86% probability of having a reduced majority in Epsom. The chances of the party winning the seat at all have also dropped markedly to marginal territory of 57% down from 66% last week.

In Ohariu, the odds of United Future’s Peter Dunne retaining the seat have reduced slightly this week with the market forecasting he has an 80% probability of being re-elected (down from 83% last week).

New Zealand First remains below MMP’s 5% threshold, with a forecast 4.7% vote share (steady). Party leader Winston Peters has an 18% probability of returning to Parliament (up from 17% last week).

West Coast-Tasman remains unchanged this week, although the race remains close with Labour’s Damien O’Connor on a 50% probability of winning the seat, while National’s Chris Auchinvole is marginally behind at 48%.

Expectations that Mana Party leader Hone Harawira will retain the Te Tai Tokerau seat in the General Election have increased slightly this week at 81% this week (from 80% last week).

The probability Maori Party co-leader Pita Sharples will win Tamaki-Makaurau reduced slightly this week. Dr Sharples now has a 74% probability of retaining the seat (down from 75% last week), over Labour’s Shane Jones at 23% (up from 26% last week).

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

For the Labour Party, Nanaia Mahuta is expected to retain Hauraki-Waikato (85%, up from 82% last week) and Labour’s hold on Ikaroa-Rawhiti is steady at 80% probability.

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 (steady).

In marginal electorates other than those mentioned above, the probability National’s Jonathan Young will retain New Plymouth is 74% (down from 83% last week). There is a 72% probability that National’s Nikki Kaye will retain Auckland Central (down from 73% last week) and an 80% likelihood National’s Paula Bennett will retain her Waitakere seat (down from 84% last week). In the Te Atatu electorate, Labour’s Phil Twyford has a 73% likelihood of winning the seat (up from 72% last week), and Iain Lees-Galloway has a 66% probability of victory in Palmerston North (down from 68% last week).

On a seat-by-seat basis, National is expected to win 40 electorate seats, Labour 24, 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 45.0% (down from 46.0% last week) Labour 29.7% (down from 31.0% last week), the Greens 11.1% (steady), New Zealand First 4.7% (steady), Act 3.6% (up from 3.1% last week), UnitedFuture 1.9% (up from 1.6% last week), the Maori Party 1.2% (steady), the Mana Party 1.0% (down from 1.1% last week), the Conservative Party 0.9% (down from 1.0% last week), and the New Citizen Party 0.4% (down from 0.5% last week).

Based on this data, and the electorate results above, Parliament would be as follows: National 58 MPs, Labour 38 MPs, the Greens 14 MPs, Act 5 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, and Act’s shrinking chances in Epsom, iPredict has also analysed what might happen should New Zealand First win 5.0% of the vote and John Bank’s loses Epsom. Under this scenario, Parliament would be as follows: National 57 MPs, Labour 38 MPs, the Greens 14 MPs, New Zealand First 6 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 62 MPs on confidence and supply meaning Phil Goff’s Labour Party could govern with the Greens, New Zealand First and the Maori Party, and would not need the Mana Party.

Overall, however, the market indicates a 93% probability there will be a National Prime Minister after the election (up from 92% 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 has increased to 87% (steady).

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 8:50am today.

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