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NZ First dips under 5% - market

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Fuseworks Media
Fuseworks Media

There is a broadly more favourable economic outlook for New Zealand, with a recession before the end of the year looking even less likely, and an improvement in unemployment and GDP growth expectations, according to this week's snapshot from New Zealand's prediction market, iPredict. In politics, John Key continues to be strongly favoured to remain Prime Minister, and would be able to govern with the support of the Act Party or with both of the UnitedFuture and Maori parties. Meanwhile, New Zealand First has again dipped below MMP's 5% threshold. Economic Context The likelihood of a recession before the end of the year continues to decline, and there is now less than a 12% probability of a recession for each of the next three quarters. The probability the economy will be in a recession in the June quarter is 3% (down from 8% last week), the September quarter 9% (down from 12% last week) and the December quarter 11% (down from 13% last week). Page 1 of 5

Expectations for GDP growth in the yet-to-be-reported March 2011 quarter have increased to 0.4% (up from 0.3% last week). The predicted growth in the June quarter has increased to 0.6% (up from 0.5% last week) and the following quarters have remained steady, on 0.7% for the September 2011 quarter, 0.7% for the December 2011 quarter, and 0.6% for the March 2012 quarter.

Forecast unemployment has improved slightly in the medium-term. Unemployment is expected to be 6.6% in the June 2011 quarter (steady), 6.4% in the September 2011 quarter (steady), 6.2% in the December 2011 quarter (down from 6.3% last week) and 6.4% in the March 2012 quarter (steady). Inflation expectations have improved slightly in the medium term. Annual inflation is expected to be 5.2% in the June 2011 quarter (steady), 4.7% in the September 2011 quarter (steady), 2.5% in the December 2011 quarter (down from 2.6% last week) and 2.7% in the March 2012 quarter (steady). The market continues to indicate strongly that petrol prices will be capped at a maximum price of $2.30 this year.

The probability that unleaded petrol will exceed $2.30 per litre in 2011 is 25% (down from 26% last week); the probability it will exceed $2.40 per litre is 11% (down from 12% last week); and the probability it will go above $2.50 per litre is 8% (down from 10% last week). The market continues to expect Reserve Bank Governor Alan Bollard to increase the OCR to 2.75% in December, and a further increase to 3.00% is expected in March 2012.

The expected 90-day bank bill rate on 1 September 2011 is 2.73% (down from 2.76% last week) and 2.88% for 1 December 2011 (down from 2.89% last week).

There is a 60% probability that average floating-rate mortgages will reach 6.00% by the end of the year, down from a 68% probability last week, but just a 13% probability that they will reach 6.50% in 2011, up from 11% last week. The market is indicating that the Current Account deficit for the year to March 2011 will be 5.03% of GDP (steady).

A deficit of 5.07% of GDP is predicted for the year ending June 2011 (greater than the 4.90% indicated last week), 4.53% of GDP for the year ending September 2011 (greater than the 4.51% indicated last week), and 3.24% of GDP for the year ending December 2011 (steady).

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Election Date, Parties & Personnel The probability the election will be held on Saturday 26 November is steady at 96%, and all current leaders of parliamentary parties have at least a 93% probability of remaining in their positions until then. The most vulnerable is still Maori Party Co-Leader Dr Pita Sharples, but with just a 7% probability of being replaced prior to the election. Key Electorate Contests Act has firmed up its support in Epsom this week, with an 89% probability (compared with 86% last week and 79% the week before) that the seat will be won by a candidate other than a National candidate or incumbent Act MP Rodney Hide. In Ohariu, United Future's Peter Dunne has a weakened position, with a 72% chance of being re-elected (down from 76% last week and 69% the week before). National MP Katrina Shanks is now second favoured with 20% (up from 11% last week) ahead of Labour MP Charles Chauvel, who has a 7.5% probability of winning the electorate (down from 13% last week)

New Zealand First has again fallen below MMP's 5% threshold this week, with a forecast 4.9% vote share (compared with 5% last week). Party leader Winston Peters has only a 23% probability of returning to Parliament (compared with 26% last week). Expectations that Mana Party leader Hone Harawira will retain the Te Tai Tokerau seat in the General Election have remained steady at 81%.

Maori Party Co-Leader Pita Sharples is expected to retain Tamaki-Makaurau (66%, down from 70% last week), Co-

Leader Tariana Turia is expected to retain Te Tai Hauauru (77%, up from 76% last week), and Te Ururoa Flavell is expected to retain Waiariki (77%, up from 76% last week).

For the Labour Party, Nanaia Mahuta is expected to retain Hauraki-Waikato (77%, up from 73% last week) and Labour's position in Ikaroa-Rawhiti (currently Parekura Horomira's seat) has weakened slightly (66% probability, down from 70% last week). Te Tai Tonga remains forecast to change hands, with a 68% probability it will be won by Labour's Rino Tirikatene from the Maori Party's Rahui Katene, steady compared with last week. Page 3 of 5

In marginal electorates other than those mentioned above, the probability National's Jonathan Young will retain New Plymouth is steady at 68%. There is a 77% probability that National's Nikki Kaye will retain Auckland Central (steady). National's Paula Bennett remains only marginally favoured to retain Waitakere (53% probability, steady) and Labour's Damien O'Connor is expected to win back West Coast-Tasman for Labour (55% probability, up from 53% last week). With no changes to forecast winners in electorate seats over the last week, National continues to be expected to win 40 electorate seats, Labour 24, the Maori Party 3, and Act, United Future and the Mana Party 1 each. Party Vote, Election Result and Alternative Scenarios National's forecast party vote has decreased slightly this week, while Labour's forecast vote share has increased.

Forecast party vote shares are now: National 44.0% (down from 44.5% last week), Labour 32.7% (up from 31.4% last week), the Greens 6.9% (down from 7.2% last week), New Zealand First 4.9% (down from 5.0% last week), Act 4.5% (down from 4.6% last week), UnitedFuture 2.1% (down from 2.2% last week), the Maori Party 1.9% (steady), the Mana Party 1.9% (down from 2.0% last week), the New Citizen Party 0.4% (down from 0.6% last week) and the proposed Reform New Zealand Party 0% (steady). Based on this data, and the electorate results above, Parliament would be as follows: National 56 MPs, Labour 42 MPs, the Greens 9 MPs, Act 6 MPs, the Maori Party 3 MPs, UnitedFuture 3MPs and the Mana Party 2 MPs. There would be 121 MPs, requiring a government to have the support of 61 MPs on confidence and supply, so that John Key's National Party could govern with the support of the Act Party or both of the Maori and UnitedFuture parties. Given New Zealand First's proximity to MMP's 5% threshold, iPredict has also analysed what might happen should New Zealand First win 5% of the vote. Under this scenario, Parliament would be as follows: National 54 MPs, Labour 40 MPs, the Greens 8 MPs, Act 5 MPs, the Maori Party and UnitedFuture 3 MPs each and the Mana party 2 MPs.

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 require the support of the Act Party and one of UnitedFuture or the Maori Party. Overall, however, the market continues to indicate an 87% probability there will be a National Prime Minister after the election (steady compared with 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 is steady at 78%, despite this week's launch of a campaign against the system. 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 8:38 am today.

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