Now mathematically possible for a Labour-led govt if NZ First hits 5% of the vote, iPredict says

A Labour-led government after the November 26 election is now mathematically possible if potential coalition partner New Zealand First hits 5% of the vote, according to New Zealand on-line predictions market iPredict.

In its weekly election snapshot, iPredict said Labour had gained more of the forecast vote over recent weeks at the expense of National and Labour's support parties. This follows this week's release of the latest Roy Morgan poll, showing support for Labour jumped from 28% to 36%, while National's poll rating fell from 53% to 49%. See the Roy Morgan poll here.

The general downward trend in National's forecast party vote over the last six weeks has continued this week, while Labour's forecast party vote has increased sharply, iPredict said. Forecast party vote shares are now:

National 44.0% (down from 45.5% last week), Labour 33.6% (up from 30.2% last week), the Greens 7.0% (steady), New Zealand First 4.9% (steady); Act 4.3% (down from 4.7% last week), the Maori Party 1.9% (down from 2.1% last week), UnitedFuture 1.6% (down from 2.1% last week), the Mana Party 1.5% (down from 1.6% last week), the proposed Reform New Zealand Party 0.7% (steady), and the New Citizen Party 0.6% (down from 0.7% last week).

"Based on this data, and the electorate results [below], Parliament would be as follows: National 56 MPs, Labour 43 MPs, the Greens 9 MPs, Act 6 MPs, the Maori Party 3 MPs, and the UnitedFuture and Mana parties 2 MPs each.  

"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 would have the numbers with the support of the Act Party, or both the Maori and UnitedFuture parties.  A two-party National/Green government would also be possible," iPredict said.

"Given New Zealand First's close proximity to MMP's 5% threshold, iPredict has again analysed what would happen should that party win 5% of the vote.  Under this scenario, Parliament would be as follows: National 53 MPs, Labour 41 MPs, the Greens 9 MPs, New Zealand First 6 MPs, Act 5 MPs, the Maori Party 3 MPs, and the UnitedFuture and Mana parties 2 MPs each.  There would be 121 MPs, requiring a government to have the support of 61 MPs on confidence and supply," it said.

"Under this scenario, government formation would be more complicated.  John Key's National Party would need all of the Act, UnitedFuture and Maori parties to govern meaning that the Maori Party would genuinely hold the balance of power.  This would give it the option of supporting a Labour/Green/New Zealand First/Maori Party/Mana Party government, which would have 61 seats on confidence and supply.  A two-party National/Green government would also be possible.These figures reflect the predictions made by those using iPredict's prediction market, rather than any survey of voters."

Here is the full weekly snapshot.

Key Points:
*       Labour's forecast vote grows at expense of National and its support parties
*       Goff-led Government feasible if NZ First reaches 5%
*       John Key still strongly expected to govern
*       Economic forecasts improving slowly
*       National getting stronger in New Plymouth as is Labour in Ikaroa-Rawhiti

 Commentary:

John Key continues to be strongly expected to be re-elected on 26 November despite Labour increasing its forecast vote to 33.6% at the expense of National and its support parties, this week's update from New Zealand's prediction market, iPredict, indicates.  However, for the first time in many weeks, a Phil Goff-led Government is mathematically possible should New Zealand First cross MMP's 5% threshold.  Growth forecasts are up marginally and unemployment and inflation forecasts are down slightly.

Economic Context

The market indicates a low probability of a recession.  The probability the economy will be in a recession in the June quarter is just 10% (steady compared with last week), the September quarter 13% (steady) and the December quarter 13% (up from 12% last week).

Expectations for growth have improved marginally in the short-term.  Growth for each of the next five quarters to be reported is forecast to be 0.1% for the March 2011 quarter (steady compared with last week and up from 0.0% two weeks ago), 0.5% for the June 2011 quarter (up from 0.4% for the last two weeks), 0.7% for the September 2011 quarter (steady for the last two weeks), 0.8% for the December 2011 quarter (up from 0.7% for the last two weeks) and 0.6% for the March 2012 quarter (steady for the last two weeks).

Unemployment forecasts have also improved marginally compared with last week.  Unemployment is expected to be 6.8% 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 (down from 6.5% last week).

Inflation expectations have been revised down slightly from last week.  Annual inflation is expected to be 5.2% for the June 2011 quarter (steady), 4.7% for the September 2011 quarter (down from 4.8% last week), 2.7% for the December 2011 quarter (down from 3.0% last week), and 2.6% for the March 2012 quarter (down from 2.8% last week).

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 31% (down from 34% last week), the probability it will exceed $2.40 per litre is 15% (up from 13% last week), and the probability it will go above $2.50 per litre is 11% (down from 13% last week).

Cumulative expectations for changes to the OCR suggest that Reserve Bank Governor Alan Bollard will leave the OCR at 2.50% through to December, when he will increase it to 2.75%, and then again to 3.00% in January 2012.

Expected yields for 90-day bank bills are largely unchanged from last week.  The expected 90-day rate on 1 September 2011 is 2.70% (down from 2.75% last week) and on 1 December 2011 is 2.94% (up from 2.93% last week).

Average floating-rate mortgages are still expected to stay low, with the probability they will reach 6.50% in 2011, from the 5.90% reported by the Reserve Bank for March 2011, back down to 18%, from 24% last week and 17% two weeks ago.

The market is predicting a Current Account surplus of 1.09% of GDP to be reported for the year ending March 2011, a Current Account surplus of 1.08% of GDP to be reported for the year ending June 2011, a Current Account deficit of 1.02% of GDP to be reported for the year ending September 2011, and a Current Account deficit of 1.50% of GDP to be reported for the year ending December 2011.

There is just a 3% probability that Fitch Ratings will announce a downgrade of New Zealand's long term currency rating before 1 July (steady compared with last week and down from 5% two weeks ago).

Election Date, Parties & Personnel

The probability the election will be held on Saturday 26 November is 95%, up from 94% in last week's update.  All current leaders of parliamentary parties have at least a 90% probability of remaining in their positions until then.  The most vulnerable is Maori Party Co-Leader Tariana Turia, but with just a 9% probability of being replaced prior to the election.

Key Electorate Contests

Epsom continues to become safer for Act, with an 87% probability (up from 85% last week) that it will be won by a candidate other than a National candidate or incumbent Act MP Rodney Hide.

In Ohariu, the incumbent, UnitedFuture Leader Peter Dunne, also continues to be favoured, with a 58% probability of being re-elected, up from 52% last week.  Second favoured continues to be Labour's Charles Chauvel, with a 22% probability of winning the seat, down from 28% last week.

The probability Winston Peters will be returned to Parliament is down to 26%, from 30% last week, with his party remaining narrowly below MMP's 5% threshold.  The probability he will stand in Epsom is down to 10%, from 15% last week, while there remains a 13% probability he will stand in the Prime Minister's Helensville electorate.

In the Maori seats, there have been no changes in forecast winners.  There is an 80% probability Mana Party Leader Hone Harawira will win the Te Tai Tokerau by-election (down from 83% last week) and a 65% probability he will prevail in the General Election (down from 66% last week).

Maori Party Co-Leader Pita Sharples is expected to retain Tamaki-Makaurau (72% probability, up from 70% last week), Mrs Turia is expected to retain Te Tai Hauauru (78% probability, steady), and Maori Party MP Te Ururoa Flavell is expected to retain Waiariki (77% probability, steady).

For the Labour Party, Nanaia Mahuta is expected to retain Hauraki-Waikato (76% probability, down from 77% last week) and Parekura Horomia or another Labour candidate is expected to retain Ikaroa-Rawhiti (53% probability, up from 48% last week).

Te Tai Tonga continues to be forecast to change hands, with a 63% probability it will be won by Labour's Rino Tirikatene, down from 65% probability last week.

In marginal electorates other than those mentioned above, there is a 74% probability that National's Nikki Kaye will retain Auckland Central, up from 71% last week.  The probability National's Jonathan Young will retain New Plymouth is up to 57%, from 52% probability last week and 50% the week before.  National's Paula Bennett remains favoured to retain Waitakere (57% probability, down from 60% last week) and Labour's Damien O'Connor is expected to win back West Coast-Tasman for Labour (53% probability, down from 55% 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, UnitedFuture and the Mana Party 1 each.

Party Vote, Election Result and Alternative Scenarios

The general downward trend in National's forecast party vote over the last six weeks has continued this week, while Labour's forecast party vote has increased sharply.  Forecast party vote shares are now: National 44.0% (down from 45.5% last week), Labour 33.6% (up from 30.2% last week), the Greens 7.0% (steady), New Zealand First 4.9% (steady); Act 4.3% (down from 4.7% last week), the Maori Party 1.9% (down from 2.1% last week), UnitedFuture 1.6% (down from 2.1% last week), the Mana Party 1.5% (down from 1.6% last week), the proposed Reform New Zealand Party 0.7% (steady), and the New Citizen Party 0.6% (down from 0.7% last week).

Based on this data, and the electorate results above, Parliament would be as follows: National 56 MPs, Labour 43 MPs, the Greens 9 MPs, Act 6 MPs, the Maori Party 3 MPs, and the UnitedFuture and Mana parties 2 MPs each.  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 would have the numbers with the support of the Act Party, or both the Maori and UnitedFuture parties.  A two-party National/Green government would also be possible.

Given New Zealand First's close proximity to MMP's 5% threshold, iPredict has again analysed what would happen should that party win 5% of the vote.  Under this scenario, Parliament would be as follows: National 53 MPs, Labour 41 MPs, the Greens 9 MPs, New Zealand First 6 MPs, Act 5 MPs, the Maori Party 3 MPs, and the UnitedFuture and Mana parties 2 MPs each.  There would be 121 MPs, requiring a government to have the support of 61 MPs on confidence and supply.

Under this scenario, government formation would be more complicated.  John Key's National Party would need all of the Act, UnitedFuture and Maori parties to govern meaning that the Maori Party would genuinely hold the balance of power.  This would give it the option of supporting a Labour/Green/New Zealand First/Maori Party/Mana Party government, which would have 61 seats on confidence and supply.  A two-party National/Green government would also be possible.

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%.

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 7.25 am today.