Have your say: Should National let Act leader Rodney Hide win Epsom, or can they afford to lose the Act Party?

Act Party leader Rodney Hide, who was interviewed last month by Bernard Hickey (above) was given a 50% chance of retaining Auckland's Epsom seat for Act yesterday.

This was before Prime Minister John Key indicated National may let the Local Government Minister keep his Epsom seat by focusing in that seat on keeping the party vote for National, rather than winning the electorate.

The contract on iPredict for Hide to retain Epsom had jumped up to 66 cents this morning after Key's comments that National would focus on its party vote in Epsom.

Here's what iPredict said yesterday in its weekly snapshot, taken before the PM's comments yesterday:

Epsom has joined Ikaroa-Rawhiti, New Plymouth, Te Tai Tonga and West Coast-Tasman as one of the five most marginal electorates in the country.  There is now just a 50% probability Mr Hide will retain Epsom for his party, down from 67% last week.  The probability it will be won by a National candidate (other than Mr Hide if he stood for National) is now 48%, up from 31% last week.

The problem for National is if they were to stand a credible candidate against Hide and win the electorate seat, Act would not be returned to Parliament. Although current polls suggest National could govern alone, there is a lot of water left to go under the bridge before the November 26 election.

Act currently has five MPs in Parliament supporting the government on confidence and supply. If National were to win Epsom, that could effectively mean five fewer seats for forming a government, with its only possible coalition partners being the Maori Party and UnitedFuture.

Your view?

So should National let Act back into Parliament by not standing a candidate against Hide in Epsom?

Would Hide even lose Epsom if he was up against a credible candidate? (Remember there has been polling done on whether Epsom voters would vote for former National leader Don Brash or former MP and Auckland Mayor John Banks - and the likelihood of Brash leading a new party into the next election rose slightly this week, although it is still very unlikely at 8%.)

Here's this week's snapshot from iPredict, released yesterday. CPI inflation came through at 4.5% annually for the March quarter, while Prime Minister John Key signalled yesterday National would let Act leader Rodney Hide

Key Points:
•       National forecast to govern alone – even if Act and UnitedFuture leave Parliament and NZ First reaches 5%
•       Epsom now one of top five marginals, along with Ikaroa-Rawhiti, New Plymouth, Te Tai Tonga and West Coast-Tasman
•       Hide’s hold on leadership weakens while Goff’s strengthens
•       Economic growth expectations remain low
•       Inflation, unemployment and interest rate expectations unchanged

Commentary:

This week’s snapshot from New Zealand’s online prediction market, iPredict, indicates John Key’s National Party would be able to govern alone, despite market expectations that its support will fall significantly, from that suggested by recent opinion polls, before the General Election on 26 November.

National’s ability to govern alone holds true even if it is assumed that both the Act and UnitedFuture parties were to leave Parliament and New Zealand First were to return with 5% of the party vote.  Mr Key’s strongest governing position would be under a scenario where both Act and UnitedFuture left Parliament – the former being increasingly likely – while New Zealand First did not reach 5%.  Under this scenario, the National Party would have 65 MPs in a Parliament of 121.

Economic Context

Recession fears have remained constant over the last week, with the probability the economy will be in a recession in the June, September and December 2011 quarters remaining broadly steady at 22%, 15% and 12% respectively.  Expectations for negative growth in the March 2011 quarter also remain steady with just a 26% probability growth will be above 0% for that quarter.

Growth forecasts are also unchanged and remain low.  Growth for each of the next five quarters to be reported is expected to be -0.2% for the March 2011 quarter 0.2% for the June 2011 quarter; 0.6% for the September 2011 quarter; 0.7% for the December 2011 quarter; and 0.5% for the March 2012 quarter.

Unemployment forecasts also remain steady.  Unemployment is expected to be 6.8% in the March 2011 quarter; 6.7% in the June 2011 quarter; 6.3% in the September 2011 quarter; 6.4% in the December 2011 quarter; and 6.5% in the March 2012 quarter.

Inflation expectations are also relatively unchanged.  Annual inflation is expected to be 4.8% in the March 2011 quarter (steady); 5.2% for the June 2011 quarter (down from 5.3% last week); 5.0% for the September 2011 quarter (steady); 3.4% for the December 2011 quarter (up from 3.1% last week); and 3.1% for the March 2012 quarter (steady).

Big petrol price rises continue to be forecast, although the strength of expectations has continued to ease back slightly.  The probability that unleaded petrol prices will exceed $2.20 per litre in 2011 is 89%, down from 90% last week; the probability it will exceed $2.30 per litre is 52%, down from 54% last week and 60% the week before; and the probability it will exceed $2.40 per litre is now down to 30%, from 34% last week, 35% two weeks ago; 40% three weeks ago and 45% four weeks ago.  The probability it will go above $2.50 per litre remains 24%.

The market continues to expect that Reserve Bank Governor Alan Bollard will leave the OCR at 2.50% for most of the year before raising it to 2.75% on 8 December.  There remains a 98% probability he will leave it unchanged on 28 April (steady compared with last week); a 90% probability he will leave it unchanged on 9 June (up from 87%); an 86% probability he will leave it unchanged on 28 July (down from 87%); an 88% probability he will leave it unchanged on 15 September (steady); a 70% probability he will leave it unchanged on 27 October (up from 69%) and a 50% probability he will increase it to 2.75% on 8 December (steady).

Expected yields for 90-day bank bills are largely unchanged from last week.  The expected 90-day rate on 1 June 2011 is 2.55% (down from 2.57% last week), the expected 90-day rate on 1 September 2011 is 2.76% (steady) and on 1 December 2011 is 2.97% (up from 2.93% last week).

Average floating-rate mortgages continue to be expected to stay low.  The probability they will reach 6.50% in 2011, from the 5.90% reported by the Reserve Bank for March 2011, is now 18%, up from 17% last week and 16% the week before.

Election Date, Parties & Personnel

The market continues to indicate a 97% probability that the election will be held on Saturday 26 November.  All current leaders of parliamentary parties have at least a 76% probability of remaining in their positions until then.  The most vulnerable is now Act Leader Rodney Hide, who has a 24% probability of being replaced before the election, up from 7% last week.  The probability that Labour Leader Phil Goff will be replaced before the election has now fallen back to just 12%, from 17% last week, 22% two weeks ago and 42% three weeks ago.

The probability of a new party being registered prior to the election involving at least two of Independent MP Hone Harawira, Unite National Secretary Matt McCarten and former Green MP Sue Bradford has slipped back to 27%, from 30% last week and 34% the week before.  The probability that a new party will be registered involving former National Party Leader Don Brash is 8%, up from 7% last week.

Key Electorate Contests

Epsom has joined Ikaroa-Rawhiti, New Plymouth, Te Tai Tonga and West Coast-Tasman as one of the five most marginal electorates in the country.  There is now just a 50% probability Mr Hide will retain Epsom for his party, down from 67% last week.  The probability it will be won by a National candidate (other than Mr Hide if he stood for National) is now 48%, up from 31% last week.  UnitedFuture Leader Peter Dunne continues to have a 55% probability of being re-elected in Ohariu, still well ahead of a National candidate (26% probability, down from 27% last week and 28% the week before) or a Labour candidate (20% probability, up from 19% last week and 17% the week before).  The probability Winston Peters will be returned to Parliament has risen to 31%, from 30% last week.  The probabilities he will stand in Epsom or Helensville remain steady at 17% and 11% respectively.

In the Maori electorates, Labour’s hold on Hauraki-Waikato has strengthened from 70% probability over the last month to 72% in this week’s snapshot.  The probability Labour will win Te Tai Tonga from the Maori Party has also strengthened (from 50% over the last month to 52% this week), as has the probability the Maori Party will pick up Ikaroa-Rawhiti (from 52% the last two weeks to 53% this week).  Mr Harawira’s hold on Te Tai Tokerau has continued the recent trend of weakening slightly, with him now having a 74% probability of retaining the seat, down from 75% last week and 78% the previous two weeks.  There have been no changes in Tamaki-Makaurau, Te Tai Hauauru or Waiariki, all of which are expected to be won by the Maori Party, with 74%, 77% and 82% probability respectively.

Other than those mentioned above, there are five seats where the projected winner has less than a 75% probability of winning.  Auckland Central continues to have a 71% probability of being retained by National’s Nikki Kaye; New Plymouth now has a 52% probability of being won by Labour’s Andrew Little from National’s Jonathan Young, (down from 53% last week); Waimakariri a 74% probability of being retained by Labour’s Clayton Cosgrove (up from 73% last week); Waitakere a 66% of being retained by National’s Paula Bennett (steady); and West Coast-Tasman a 50% probability of being won by Labour’s Damien O'Connor over National’s Chris Auchinvole (steady).  Mr Auchinvole has a 48% probability of retaining the seat, steady compared with last week.

Overall, there has been no change in expected electorate seat tallies over the last week, with National expected to win 39 electorates, Labour 24, the Maori Party 4 and Act, UnitedFuture and Mr Harawira 1 each.

Party Vote, Election Result and Alternative Scenarios

There have been material changes in forecast party vote shares, which are now: National 48.0% (up from 46.5% last week), Labour 29.7% (down from 31.9%), the Greens 7.2% (up from 7.0%), Act 4.0% (steady), New Zealand First 3.8% (down from 4.7%), UnitedFuture 2.4% (up from 2.2%), the Maori Party 1.9% (up from 1.7%), a party around Mr Harawira 1.1% (down from 1.3%), the New Citizen Party 0.7% (steady) and the proposed Reform New Zealand Party 0.4% (steady).

Based on this data, and the electorate results above, Parliament would be as follows: National 62 MPs, Labour 38 MPs, Greens 9 MPs, Act 5 MPs, the Maori Party 4 MPs, UnitedFuture 3 MPs and a party around Mr Harawira 1 MP, for a total of 122 MPs.  A government would be required to have the support of 62 MPs on confidence and supply so that Mr Key’s National Party could govern alone.

iPredict has also examined the impact of Mr Hide and Mr Dunne losing their seats, and New Zealand First reaching the 5% threshold.

Were Act not to win Epsom but Mr Dunne to hold Ohariu, Parliament would be as follows: National 64 MPs, Labour 39 MPs, Greens 10 MPs, the Maori Party 4 MPs, UnitedFuture 3 MPs and a party around Mr Harawira 1 MP, for a total of 121 MPs.  A government would be required to have the support of 61 MPs on confidence and supply and Mr Key could govern alone.

Were both Act to lose Epsom and UnitedFuture to lose Ohariu, Parliament would be as follows: National 65 MPs, Labour 40 MPs, Greens 10 MPs, the Maori Party 4 MPs and a party around Mr Harawira 2 MPs, for a total of 121 MPs.  A government would be required to have the support of 61 MPs on confidence and supply so that, again, Mr Key could govern alone.

Were both Act and UnitedFuture to leave Parliament and the New Zealand First Party to secure MMP’s 5% threshold, Parliament would be as follows: National 62 MPs, Labour 39 MPs, the Greens 9 MPs, New Zealand First 7 MPs, the Maori Party 4 MPs and a party around Mr Harawira 1 MP.  A government would be required to have the support of 62 MPs on confidence and supply so that Mr Key could still govern alone.

Overall, the market indicates an 86% probability there will be a National Prime Minister after the election, up from 84% last week and 83% the week before.

Miscellaneous

In the Rodney electorate, where the National Party’s selection process was scrapped and started again, Mark Mitchell remains favoured with 66% probability, up from 62% last week.  Brent Robinson is second-favourite, with 34% probability of being selected, steady compared with last week.

The probability New Zealanders will elect to retain the MMP voting system in the referendum to be held on Election Day remains steady at 80%.

iPredict is owned by Victoria University of Wellington.  Details on the company and its stocks can be found atwww.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 11.52 am today.