iPredict Economic & Political Newsletter 10 April

Press Release – iPredict

• Georgie Pie may be on its way back • Judith Collins to remain Minister but defamation action won’t succeed • Nathan Guy favoured to be Primary Industries Minister by year’s end • NZ Government to increase tobacco and alcohol excise …iPredict Ltd Economic & Political Newsletter 10 April 2012

Georgie Pie may be on its way back • Judith Collins to remain Minister but defamation action won’t succeed • Nathan Guy favoured to be Primary Industries Minister by year’s end • NZ Government to increase tobacco and alcohol excise duties • Pengxin Group to get Crafar Farms in May • Winston Peters to be Kingmaker in 2014; Labour to governChina and Australian economic stocks launched

New Zealand Politics Turmoil for the New Zealand Government appears not to be over yet as the ACC scandal continues. While ACC Minister Judith Collins is expected to launch defamation proceedings against Labour MPs Trevor Mallard and Andrew little by 21 April for alleging she may have leaked an email by former National Party President Michelle Boag, she is unlikely to win damages, and a Beehive staffer is most likely to be found to have leaked the email. While Prime Minister John Key is not expected to launch an inquiry into the affair, the Police are strongly expected to formally launch an investigation. For her part, Ms Collins has an 84% chance of remaining a Minister until at least 1 June 2012, and is once again the most likely candidate to be the next National Party leader at 34%, ahead of Hekia Parata on 19%. Nevertheless, more change in the Cabinet is also expected by year’s end, with Nathan Guy well ahead in the race to become Primary Industries Minister with David Carter tipped to replace Lockwood Smith as Speaker. Nick Smith has an outside chance (43% probability) of being re-appointed a Minister by 1 January 2013 and former National MP Aaron Gilmore is also expected to return to Parliament. Change is also expected in the Government’s support parties, with both Turiana Turia and Pita Sharples expected to cede their positions as co-leaders of the Maori Party before the next election. Act Leader John Banks is also somewhat fragile, with just a 57% chance of remaining party boss. While UnitedFuture leader Peter Dunne has an 88% chance of remaining head of his party, it has just a 37% chance of being returned to Parliament after the next election. Across the aisle, there is some risk to Labour leader David Shearer’s position, with just a 70% he will remain leader through to the next election If he is replaced, the market expects him to be succeeded by Grant Robertson. The Green co-leaders Russel Norman and Meteria Turei, NZ First leader Winston Peters and Mana leader Hone Harawira all look safe in their positions to the next election, with at least an 82% chance of remaining in their jobs. The next New Zealand General Election is almost certain to be held in 2014, with traders suggesting Mr Peter’s NZ First will be the kingmaker. The forecast party votes are: National 416% (down from 42.1%); Labour 33.6% (down from 34.5%); Greens 11.1% (up from 9.3%); NZ First 5.2% (steady); Conservative 2.7% (steady), Act 1.7% (steady); Maori Party 1.4% (steady); Mana Party 1.3% (down from 1.4%) and UnitedFuture 0.8% (up from 0.7%). Of small parties not forecast to pass the 5% threshold, the Maori Party is expected to win 2 electorate seats and the Act and Mana parties one each. Based on these results, Parliament would consist of: National 52 MPs; Labour 42 MPs; the Greens 14 MPs; New Zealand First 6 MPs; the Maori, Act and the Mana Party 2 MPs each. There would be 120 MPs, requiring 61 to govern. The National/Act partnership would have 54 MPs while the Labour/Green/Mana group would have 58 MPs, meaning Labour could form the next government with the support of NZ First. National/Act would require the support of both NZ First and the Maori Party. Overall, there is a 53% probability Labour will form a Government after the next General Election, with a 42% probability David Shearer will be Prime Minister by 1 January 2015. NZ Issues Early trading suggests that the Georgie Pie isn’t expected to be re-launched in New Zealand by Christmas, but with a 42% probability the possibility is not off the table. Excise duties are expected to be increased on tobacco and alcohol in 2012/13, although the market suggests petrol excise won’t be increased. New stock asks whether John Allen will depart as CEO and Secretary of Foreign Affairs and Trade before July 2012 as the MFAT cost –cutting saga continues. iPredict also has stock on MFAT appropriations for 2012/13 Traders believe that the New Zealand Police will experience cuts in their appropriations for the 2012/13 budget. No Commission of Inquiry is expected into the 2007 police raids on suspected terror activities in the Urewera district, but nor are the ‘Urewera Four’ expected to be re-tried. In other matters, Pengxin Group’s bid for Crafar farms is predicted to become unconditional between 28 April and 2 June 2012. The Defence Force isn’t expected to announce an outsourcing of their payroll administration before 2013. The Auckland Council is no longer expected to add a new bin for glass collection, and the market doesn’t believe there will be an increase in the waste levy rate. New Zealand Economic Forecasts Contracts have been extended out to December 2013 for GDP growth, unemployment, Inflation, and the current account deficit. Commentary on these stocks will be included as trading increases on the NZ Economics page. Short-term New Zealand growth prospects have moved a bit both ways, with growth expected to be 0.4% for the March 2012 quarter (down from 0.5%), 0.6% for the June 2012 quarter (steady), and 0.5% for the September 2012 quarter (up from 0.4% last week). Forecast unemployment is unchanged from last week, with the market still predicting unemployment of 6.4% for the March 2012 quarter, 6.3% for the June 2012 quarter, 6.3% for the September 2012 quarter and 6.2% for the December 2012 quarter. Inflationary expectations have reduced slightly over the past week. Inflation is forecast to be 1.5% for the March 2012 quarter (up from 1.5%), 1.5% for the June 2012 quarter (steady) and 1.7% for the September 2012 quarter (steady). 91 unleaded petrol is expected to cost $2.19 per litre at the end of April rising to $2.20 per litre at the end of May, reducing to $2.18 to the end of June. The Reserve Bank of New Zealand is expected to hold off increasing the Official Cash Rate (OCR) until December 2012, when it will rise to 2.75%. Fonterra payouts for milk solids before retentions have increased slightly this week. The 2011/12 Fonterra payout is now expected to be $6.83 per kilogram, up 1c over the week. The forecast payout for 2012/13 has increased 2c to $6.40, the forecast payout for 2013/14 has remained steady at $7.38, and forecast payout for 2014/15 has also remained steady at $7.42. New stock has been launched for the Fonterra payout 2015/16, iPredict will report on it once trading has increased. Current account deficit expectations are 4.26% to March 2012, 5.35% in June 2012, 5.55% in September 2012 and 6.01% in December 2012. International Economic Forecasts New categories have been launched this week on the Chinese Economics, early trading on Q1 GDP in China suggests the country grew by 1.88% in that quarter, with new stock continuing to be added over time. World growth expectations remain steady at 3.09% for the 2012 year. The Australian Cash Rate is expected to be reduced by 0.25 points on 1 May 2012, and then stay unchanged till the end of the year. Further Inflation, GDP, and Current Account Deficit stock have been released to measure the Australian Economy. There is a 52% probability that New Zealand and South Korea will sign a Free Trade Agreement before 1 December 2014. There is a 22% probability that at least one Euro member will depart the single currency in 2012. There continues to be a 40% probability the US Senate will formally approve a resolution of ratification of the Trans Pacific Partnership by July 2015. International Politics In London, Boris Johnson has a 81% chance of winning the 2012 Mayoral Election, with 50% of the first choice vote and 52% of the final vote, while Ken Livingstone has a 17% chance of winning the 2012 London Mayoral Election, with 42% of the first choice vote and 47% of the final vote. In Australia, iPredict traders continue to forecast that the two candidates for Prime Minister at the next Federal Election will be incumbent Labor Prime Minister Julia Gillard (56% probability) and Liberal Party challenger Tony Abbott (63% probability). In the next Australian Federal Election, first preferences have remained steady this week and are forecast to be: Labor 33.9%; Liberal 31.0%; Greens 11.2%; Queensland Liberal National 9.4%; Australian National 6.8% and Family First 4.5%. On a two-party preferred basis, the Coalition is forecast to win 51.7% of the vote and Labor 48.3%. The Coalition has a 78% probability of forming the next Federal Government (up from 76% last week). New stock has been launched predicting the next Australian Federal Election date, which must be held by November 2013. In the Northern Territory, the Country Liberal Party is expected to win 52% of the First Preference vote, while in the Australian Capital Territory election the Labor and Green parties are expected to win a combined 54% of First Preference Votes. Stocks have also been launched forecasting Chief Ministers for Northern Territory and Australian Capital Territory after their elections this year, In China, Wen Jiabao is not expected to remain Premier through to 1 January 2013. Yang Jiechi is expected to remain Minister of Foreign Affairs and Chen Deming to remain Commerce and Trade Minister. However, Zhou Xiaochuan is expected to be replaced as Governor of the People’s Bank of China by year’s end, as is Xie Xuren as Minister of Finance. As predicted by iPredict, Mitt Romney was successful in the District of Columbia, Maryland, and Wisconsin. Romney is also expected to win the Connecticut, Delaware, New York, Pennsylvania, Rhode Island, Indiana, North Carolina, West Virginia, Nebraska, Oregon, Arkansas, Kentucky, Texas, California, Montana, New Jersey, New Mexico, South Dakota and Utah Primaries. While Rick Santorum is only expected to win the Missouri Caucus. Overall, Romney has a 96% chance of being the Republican Party nominee, however Barack Obama is expected to win the presidential election. The Democratic Party is expected to win 53% of the share of the Electoral College vote, and 52% of the popular vote. The Republican Party is expected to win 47% of the Electoral College vote and 48% of the popular vote. Early trading suggests that the US Supreme Court will rule Obama’s individual mandate unconstitutional. In the UK, the Conservative/Liberal Democrat coalition is expected to survive 2012 (79% probability). In France, there is a 72% probability Francois Hollande will win the presidential election over incumbent Nicolas Sarkozy. In Syria, early trading suggests Bashar al-Assad will remain in power until at least 1 December 2012. There is a 31% probability Israel will launch an airstrike against Iran in 2012, up from 27% last week and a 28% probability North Korea will detonate an atomic device (up from 13% last week). Miscellaneous iPredict is owned by Victoria University of Wellington. Details on the company and its stocks can be found at www.ipredict.co.nz. The weekly snapshot is taken at a random time each week. This week’s was taken on the afternoon of Tuesday 10 April. ENDS

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