Column – iPredict

Both inflationary and interest-rate expectations have fallen significantly over the last week, according to the combined wisdom of the 8000+ registered traders on New Zealands predictions market, iPredict.iPredict Ltd: New Zealand Weekly Economic & Political Update: 5 December 2014

Inflationary Expectations Fall Significantly
Both inflationary and interest-rate expectations have fallen significantly over the last week, according to the combined wisdom of the 8000+ registered traders on New Zealand’s predictions market, iPredict. Annual inflation is now expected to be only 0.8% in the September 2014 quarter and only 1.0% in the December 2014 quarter, while the Official Cash Rate is not expected to reach 3.75% until October next year. Short-term forecasts for GDP and the fiscal balance have both eased slightly. John Key’s position as leader of the National Party has weakened marginally but he is still strongly expected to lead his party into the next election year, forecast to be 2017, and National’s chances of winning the next election have risen marginally to 55%. Judith Collins’ chances of returning to Cabinet before the election have eased.

Politics:
John Key is expected to remain National leader until at least the end of 2016 (70% probability, down from 73% last week) and has a 44% probability of remaining National leader until at least the end of 2017 (down from 47% last week)

Paula Bennett is again favourite to become National Party leader if a vacancy arises (26%, up from 25% last week), followed by Steven Joyce (25% probability, down from 26%), Jonathan Coleman (12%, up from 10%) and Simon Bridges (7%, down from 8%).

Stocks on Andrew Little’s longevity as leader of the Labour Party will be launched in the near future.

Judith Collins expected to be appointed to Cabinet before next election (50.3% probability, down from 65% last week).

Next election expected in 2017 (93% probability, steady compared with last week).

Forecast party vote shares at next election:
• National: 45.7% (new stocks)
• Labour: 31.5% (new stocks)
• Greens: 14.7% (new stocks)
• NZ First: 7.0% (new stocks)
• Others: 1.1% (new stocks)

National expected to win 2017 General Election (55% probability, up from 52% last week)

Economics:
Quarterly GDP growth expected to be:
• 0.7% of GDP in the September quarter (down from 0.8% last week)
• 0.8% in the December quarter (steady compared with last week)
• 1.0% in the March 2015 quarter (steady compared with last week)
• 1.1% in the June 2015 quarter (steady compared with last week)

Unemployment expected to be 5.3% in the December quarter (steady compared with last week). Unemployment stocks for 2015 will be launched in the near future.

Current account deficit expected to be 2.5% of GDP in the September quarter (up from 2.4% last week) and 3.8% of GDP in the December quarter (steady)

Annual inflation expected to be:
• 0.8% to end of December quarter (down from 1.1% last week)
• 1.0% to end of March 2015 quarter (down from 1.4% last week)
• 1.6% to end of June 2015 quarter (down from 1.7% last week)
• 2.0% to end of September 2015 quarter (down from 2.1% last week)

Official Cash Rate priced to be:
• 3.496% on 11 December (down from 3.504% last week)
• 3.495% on 29 January (down from 3.506% last week)
• 3.512% on 12 March (down from 3.520% last week)
• 3.538% on 30 April (down from 3.546% last week)
• 3.589% on 11 June (down from 3.599% last week)
• 3.634% on 23 July (down from 3.655% last week)
• 3.692% on 10 September (down from 3.712% last week)
• 3.749% on 29 October (down from 3.769% last week)
• 3.811% on 10 December 2015 (down from 3.821% last week)
• OCR stocks out to June 2016 will be launched in the near future

Fiscal balance expected to be:
• -0.11% of GDP in 2014/15 (down from -0.03% last week)
• 0.95% of GDP in 2015/16 (steady)
• 1.98% of GDP in 2016/17 (steady)
• 2.37% of GDP in 2017/18 (steady)

Foreign Affairs/Constitution:
• The Trans-Pacific Partnership is not expected to be ratified by the US Congress before 1 July 2017 (only 29% probability it will be, steady compared with last week)
• Helen Clark’s prospects of being the next UN Secretary General are 27% (up from 20% last week)
• There is a 19% probability New Zealand will become a republic by 2020 (steady compared with last week)

iPredict Ltd is owned by Victoria University of Wellington. Details on the company and its stocks can be found at www.ipredict.co.nz. The weekly economic and political update is prepared by Exceltium Ltd on a pro bono basis and is based on a snapshot taken at a random time each week. This week’s was taken at 10.07 am today.

ENDS

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