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http://www.elections.org.nz/elections/2011-referendum-on-the-voting-system.html
...What will happen as a result?
If at least half the voters opt to keep MMP, there will be an independent review of MMP in 2012 to recommend changes that should be made to the way it works. The Electoral Commission will conduct the review. It must include a number of matters that have been decided by Parliament including the thresholds parties must meet to be eligible for a share of list seats, whether voters should be able to change the order of candidates on a party list and whether candidates can stand in both an electorate and on the party list. The size of Parliament and Maori representation will not be reviewed, but the Commission may consider any other aspects of the MMP voting system.

If more than half the voters opt to change the voting system, Parliament will decide if there will be another Referendum in 2014 to choose between MMP and the alternative voting system that gets the most support in the second question in the 2011 Referendum.

About the Voting Systems
The voting systems you can choose from are MMP and four alternatives called:
First Past the Post (FPP);
Preferential Voting (PV);
Single Transferable Vote (STV);
Supplementary Member (SM)

Here is a summary of each system:

MMP – Mixed Member Proportional
This is the system we currently use to elect our Parliament.

There are 120 Members of Parliament (MPs). There are 70 electorates, including the Maori electorates. Each elects one MP, called an Electorate MP. The other 50 MPs are elected from political party lists and are called List MPs.

Each voter gets two votes.

The first vote is for the political party the voter chooses. This is called the party vote and largely decides the total number of seats each political party gets in Parliament.

The second vote is to choose the MP the voter wants to represent the electorate they live in. This is called the electorate vote. The candidate who gets the most votes wins. They do not have to get more than half the votes.

Under current MMP rules, a political party that wins at least one electorate seat OR 5% of the party vote gets a share of the seats in Parliament that is about the same as its share of the party vote. For example, if a party gets 30% of the party vote it will get roughly 36 MPs in Parliament (being 30% of 120 seats). So if that party wins 20 electorate seats it will have 16 List MPs in addition to its 20 Electorate MPs.

Coalitions or agreements between political parties are usually needed before Governments can be formed.

FPP - First Past the Post
There are 120 Members of Parliament. Each of the 120 electorates, including the Maori electorates, elects one MP.

Each voter has one vote to choose the MP they want to represent the electorate they live in. The candidate who gets the most votes wins. They do not have to get more than half the votes.

The winning party usually wins a share of the seats in Parliament larger than its share of all the votes across the country. Smaller parties usually receive a smaller share of seats than their share of all the votes.

A government can usually be formed without the need for coalitions or agreements between parties.

PV - Preferential Voting
There are 120 Members of Parliament. Each of the 120 electorates, including the Maori electorates, elects one MP.

Each voter ranks the candidates – 1, 2, 3, etc – in the order they prefer them.

A candidate who gets more than half of all the first preference votes (that is votes marked “1”) wins.

If no candidate gets more than half the first preference votes, the candidate with the fewest number “1” votes is eliminated and their votes go to the candidates each voter ranked next.

This process is repeated until one candidate has more than half the votes.

The winning party usually wins a share of the seats in Parliament larger than its share of all the votes across the country. It is hard for smaller parties to win seats in Parliament, but votes for smaller party candidates may influence who wins the seat because of second, third, etc preferences.

A government can usually be formed without the need for coalitions or agreements between parties.

STV - Single Transferable Vote
There are 120 Members of Parliament. Each electorate has more than one MP. This includes the Maori electorates. It is likely the 120 MPs would be divided between 24 and 30 electorates, each with 3 to 7 MPs.

Each voter has a single vote that is transferable. Voters either rank the individual candidates – 1, 2, 3, etc – in the order they prefer from all the candidates, OR they may vote for the order of preference published in advance by the political party of their choice.

MPs are elected by receiving a minimum number of votes. This is known as the quota and is based on the number of votes in each electorate and the number of MPs to be elected.

Candidates who reach the quota from first preference votes are elected.

If there are still electorate seats to fill, a two-step process follows.

First, votes the elected candidates received beyond the quota are transferred to the candidates ranked next on those votes. Candidates who then reach the quota are elected.

Second, if there are still electorate seats to fill, the lowest polling candidate is eliminated and their votes are transferred to the candidates ranked next on those votes.

This two-step process is repeated until all the seats are filled.

The number of MPs elected from each political party usually mirrors the party’s share of all the votes across the country.

Coalitions or agreements between political parties are usually needed before governments can be formed.

SM - Supplementary Member
There are 120 Members of Parliament. There are 90 electorates, including the Maori electorates. Each elects one MP, called an Electorate MP. The other 30 seats are called supplementary seats. MPs are elected to these seats from political party lists and are likely to be called List MPs.

Each voter gets two votes.

The first vote is to choose the MP the voter wants to represent the electorate they live in. This is called the electorate vote. The candidate who gets the most votes wins. They do not have to get more than half the votes.

The second vote is for the political party the voter chooses. This is called the party vote. The share of the 30 supplementary seats each party gets reflects its share of the party vote.

For example, if a party gets 30% of the party vote, it will get about 9 List MPs in Parliament (being 30% of the 30 supplementary seats) no matter how many electorate seats it wins.

This makes SM different from MMP where a party’s share of all 120 seats mirrors its share of the party vote.

One or other of the major parties would usually have enough seats to govern alone, but coalitions or agreements between parties may sometimes be needed.

What strikes me about NZ is that they actually discuss these things and act on them. Not like the USA, where our particular brand of plurality voting is unassailable TRADITION!!! [to be read in Topol's singing voice]

ETA: Check out this site with more analysis & a tool to see which system works for your own theory of how a parliament should work:
http://www.referendum.org.nz/
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