How to predict the 2001 federal election outcome (maybe)

Finally, we turn to the bookies and the punters. Under Northern Territory law, bookies are allowed to take bets on a range of non-sporting events, including elections. This has given us a new source of data for predicting election outcomes. Their accuracy is based on the assumption that when we are asked to put our money where our mouth is, it is likely that we think long and hard about all dimensions of the government’s performance.

According to Centrebet, Australia’s largest online bookmaker, Beazley has been a solid favourite all year. At one point Beazley was posted at odds of 7/2 on – shorter odds than Phar Lap in the 1930 Melbourne Cup. Even at those skinny odds, Centrebet sportsbook manager Gerard Daffy found that "most bets have been for Labor", with one Victorian punter putting $50,000 on Beazley.

Indeed, betting market fluctuations over the past two years tell a more nuanced story than either the polling results or the economic indicators. This election appears to have been Howard's to lose. The Liberal Party opened a strong odds-on favorite, but their odds have drifted out significantly since. While Howard's polling numbers slid south some time ago, the punters only really reacted in the wake of the Western Australian and Queensland elections. This slide has also coincided with ongoing concern about the GST, and the deterioration in the economic outlook.

Following the Tampa incident however, the punters reacted before the polls, and Howard has been all the rage, attracting two bets of $10,000 amid other large wagers. In a remarkably even betting contest, Centrebet are now offering a return of $1.75 for every dollar wagered on Beazley, and $1.95 for Howard-supporters. This suggests that Labor rates about a 55% chance of winning the election.

Daffy rates the betting markets as the most accurate barometer of the electorate, and he reads them as pointing squarely in the direction of Labor, who have been "backed for bundles". He notes that the federal election "will be the single biggest betting event this year - bigger than either the ARL or NRL grand final." After all, he points out, "it is an 'event' that everybody has a vested interest in." But before you rush to cast your bet, it is worth noting that in 1993, Hewson lost as a short-priced favourite.

Each of the three ways of forecasting elections point to a close election. While last week’s polls are pointing to Howard, recent events make these numbers difficult to interpret. Looking at "fundamentals", the softening economy suggest that Howard is in trouble, and on this point, the betting market suggests that the punters concur. Pollsters, economists or punters – who do you trust?