Three Tools for Forecasting Federal Elections: Lessons from 2001

How best to predict Australian federal election results? This article analyses three forecasting tools – opinion polls, economic models, and betting odds. Historically, we find that opinion polls taken close to the election are quite accurate, while economic models provide better medium-run forecasts. The 2001 election largely follows this pattern, although the economic models provided more accurate projections than recorded through the 1990s. Against these, we compare betting odds, analyzing a rich data source from one of Australia’s largest bookmakers, Centrebet. The betting market not only correctly forecast the election outcome, but also provided very precise estimates of outcomes in a host of individual electorates. Betting fluctuations provide an intriguing quantitative record of the shifting fortunes of the campaign. We conclude that – particularly in marginal seats – the press may have better served its readers by reporting betting odds than by conducting polls. 1 Corresponding author: Political Economy Group, Stanford GSB, 518 Memorial Way, Stanford, CA 94305.