Three Tools for Forecasting Federal Elections: Lessons from 2001

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Abstract
What is the best way 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 November 2001 federal election largely follows this pattern, although the economic models provided more accurate projections than recorded through the 1990s. Against these, we compare betting odds, analysing 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 present an intriguing quantitative record of the shifting fortunes of the campaign. Particularly in marginal seats, the press may have better served its readers by reporting betting odds than by conducting polls. We conclude that the results of these three models can help determine how important the events of August and September 2001 were in deciding the outcome of the election.