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The Market the Best Guide

Tuesday, 2nd May, 2006

I am not sure what Newspoll published in The Australian actually measures but it is very little help in trying to establish who will win the next election. Public opinion is just not as fickle as the newspaper would have us believe.

Not that there is anything fickle about how The Australian treats its fortnightly stories based on the federal Newspoll: if the news is good for Kim Beazley and/or Labor then treat it as an aberration and bury it inside; if it is bad then put it on the front.

It was the front page this morning with the suggestion that Beazley is preferred as Labor Leader by fewer people than both Julia Gillard and Kevin Rudd and that the Liberals have a comfortable lead overall.

The following table of two party preferred support shows the volatility of Newspoll this year:

Labor and the Coalition have been in front in four surveys each with both having a supposed low point since January of 47 and a high of 53. In my days running Labor Party campaigns I never experienced such dramatic shifts in public opinion in such a short time.

For me the best guide remains the market. The bookmaker Centrebet this morning has the Coalition returning $1.60 for a $1 and Labor $2.20. That is exactly the same as the market a fortnight ago when Labor supposedly had a comfortable lead. Take out the bookmaker's margin and the assessment becomes a 58% chance of a Coalition victory at the next election and a 42% chance of a Labor victory.

[Anyone interested in the record of markets versus opinion polls in predicting election outcomes will find a study by the Iowa University 's College of Business Administration at http://www.biz.uiowa.edu/iem/archive/BFNR_2000.pdf ]