Latest Election Betting Implies 6 On Cross Benches, But Still Coalition Majority

Last Tuesday night (21/6) I ran a simulation of the looming Federal election using probabilities implied by the individual electorate betting odds on Sportsbet, Luxbet and Crownbet. The odds implied Coalition 79 seats, ALP 66 seats and 5 on the cross benches as the most probable result.

I just ran another, using the betting odds as of this Wed night (29/6).

The most probable seat distribution has changed to 79 - 65 - 6, with an extra cross bench seat for either the Greens or Nick Xenophon. As the odds in some marginal seats have firmed for the favourites, Labor’s chances of forming a majority government have fallen from about 1% to less than 0.25%. The chance of a hung parliament is still high: 25% ± 2.5%.

Nick Xenophon’s odds in the conservative Adelaide electorate of Mayo have significantly shortened, from about $3.00 to $1.50 - $1.60. He has also come in to between $3 and $4 in Barker, Boothby and Grey. All of these are normally conservative electorates, so the swing toward Xenophon must be a concern to the Coalition. The betting now puts Xenophon at a 35% chance of winning multiple lower house seats in SA.

With the Greens shortening from $4 to even money in the north Melbourne seat of Batman, they now have a 50% chance of winning 2 lower house seats. Moreover, Batman borders Adam Bandt’s seat of Melbourne, so a win here would give the Greens the makings of a contiguous heartland in inner city Melbourne.

The perfidious Tony Windsor and Rob Oakeshott are still chances in New England and Cowper (God help us).

Bob Katter, Andrew Wilkie, Cathy McGowan, plus 2 Greens and a Nick Xenophon Team or 1 Green and 2 Nick Xenophon Team ... not an easy cross bench for Malcolm Turnbull to deal with. Wilkie and the Greens will be obstructionist and Katter, McGowan and Xenophon will hold the government to ransom.

There are 14 lower house seats in which 2 candidates are both paying less than $3 on all 3 sites and thus could be considered genuinely close contests: Cowper, Gilmore, Macarthur and Macquarie in NSW, Batman in VIC, Capricornia, Forde and Petrie in QLD, Hindmarsh and Mayo in SA, Burt and Cowan in WA and Braddon and Lyons in TAS. Of these, Macarthur, Batman, Capricornia, Mayo and Cowan are very close.

I will look at the betting odds again this Friday night.

The Best Brexit Result: A Very Narrow Bremain

With voting about to get underway in the Brexit referendum, what is the best outcome for Britain?

I won't link to the betting sites, because the odds will change so rapidly, so there is not much point in deriving probabilities from them. Last estimate was 1.25 for Remain and 4.00 for Brexit. That translates to an implied 81% probability for Britain to remain in the EU. 

Better for Britain is a very close Bremain, say 51 - 49 or 52 - 48. This would force the Eurocrats to really put a dollar value on Britain remaining part of the EU, without the chaos of it actually exiting.

The salient problem driving the Brexit vote is the technocratic socialism which Britain has always hated. To imagine anything else in the EU is anathema to the EU MPs in Brussels and that is the nub of the problem

Election Betting Says Coalition With Slim Majority, But Strong Possibility Of Hung Parliament

Last federal election I ran several simulations of the outcome, based on the betting odds on the 150 individual electorates. The initial post explained how the simulation worked.

This federal election, Sportsbet, Luxbet and Crownbet are all offering odds for every electorate. Interestingly, William Hill is not, despite doing so in 2013.

The simulation as of Tues 21 June gives the most likely outcome as Coalition 79, Labor 66 and 5 on the cross benches, made up of independents Bob Katter, Andrew Wilkie, Cathy McGowan, Green Adam Bandt and probably one Nick Xenophon seat in SA, most likely Mayo.

The first 4 are incumbents, strongly tipped to retain their seats. In particular, Cathy McGowan is benefiting from the Liberals’ insane decision to rerun lazy, arrogant and unpopular erstwhile member Sophie Mirabella. Why would they not find a new, more capable candidate in an electorate which will clearly vote conservative, given a halfway decent choice?

The number of cross benchers is a serious problem for both the Coalition and Labor, particularly as the phenomenon is looking to be not just entrenched, but growing. It certainly shows up in the simulation. Based on current betting, Labor has less than 1% chance of forming a majority government. However 20 - 30% of paths lead to a hung parliament. The large confidence interval is due to the sensitivity of seat distributions to the uncertain correlation parameter in the simulation. The 20 - 30% chance of a hung parliament is estimated from the range of reasonable voting correlation parameter estimates.

There are approximately 70 seats “in play”. Of these, some are under speculative attack from the Greens (Grayndler, Sydney, Higgins, Wills, Fremantle), but in the North Melbourne Labor heartland of Batman, the Greens are currently paying 2.10 - 2.30.

Tight contests are Eden-Monaro (as usual), Macarthur and Page in NSW, Dunkley and LaTrobe in VIC, Brisbane, Capricornia and Forde in QLD, Grey, Hindmarsh and Mayo in SA, Burt (new), Cowan, Hasluck and Swan in WA, Braddon and Lyons in TAS and Solomon in the NT.

Only 18 seats in the genuine 50/50 range and the government with a 30 seat majority goes a long way to explaining the low probability of an ALP majority.

The other problem for the major parties is the translation of the upper house voting strength of Nick Xenophon to the 11 lower house SA electorates. His team is polling strongly in 7 of these 11 electorates. More problematic for those who want to avoid a hung parliament is that 5 of the 7 would otherwise go to the Liberals.

Xenophon’s team will probably win 1 or at most 2 of these 5, however that increases the likelihood he will be in a strong position to negotiate in BOTH houses with Malcolm Turnbull (who has shown himself to be more eager to please all interests than a leader should be).

The most important outcome of this simulation is the higher than I thought probability of a hung parliament. Many other countries have them, however Australia has no tradition of it, so the minor parties and independents have no real experience of working WITH governments instead of in their own interests. This is a serious problem, given the level of global and political instability. Great for derivatives traders, bad for manufacturers.

I will run another simulation on Fri July 1, the day before the election.