Despite the polls, Labor are only warm favourites for 2019 election

Mon, 27 Feb 2017  |  

The election betting markets react to the weight of money punters place on each possible outcome. When there is a disproportionate flow on one side, its odds shorten (ie, is more likely to win) and the other side widens.

As a result the betting markets reveal the weighted average probability of each possible outcome, be that in elections or on any other event.

In terms of the next Federal election, the opinion polls have Labor 6, 8 or 10 points ahead of the Coalition. Any of these results would result in a thumping election win for Labor.

The betting markets are not as convincing about Labor’s chances at the next election. Labor is favourite, but not overwhelmingly so. In other words, punters are not willing to place their hard earned cash on Labor in sufficient volume at the current odds to drive the price lower. It could be because the election is still probably two years away and a lot might happen between now and then, or that Malcolm Turnbull might pull a proverbial rabbit out of the hat – who knows, but the latest (and best) odds show:

Labor $1.68
Coalition $2.25

Now remember: The bookies and the odds are never wrong. 5,000 to one shots win soccer championships, Trump won the US election at 100 to 1 and Ajax lost the 1939 Rawson stakes at $1.02. The glorious uncertainty in life and in probabilities – which are often reflected in betting markets – are show favourites winning or losing.

Suffice to say, polls two years out from election day have an low predictive power, so too betting markets. From this perspective, it appears the Coalition government will be in deep trouble at the next election, but the betting markets are not so parlous and as they say, 100 weeks is a long time in politics.

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As house prices fall across Australia, should we be worried for our economy?

Tue, 13 Mar 2018

This article first appeared on the Yahoo7 Finance website at this link: 


As house prices fall across Australia, should we be worried for our economy?

Are you a home owner?

If you are in Sydney, Perth and Darwin, you are losing money at a rapid rate.

In Melbourne and Canberra, prices are topping out and there is a growing risk that prices will fall through the course of this year. If your dwelling is in Brisbane or Adelaide, you are experiencing only gentle price increases, whilst the only city of strength is Hobart, where house prices are up over 13 per cent in the past year.

The house price data, which are compiled by Corelogic, are flashing something of a warning light on the health of the housing market and therefore the overall economy. For the moment, the drop in house prices has not been sufficient to unsettle the economy, even though consumer spending has been moderate over the past year.

The importance of house prices on the health of the economy is shown in the broad trend where the cities that have the weakest housing markets tend to have the slowest growth in consumer spending and are the worst performance for employment and the unemployment rate. The cities with the strongest house prices have strong labour markets and more robust consumer spending.

Trump could cause the next global recession: here's how

Wed, 07 Mar 2018

This article first appeared on the Yahoo7 Finance website at this link: 


Trump could cause the next global recession: here's how

The Trump trade wars threaten the global economy. This is not an exaggeration or headline grabbing claim, but an economic slump based on a US inspired global trade war is a distinct and growing possibility as it would dislocate global trade flows, production chains and bottom line economic growth.

Up until a few weeks ago, there was a strong enthusiasm for the economic policies of US President Donald Trump. Tax cuts and planned infrastructure spending were seen to be good for the US and world economies. US stocks and many around the rest of the world rose strongly, to a series of record highs. At the same time, bond yields (market interest rates) surged as the market priced in interest rate hikes and inflation risks from the ‘pro-growth’ policies. It was seen to be good news.

Very few, it seems, were worried about the consequences for US government debt and the budget deficit from this cash splash, especially when the US Federal Reserve was already on a well publicised path to hiking interest rates.

About a month or two ago, a few of the more enlightened and inquisitive analysts started to focus on the fact that the annual budget deficit under Trump was poised to explode above US$1 trillion with US government set to exceed 100 per cent of annual GDP.

A debt binge fuelled by tax cuts was a threat to the economy after the temporary sugar hit.