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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Business profits expectations for 2018 are the highest they’ve been since 2011, with companies set to boost employee numbers in the first quarter on the back of the positive outlook, according to illion’s latest Business Expectations Survey.

Data from the survey indicated businesses operating in the Finance, Insurance and Real estate sector had the highest profit expectations approaching the new year, followed by the Transport, Communications and Utilities sector.  The survey shows that overall, the Business Expectations Index is up 25.7 percent on the same period last year and the actual performance of businesses across all sectors is at a 13 year high.

Stephen Koukoulas, illion Economic Adviser, said there were a number of factors driving the positive outlook for 2018. “Corporate profits are getting a boost from lower costs, which are being driven by record low interest rates and on-going low wages growth – which is all occurring at a time of solid gains in the ASX”.

Oz economy: The good, the bad and the ugly

Fri, 08 Dec 2017

This article first appeared on the Yahoo 7 Finance website at this link: https://au.finance.yahoo.com/news/2138618-050543271.html 

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Oz economy: The good, the bad and the ugly

The Australian economy continues to grow, but the pace of expansion remains moderate, being constrained by ongoing weakness in household spending and a slide in housing construction. The good news is further evidence of an upturn in private business investment and stronger growth in public sector infrastructure spending which is providing support for the economy.

At face value, 2.8 per cent annual GDP growth rate is quite good, but the devil in the detail on how that growth has been registered is why there are some concerns about the sustainability of the expansion as 2018 looms.

Household spending remains mired with growth of just 0.1 per cent in the September quarter. It seems the very low wage growth evident in recent years, plus data showing a small rise in the household saving rate, is keeping consumer spending in check.

Making up well over half of GDP, household spending will be the vital element of the economy into 2018. If wages growth remains weak, there seems little prospect of a pick up in household spending. And if household spending remains weak, bottom line GDP growth will be relying on a strong expansion in business investment and public sector demand.