The Liberal-National Party Coalition parties remains fairly hot favourites to win the next election.

Despite the torrent of polls which show Labor with a thumping 6 or 8 point lead, the betting markets continue to favour the Coalition. According to the bookies, the Coalition are $1.65 to win the election while Labor are $2.25. Allowing for the bookies margin, this suggests the Coalition are about a 58 per cent chance to win, while Labor are 42 per cent.

In other words, punters risking their hard-earned cash are suggesting the polls are either useless or are a mid-term blip for the government and that as the election draws nearer, the polls will even out and the Coalition is more likely than not to retain office.

Either that, or punters do not realise yet that $2.25 for a party with a thumping poll lead a year or so out from election day is stunningly good value. $2.25 represents a 125 per cent tax free return for a year, payable if Labor win the election.

The facts are that Labor need to win 20 or more of the Coalition’s 90 seats if it is to form government next year. This is a tough call, particularly now Mr Abbott is opening the pork barrel with funding for ovals in marginal Brisbane electorates and is dumping billions of dollars into South Australia.

Good punters know betting is about probabilities – no one knows whether a coin toss will be heads or tails or whether Labor or the Coalition will win the next election. The odds for a coin toss, for example, are $2.00 heads, $2.00 tails. If someone offered $2.10 for tails, a smart punter would bet ‘tails’ on the knowledge the market was mis-priced. This of course does not mean tails will come up and the punter might still lose, but when there are enough bets placed on market mis-pricing such as this, by definition the punter must come out ahead.

So back to the election betting.

$2.25 Labor? $1.65 the Coalition?

Most pundits, for what they are worth, seem to think its roughly an even money bet who will win the 2016 election. The benefits of incumbency and the large majority favour the Coalition; the ineptitude of the government and the failure of Mr Abbott and Mr Hockey to deliver on economic and budget promises will help Labor. The recent State election results in Victoria, South Australia and Queensland also suggest the electorate is fickle enough to swing substantially.

For me, the $2.25 for Labor looks to be value – that is, Labor are a better than a 42 per cent chance of winning the election. I might be wrong, but at those odds, I will have a few shekels on a Labor win.

PS: If the betting markets do reverse in the months ahead and the Coalition get out to $2.00 and beyond, I will back the Coalition to win and thereby lock in a profit whatever the result.