and smaller parties often make deals with larger ones (or each other) for preferences in return for various policy concessions and such:
Preferential voting (or preference voting) is a type of ballot structure used in several electoral systems in which voters rank a list or group of candidates in order of preference. For example, the voter may write a '1' beside their first choice, a '2' beside their second preference, and so on. This contrasts with ballots used by methods which do not allow more than two-valued ranking of candidates (Yes or No, often with No assumed unless Yes is marked), such as Plurality voting or Approval voting.
Australia uses preferential ballots in two different ways: instant-runoff voting and the single transferable vote system, although neither of these names are commonly used in Australia.
Instant-runoff voting is used in electing candidates to single-member electorates such as the Australian Federal House of Representatives, state legislative assemblies and local government municipalities.
Single Transferable Vote systems are used in electing candidates to multi-member electorates such as the Australian Senate, State upper houses, Tasmania's State legislative assembly, the Australian Capital Territory's legislative assembly, and some local government municipalities.
Ballot papers are counted according to prescribed set of rules which prescribe the method used in the counting of the ballots and the distribution of preferences. Voters' preferences are now data-entered into computer systems, which then process the recorded votes to determine the results of the election. Copies of the transcribed date file used in the counting of the elections are published and made available for public inspection and scrutiny.
Supporters of the parties and individual candidates hand out "How to Vote" cards (HTVs) at the entrance to polling stations or distributed with election material sent in the post, advising voters how to fill in their ballots to support that party or candidate. The information published on a how to vote card is a recommendation only and no voter is obliged to vote as published, but up to 80% of voters follow the recommendations of their preferred party or candidate. The proportion of voters that choose not to follow their preferred candidate's recommendations is called the "preference leakage"<2>.
The STV systems of some jurisdictions in Australia (e.g. the Senate) allow group voting tickets or "above the line voting" where a voter can with a single mark indicate support for a predefined set of preferences. This reduces the burden on voters, especially where there are large numbers of candidates and when a complete preference list is required to make a vote valid, so about 95% of voters use this option. Voters not wishing to use the "above-the-line-voting" option maintain the entitlement to indicate preferences for individual candidates; this is referred to as below-the-line voting. The allocation of predefined and individual voter preferences are important in determining the results of the election.
http://en.wikipedia.org/wiki/Preferential_voting