What is particularly surprising from a British perspective is that AV was introduced in Australia by a conservative government and for a long time it proved to be the glue that maintained the conservative "Coalition" of the Liberal and National Parties (and their predecessors) by allowing the two parties to simultaneously compete with each other and fight Labor. The article is worth a read as it shows how often preferences have played a role in the outcome of elections and how the parties benefiting have changed over time:
There is a remarkable conclusion to the article. In the high period of the DLP [Democratic Labor Party] between 1955 and 1972, the Coalition won a total of 34 seats at seven elections after trailing Labor on the first preference vote. In the same period, Labor came from behind to win in just one seat.How much we can conclude about introducing AV in the UK is hard to say, because it would almost certainly be optional preferencing and it's not clear how many votes would be "lost" to the main parties at the first preference stage and fail to return. Still it's good fodder for the discussion here.
Since 1980, the operation of preferential voting has had the reverse political impact. At the 11 elections since 1980, the Coalition has won only five seats where the combined Coalition vote trailed Labor on the first preference count. In the same period, Labor has won a total of 61 seats having trailed the combined Coalition vote on first preferences.
Given this record, it is a wonder that hard-heads in the Coalition haven't realised they are being beaten by compulsory preferential voting, and perhaps optional preferential voting might be worth a try.
The 2007 election joins 1990, 1961 and 1969, as examples of preferential voting electing a government that could have fallen short of a majority under simple majority voting.