Using data from 191 Australian state elections, the authors test how voters respond to economic conditions. They find that unemployment has a strong impact on election outcomes, with each additional percentage point of unemployment reducing the incumbent's re-election probability by 3-5 per cent. However, when luck (unemployment in other states) is separated from competence (unemployment in that state relative to the rest of Australia), the authors find that both luck and competence are equally important. This is consistent with a psychological theory of the ‘fundamental attribution error’, in which observers consistently underestimate the importance of situational constraints. The authors also find evidence that unemployment driven by a clearly exogenous source – the United States economy – has a non-trivial impact on the re-election probability of Australian state governments. The results suggest that Australian voters either retain too many state governments in economic booms, vote out too many state governments in recessions, or perhaps both.