Hydatid disease, caused by Echinococcus granulosus, is a widespread, endemic disease of Australian livestock, wildlife, and occasionally, humans. In the Australian beef industry, the disease is believed to have a substantial economic impact. The reference standard test (gold standard) for detection of hepatic hydatid cysts is gross identification of cysts following cutting of livers into 5–6 mm slices with histological identification in the case of equivocal cysts. This test is not feasible in abattoirs because it takes too long, destroys inspected livers which have monetary value, and could require laboratory facilities. Therefore, routine meat inspection in abattoirs comprises visualisation of the organ surface and palpation to detect hydatid cysts. In this study, we aimed to evaluate the diagnostic sensitivity and specificity of current routine meat inspection processes in an abattoir to detect hepatic hydatid disease (the index test) in comparison to the reference standard test. Both the index and reference standard tests were performed on a systematic random sample of 636 livers from 5023 cattle slaughtered during the study period. Relative proportions of the true positives and false negatives were calculated for categories age, sex, feed-type (grass- or grain-fed), number of cysts, and size of cysts. Pearson’s Chi-squared analyses were used to assess the significance of these proportions. Relative diagnostic sensitivity and specificity of the index test were determined whilst accounting for the sampling fraction.The relative proportion of true positives to false negatives in livers with one cyst (True Positives [TP] = 30.2%) was significantly lower than in livers with 2–5 cysts (TP = 59.2%; P < 0.05), and livers with more than ten cysts (TP = 75%; P < 0.001). The diagnostic sensitivity and specificity of the index test was 24.9% (95% Confidence Interval [CI] 18.9–32.3) and 98.9% (95% CI 97.6–99.6), respectively. The high specificity demonstrates that truly uninfected livers are generally correctly reported. However, the low sensitivity of the index test indicates that prevalence reported by the focus abattoir is underestimated. Although the intended use of routine meat inspection for hydatid disease – to remove “unwholesome” meat from the line of human consumption – is conducted, the results of this study demonstrate that the prevalence of E. granulosus might be higher than reported in abattoir data.