This article first appeared on the Meajin website at this address 

You must click on that link to see the full article. Below is a brief summary of the main points.

The Economy of Best Perceptions 

A recent Essential Research poll found that voters overwhelmingly judged the Liberal Party to be better managers of the economy than the Labor Party, with a margin of 42 per cent to 21 per cent. No surprise there … such results are of a piece with years of polling that trace the entrenched community sense that Liberals make the best economic stewards. Which is not to say that these perceptions are ever judged against the facts.

Constructing that sort of judgement from the evidence is timely. In May 2016 both sides of politics will have been in office for the same amount of time since Gough Whitlam won the December 1972 election: 43 years and six months ago, during which Labor and the Coalition will each have been in office for 21 years and nine months. These are long time frames, and sufficient to weigh this economic contest. Given the vast array of economic data around, it should be relatively straightforward to measure which side of politics is the ‘better economic manager’. In this essay, the economic indicators used to judge economic management are real GDP growth, including a comparison against the United States economy, and employment growth.


The overall weighted average quarterly GDP growth rates since 1972 are 0.80 per cent for the Labor Party and 0.77 per cent for the Liberal Party. This shows that the economy grows faster, on average, under Labor than the Coalition by 0.03 per cent per quarter, which is a touch over 0.1 per cent per annum. This may not appear to be a huge difference, but in today’s dollar terms it is approximately $1.7 billion per annum of extra GDP in each of the 22 years Labor has been in government. The cumulative effect of this difference on GDP is just under $40 billion. In per capita GDP terms, this is an additional $1600 for each of us.

As a control on this measure of economic success, benchmarking Australian GDP growth against US real GDP growth should at least partly overcome any potential bias that one side or the other was impacted more heavily by the business cycle in the United States, the world’s largest economy.

The overall weighted average difference shows that when Labor is in government, Australian real GDP growth is 0.18 per cent faster per quarter than growth in the United States, while under the Liberal Party it is just 0.04 per cent faster than that of the United States, on average. In annualised terms, the Australian economy grows 0.6 per cent fast than the US economy when Labor is in government relative to when the Coalition is in government. Given that this covers more than 20 years of each side being in government, the cumulative effects are significant.


Using a weighted average of the monthly employment growth from November 1972, Labor registered average monthly employment increases of 0.154 per cent, while for the Coalition the average monthly gain was 0.136 per cent. The average monthly difference is 0.018 per cent or 0.216 per cent a year.

Given the size of the labour force today (at December 2015, there were 11,902,000 people employed), the difference of 0.018 per cent in monthly employment growth is approximately 2140 people extra per month or 25,710 people per year. In other words, given the size of today’s labour market, when the Labor Party is in government, annual employment creation is 25,710 higher than when the Coalition is in power. Over the 22 years of Labor governments since 1972, 565,000 more people will be in work today than had job creation been at the pace set by the Coalition parties in government.


Contrary to perception, the data for GDP and employment growth over the past 43 years suggest a stronger economy with a faster pace of job creation when Labor is in power than when the Coalition is in power. All of which makes you wonder why the electorate seems so convinced the Coalition parties are the better economic managers.