This article first appeared on the Yahoo 7 website on 30 June at this address: https://au.finance.yahoo.com/news/will-saturday-s-election-produce-another-shock-result-010344513.html
Will Saturday’s election produce another shock result?
Election day is almost here.
It’s basically a choice between some extra spending on education and health, paid for by a change to negative gearing and capital gains tax rules versus a substantial company tax cuts paid for by cuts to education and health. The polls are all close, either line ball at 50:50 or one side or the other ahead 51:49.
While the betting market have the Coalition hot favourites at $1.10 (Labor are $7.00), there have been a slew of recent election results that have seen the underdog win. Be it the Brexit vote, the 2015 UK election, the State elections in Queensland and Victoria in recent years, all were shock results largely unseen by the pollsters of the betting markets.
Everyone agrees that there will be a swing to Labor. It will pick up seats. But the strong, but by no means unanimous, view is that Labor will fall just short. The new House of Representatives might be something of the order of 78 to the Coalition, 65 to Labor and seven minor party seats.
Incredibly, the macro economy has received scant attention during the election campaign. There has been no discussion on the rate of economic growth that is desirable for Australia nor any discussion about the outlook for unemployment. The “jobs and growth” slogan has not delved into any specifics.
What does it mean?
Is 1 per cent GDP growth and 50,000 new jobs over a year consistent with that “jobs and growth” pledge?
If so, it would be a dismal economic failure because the economy needs to growth at about 3 per cent per annum to make lasting inroads into unemployment and around 200,000 new jobs need to be added to the labour force each year to keep up with population growth and other demographic changes.
The other unanswered question is how that “jobs and growth” will be delivered?
The budget forecasts were for GDP growth of just 2.5 per cent with the unemployment rate remaining at 5.5 per cent for the next few years. This is not the performance of a strong economy. Macroeconomic policy should be framed at lifting economic growth, to 3 per cent or more, while there is so much slack in the economy so that the unemployment rate can fall to socially acceptable levels.
A company tax cuts that does not kick in until after 2020 is not that policy. Spending on education and health, and a small increase in the budget deficit in the next few years will have a more immediate, positive effect on growth. By definition there is more money in the economy rather than less.
These are the issues that many voters will ponder at they cast their vote on Saturday. While the polls and betting markets currently favour a small Coalition win, remember that a 5,000 to one shot won the English Premier League football, a 100 to one shot won the 2015 Melbourne Cup and Iceland beat England in the Euro football earlier this week.
Unexpected things can, and often do, happen.