For the first time ever we’ve seen stories about grief counselling for Labor voters devastated by what Aussie voters did on May 18. On the other hand, I have to say that I’ve never seen such post-election economic optimism. While it might not be shared by all of us who voted, the key Australians who invest, create goods and services, put people out of work into work and who ultimately will pay higher wages have moved into a more optimistic phase.
To those electorally emotional, your black cloud has at least some kind of a silver lining. Well, that’s an economist’s take on the matter.
This is a plus for anyone liking job security and the hope of a pay rise. And it comes at a time when the economy really needs a lift.
In case you missed it, the September quarter economic growth number came in at 0.3%. That was followed up by a weaker 0.2% result. The annual growth number was 2.3% but this was helped by stronger growth in the March and June quarters. We’re now into the June quarter of 2019 and will see the March number for this year next Wednesday. Judging from the run of economic data we’ve seen, I can’t say I’m overly optimistic but CommSec’s Craig James is forecasting 0.5%, which would be an OK result.
On Thursday, the business investment figure for March was disappointing, down 1.7% after a nice rise in the December quarter of 1.3%. This could have reflected some pre-election anxiety — that often happens — and is more likely when an expected future government is promising controversial policies of a Shorten kind.
However, the best bit of news was that planned investment is around $99 billion, which was a rise of 12.8% and was the best reading in seven years! Add to this the ScoMo confidence rebound, which was seen in the ANZ-Roy Morgan weekly consumer confidence indicator that shot up 1.2% to 118.6 points, that’s well above the short-term average of 114.4 and the long-term reading of 113.1 points.
So what’s driving this optimism and will it actually translate into real economic gains for lots of Australians?
Before the election, both business and consumer confidence were weak and the latest reads on our economic growth had dropped from over 3% to 2.3%. There was no real reason to expect things were about to change.
The unholy mixture of anti-business stuff was creating a crisis cocktail that was bound to give us an economic hangover.
Donald’s trade war tweets on top of restrictive bank lending following the Royal Commission into banks behaving badly, on top of the usual election disruption, spooked business and investors.
I’ve always argued that Bill should have been smart enough to say something like: “I believe in my changes to negative gearing but if the economy is having problems with collapsing house prices, well then I would delay its introduction.”
He needed to look flexible for the economy’s sake but his strident support for his policies made him look like a threat and this went against him.
Morrison was criticized for not having many policies but it worked in his favour, as it didn’t threaten too much change. He regularly referred to the big jobs growth under the Coalition and how Bill was a big taxer.
And it worked!
But why should I expect a better 2019 for the economy and you?
Since the election, we’re now told the Reserve Bank will cut interest rates two or three times this year. This should help anyone with mortgage stress because your monthly bank slug is set to fall and those wanting to try to buy a property will have more chance with cheaper money on top of the lower prices for property.
More help for borrowers and the economy is on the way, with the bank regulator, APRA, telling banks to make it easier for borrowers to get loans. They’ve reduced the hoops we have to jump through to get a loan, which is good for you and the economy as well!
But wait there’s more.
There’s a first homebuyer deal coming where they stump up 5% of a deposit and the Government guarantees the other 15% with the lender, so borrowers won’t have to get expensive mortgage insurance. First-time buyers on a single income of $125,000 or a couple on $200,000 can access this deal.
Small business loan rates should fall and consumers with lower home repayments are bound to spend, creating job opportunities. We also have tax cuts coming ASAP. If the Parliament supports the Government in just over a month, more than 10 million workers will be eligible to receive up to $1,080 of tax rebates when they file their annual tax return.
That’s gotta help.
If you earn up to $37,000, you’ll get $255. From $37,001 to $47,999, you’ll get between $255 and $1,080. Those on $48,000 to $90,000 can look forward to the full $1,080. And as you go higher in income, the tax gift reduces and disappears over $126,000.
The combined effects of lower interest rates, easier borrowing conditions, tax cuts, rising confidence and hopefully an end to trade war threats from Donald Trump will help power along our economy and put more employees closer to a decent pay rise.
This week the Fair Work Commission granted 2.2 million workers on the minimum wage a 3% pay rise or $21.60 a week and this would be good for the economy because low income consumers spend their wage rises and the economy needs all the help it can get.
Socially, a Labor win might have been better for you but this election result on May 18 will prove better for the economy, as it has given confidence a second-wind. And without confidence in the economy, businesses go broke, jobs disappear, people lose their homes and wage rises become a figment of an employee’s imagination.
This ain’t a pretty picture.