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Malcolm don't do it! An early election will hurt the economy

Peter Switzer
8 March 2016

By Peter Switzer

At the risk of looking politically naïve and more like an economist who wants to see our economy do well to help job-seekers, business builders and even those interested to see the stock market benefit from confidence, I have advice for our Prime Minister — don’t do it, Malcolm, don’t do it.

Yesterday speculation about an early election was linked to the Federal Budget being held before the scheduled May 10 — one week early! 

This then permits a double dissolution election on July 2.

There might be good political reasons to go to the polls ahead of expectations but none of them are economic and given our economy is just looking good, it’s damn crazy to jeopardize that by an early election.

Historically an election is never good for the economy with lots of businesses logically deferring investment and hiring decisions until they know who will be running the government.

Sure many businesses and consumers could not give a toss but with Labor’s planned changes to negative gearing and the halving of the capital gains tax discount, consider how real estate agents and related businesses could be affected.

And of course consumers thinking about buying a home for themselves or as a landlord/investor could easily say I will wait until the election is over.

Ahead of this, the conference and hotel business will be thrown into chaos if there’s to be an early Budget as this huge national event leads to a virtual tsunami of Post-Budget breakfasts, lunches and dinners. Hotel conference centres would have to be cancelled, speakers booked for the day after the Budget — May 11 — might be already booked or might be unavailable for May 5 and the same might be the case for the actual venue!

The PwC event in Brisbane attracts over 2000 attendees, so imagine the anxiety over Malcolm’s political decision on the event manager in question, the venue operator, the speaking agencies, the speakers, the limo companies, PwC itself, the casual staff that gets employed on that day and then there are the 2000 plus customers, many of whom might not be free on May 5 to do an unscheduled Budget brekkie!

Normal people would be surprised about all of this but this is only one industry that an early Budget and early election could create chaos for.

Sure there a winners, free to air TV and radio businesses do well because political advertising is bumped up and other operations get an electoral shot in the arm to their business. However confidence is never helped by an election and this early poll talk comes as business confidence defied the crumby stock market start to the year to actually rise in the February.

The NAB’s take on business confidence went up from 2.7 to 3.4 — a nice rise — but business conditions shot up from a good 5.4 to a great 8.3! This is a measure about how businesses are travelling now and this is a great sign for the economy and it should be a plus for the Government.

I especially liked it that sub-indices in the NAB’s snapshot of business showed that the readings on profit, forward orders, employment and exports all went higher!

On top that, the weekly consumer confidence measure by Roy Morgan for the ANZ spiked 3.5 points to 114.8, which is above the average since 2014 of 111.9.

This follows last week’s revealed economic growth at 3% for the year to the end of December, when the economists were only tipping 2.5%, and the run of economic data has even got better since then, so why would you want to ruin a better than expected economy for an election?

Also it worth noting that growth above 3% is associated with job creation and falling unemployment, so it was a big deal achievement.

Ultimately, the PM will be accused of jeopardizing others’ jobs to save his own and ironically he actually used this against Kevin Rudd, when Malcolm was Opposition leader!

And why would you want the country’s leader to add to negativity when the media is doing a big job on that front anyway.

Looking at one major newspaper here are the  confidence- and economy-killing business headlines this morning:

• Global threats intensifying, says Treasury

Commodities rally seen as ‘false start’

Gas customers held hostage

Banks will withstand a house price crash says RBA (The message is positive but the words “house crash” are not helpful!)

• Strong $A poses ‘serious threat’ to growth

In summary it all says that you can ignore current good news and brace yourself for a house price, stock price and commodity price collapse. Great!

Ironically a July election could be right in the middle of another stock market rout as we often find March and April are good for stocks but then the old “sell in May and go away” happens for shares. And the other part of this old market maxim is “come back on St Legers Day”, which is in September.

Of course Malcolm could point to market crashes in September and October, which could be making him nervous but a crash would actually be a plus for the Coalition, which is seen as a safer pair of hands when it comes to business and the economy. (That said, I don’t want and expect a crash this year.)

From my point of view — an economy, business and jobs view — an early budget and election looks like good politics but questionable economics.

I don’t think we want our national leader to look as though he is a political opportunist like the most recent passing parade of PMs. Call me old fashion but a Prime Minister with guts would be the best image for the country’s leader to project.

 

 

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