14 June 2024
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Poll says voters doubt Treasurer’s Budget promises

Peter Switzer
20 May 2024

Newspoll’s latest survey of voters doesn’t make great reading for the Government, with few voters believing that inflation will be low enough for a rate cut this year.

The latest Newspoll reported in The Australian tells us that Dr Jim Chalmers’ third Budget hast been greeted by voters as the magic pudding the Treasurer and his boss, PM Anthony Albanese, would’ve hoped for, given the tax handouts and the surprise $300 energy discounts for all households.

The most telling blow for the Government was the reading that 39% of voters think the Budget wouldn’t be good for inflation. More to that point, the Treasurer’s ‘gift’ of the expectation that inflation will be in the 2-3% band that the Reserve Bank wants by Christmas, which should bring the first interest rate cut, was rejected as unlikely! Only 15% believed the promise. However, as the famous economist J.K. Galbraith once said: “In economics, the majority is always wrong”.

That’s an exaggeration by J.K., but I’d say that the majority of economists often get it wrong and so does the public, who get interviewed for these election polls.

One aspect of the Budget’s forecasts that will be watched closely in coming months will be readings on economic growth, unemployment and of course inflation.

There’s an old maxim that for inflation to fall, unemployment must rise significantly, so last Thursday’s spike in the jobless rate from 3.9% to 4.1%, was bad news for those who lost their jobs, but good news for the Treasurer and anyone praying for a rate cut some time this year.

The number that could decide whether Dr Chalmers is praised for getting his inflation call right, or bagged for being a new Dr Phil Lowe misforecaster, will be the economic growth number.

The Budget says this financial year, which ends on June 30 this year, will show a growth rate of 1.75%, which isn’t a great number for job creation. It then is expected to improve to 2% for 2025-26, but all up these low numbers suggest unemployment should rise and inflation should fall.

If this happens, the Treasurer could be seen in a better light, and it could easily make the PM opt for the early election many political experts are now saying is on the table. The longer Mr Albanese waits to go to the polls in 2025, the greater the chances more rate cuts will come, but they could be accompanied by a bigger rise in Aussies out of work!

Also, despite the “we’re not impressed with the Budget” message from Newspoll’s survey of voters, Labor is still ahead on the two-party preferred basis — 51% versus 49%. And on a Better PM basis, Albo is at 48%, down 4%, while Peter Dutton is at 35%, which is a two-point rise.

I do think the economy is slowing faster than the majority of economists are tipping, and if I’m right, the Treasurer’s inflation call could be a vote-winner. If he’s wrong, there could be a lot of people with home loans who will be encouraged by the Coalition to see Labor as poor fighters of inflation.

The drama of the data drops will not just affect who wins the next election but could determine when the next election will be held. And those same data drops will also affect stock prices and our super returns.

My best guess is that inflation will trend down with a slowing economy and a rising dollar. And I tip we will see at least one rate cut this year.

This will help stock prices provided the slowdown in the economy isn’t suggesting that a recession is a chance. My crystal ball doesn’t see a recession, but economics isn’t a precise science.

Who says economics is boring?

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