The public has spoken and depending on your point of view, has thrown out “an incompetent, wasteful spending shambolic mob that created a budget emergency with souring debt that is killing the Australian economy” and replaced them with “ultra conservative backward looking, populist bunch of flat earth climate deniers”.
The reality is that they are (hopefully) both somewhat inaccurate. Labor has been in self-destruct mode since 2010 with internal fighting, and Australia is apparently only now ‘open for business’, but what actual effect is all this likely to have on the economy and investment markets? At the risk of further offending almost everyone, the answer is a lot less than is expected from the blue corner and nowhere near as bad as expected from the red corner.
How can this be possible? There has been a huge difference in the rhetoric, the tone and the message. We have been hearing about a budget emergency and we need to cut, cut, cut. This was more than a little concerning to anyone with a basic economic understanding, as if large austerity cuts were made, the likely outcome would be reduced growth and possible recession. Fortunately, once the actual costs were released, there was only 0.3% difference to the budget spending. Emergency averted!
This is actually good news – it would seem that they aren’t as silly as the comments that have been made continuously throughout the campaign.
So will the change in government actually boost the economy, retail sales and markets? This is where it becomes interesting as if there is the perception that things will improve, consumer sentiment goes up. This increases spending and it tends to become self-fulfilling. Welcome to the business cycle!
It is the Reserve Bank who sets interest rates and growth tends to be influenced mostly by global influences. Currency rates can fluctuate wildly. Apart from emergency type of rare events (such as the GFC), the pollies tend to just be there along for the ride tweaking the edges and reshuffling deck chairs.
The election circus is now over. What we have left is (still) low unemployment, low debt, a national economy in good condition and an improving world economy. We will just have to wait to see if the new government makes many legislative changes that will actually affect our investment and planning strategies!
We will advise our clients of opportunities and legislative threats as they are proposed.
Brett Dillon CFP