POLITICS & ECONOMY
‘Miracle’ election result
Surprise outcome signals voter focus on economy
When Australian voters went to the ballot box in May, the election was seen as opposition leader Bill Shorten’s to lose. Well ahead in the opinion polls and with history on his side – the job of PM has changed hands five times in five years – he was probably packing his bags for Kirribilli House.
It turns out the polls were wrong by some considerable margin. Prime Minister Scott Morrison’s Liberal-National coalition was not only returned, but with a majority of seats. Such was the level of surprise that even Morrison said the morning after: “I’ve always believed in miracles.”
The result, he said, was down to: “Those Australians who have worked hard every day, they have their dreams, they have their aspirations, to get a job, to get an apprenticeship, to start a business, to meet someone amazing. To start a family, to buy a home, to work hard and provide the best you can for your kids. To save for your retirement.”
Morrison campaigned primarily on economic issues; these are among the leading concerns of Australian voters, who have been worried about out-of-reach house prices and the cost of living, along with climate change, health and immigration.
For around five years, average household spending has been greater than average consumption, and savings rates have dropped, signalling a squeeze on consumer budgets. Household debt is, unsurprisingly in this context, at an all-time high.
The affordability of housing has been a major concern across Australia, especially among potential first-time buyers struggling to get on the ladder; house prices have been soaring at rates of up 15 percent a year over the past decade and, in Sydney, prices have risen 70 percent in just five years.
This year, however, has seen not just a slowdown but declines in property prices as a result of a squeeze on consumer credit and rising mortgage rates. An increase in supply – home building is at a record high – means it’s becoming more of a buyers’ market. There are some predictions that prices could slip back as far as 20 percent before they rebound.
The broader economy has slowed in the past year, due in part to a dip in demand for raw materials from China, and the effect of drought at home. But growth in consumption in the second half of 2018 was what Reserve Bank of Australia deputy governor Guy Debelle describes as “considerably slower than we had anticipated”.
A slower housing market has a knock-on effect on purchasing habits related to home furnishings and even cars. But the RBA says low growth in household income – and the public expectation that it will remain low – is more likely to be the main culprit behind reduced consumer spending.
While employment is high – the jobless rate is at its lowest for decades in New South Wales and Victoria – wage growth is at its lowest level for 20 years. Wage freezes at many businesses are being lifted, but even those on the receiving end of a raise are only getting increases in the very low single digits.
The GDP growth rates of just over 2 percent being forecast for the year ahead might be the envy of many other developed economies right now, especially those in western Europe, but they are miniscule by Aussie standards.
And on a per capita basis, Australia has this year slipped into recession, with dips of 0.2 percent at the end of last year and 0.1 percent in the first quarter of 2019, discounting the effect of population growth
Having enjoyed a 28-year growth streak, uninterrupted even by the global financial crisis of 2008, Australia is home to a generation of people who have never known a recession.
The country now faces a cocktail of challenges as the government pursues a goal of full employment and inflation levels within the RBA’s target range of 2 to 3 percent.
This is the lucky country, but it will take more than luck to engineer growth at the levels to which Australians have come to expect.