Thursday, November 30, 2006

Slease not a vote factor

Forget about the fact that the Howard government in Australia are up to their armpits in sleaze and corruption, predictions are that inflation and interest rates will hit the electoral danger zones and recover well before next years federal poll.

As one economist puts it: The Howard Government could be "swept back into office on the basis of an interest rate cut".

I’ve bored my loyal readers rigid before on this issue of elections and basic economic indicators - the unemployment rate, inflation and interest rates.

According to the formula, if two or more of these rise over a full, three-year electoral cycle, the government will lose. Conversely, if two or more fall the government will be returned.

This, with some key variables, led to my prediction of a Democrat sweep in the mid-terms. One of those same variables comes into play in Australia, where the method of reporting employment figures is now skewed, but can be modified in relation to low wage issues.

That basically means employment might be high but actual take home earnings low, equating with high unemployment.

But the predictor here, for Howard is another of those tree indexes, inflation. That, of course, hits the lower and middle income range on mortgage and consumer borrowing issues.

I can understand why the concept of an economic electoral predictor is not sexy. There are always so many other pressing issues which should effect outcomes. Corruption, scandal and Iraq should be enough. Then there are those we prefer not to canvass, but which should be high on the agenda, like poverty in our supposedly prosperous countries.

I still intend to poke around these apparent side issue, and certainly don’t dissuade others from doing the same. The fact is most politicians live in hopes of persuading with issues and ignoring the real indicators.

The worst part about the prediction model is that it virtually means wishing hardship on voters to effect change on government, thus creating a potential to address other issues. Or perhaps the average voter deserves the hardship for not really thinking through the broader issues.


romunov said...

Talk about corruption.

Praguetwin said...

You know these indicators are plenty sexy to me.

I really like how you have broken them down in such simple terms. The unemployment remains a variable for the reasons you state. That is to say, even if the official unemployment numbers are going down, underemployment or wage deflation can mean that unemployment is on the rise despite the headline number going down.

This was the case in the current election in the states, and no one plays with their official number more than the U.S.

Expect the Aussies to cut rates heading into the next election.

Cartledge said...

"Expect the Aussies to cut rates heading into the next election.' That is the market prediction, 'just in time' economics.
But the voter is generally clueless about the indices, simply reacting to the actual effects. So toying with numbers won’t change voter reactions. We have already seen that with the employment/wage nexus.