Thursday, August 09, 2007

New government by December

I know you readers will tell me it is still too far out to declare the upcoming Australian election. Well I would be happy to put money on a Liberal/National loss right now; except I don’t want to add to ballooning consumer spending, and thus inflation.

Of course it is far too soon to get down to predicting margins, but under the rules of my beloved economic predictor the Howard government is finished. On broad figures the government have a buffer of 16 seats at the moment.

Polling consistently has Labor around 10% ahead. Given an unlikely uniform swing the government holds 43 seats by margins below 10%. 14 of those are below 3.3%. When we can look at the dynamics of individual seats a clearer picture will emerge, but the government is doomed.

Looking at the predictor, we have three main indicators – the unemployment rate, inflation and interest rates. If two or more of these rise over a full, three-year electoral cycle, the government will lose. So looking at them:

Unemployment rate – The government claims near full employment, however that assertion fails to look at part time, casual and other underemployment, dumping them all into simple employment. They can talk it up, but they can’t fool those not really benefiting from the claims.

Inflation – Since the last election inflation has risen from a weighted median of 2.4 through to highs of 3.0 and 3.2 and currently sitting on 2.8. The government argued against a rate rise on the basis of this 2.8 being satisfactory, but the Federal Reserve feared another blow-out.

Interest rates – After holding off for many months the rate has now been bumped by .25%. No big deal in itself perhaps, except it is the fifth rise during the life of the parliament without any corresponding drops.

Even discounting dubious employment figures the government is in dire straits. Perhaps a fallout from those indices is an accelerating housing crisis and of course the surging Aussie dollar against the greenback.

The latter might sound great, but not for our economy. Imports are cheaper, of course, driving consumer spending. On the other side, exports become more expensive, putting pressure on a range of markets.

Howard has been trotting out a number of mitigating circumstances for the rate rise; the latest that they are a result of a booming economy. I’m not sure many in his intended audience are seeing any benefits from a booming economy.

1 comment:

Praguetwin said...

I think you can go ahead a call it. Howard doesn't have a pillar to stand on.