There are a bunch of articles out today from spruikers, bulls and happy Jacks suggesting that Australia is on the verge of a new boom, held back only by election uncertainty. There is Clifford Bennet’s laugh-a-minute effort at CNBC, property developer Lang Walker is hoping for a property boom, Gotti reckons it begins our recovery phase (though he makes some good points for the longer term).
This is all just a little bit hopeful.
Quite part from the fact that we all know the outcome of the election already, I just can’t see why this is the case. The only two major policies that a change in government really effects, as far I can tell, is the NBN and the carbon tax. In the case of the former, the NBN will be reduced, so investment will fall not rise. In the case of the latter, it’s likely that renewables investment is being held back but the prospect of a double dissolution election and no carbon tax is only likely to deter investment as well.
Carbon tax cuts will be kept but there’ll be a fall off in prices so that’s no trigger for consumption.
Mining won’t be affected. The MRRT may be scrapped but it doesn’t influence investment decisions (not least because it raises no money).
Interest rates may fall further, faster if Hockey sticks to a tight Budget but that will more likely damage growth in an already weak environment, at least for the first year.
One might argue that punters will assume a return of the Howard/Costello good times and lift their borrowing but the high savings rate leads me to think they don’t really blame politics so much as an unsteady world and high debt for their cautious attitude.
In the mean time growth will be an ongoing battle between the drop in mining investment and the rise in housing investment. That’s not going to change unless Joe Hockey immediately wades in with some new as yet undisclosed stimulus. If the dollar falls further we’ll start to see some tradable activity over time but not straight away. If rebalancing gains momentum it’ll happen anyway.
I am unexcited by this argument that the election will make much difference.
