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Saturday, 24 November 2007

Labor Wins Australian Election?

Looks like the opinion polls were correct and the Australian Labor Party will win today's Federal election. Counting hasn't produced figures for WA yet, but the results from NSW and QLD look like the ALP will win enough seats to form government. I'd guess the ALP will end up with a small majority of only 2-5 seats.

The published policies of the two parties were pretty similar, apart from withdrawal of combat troops from Iraq and unwinding of the "work choices" legislation by Labor if they win. However, the big risk is that with the economy growing strongly, unemployment at 4% and inflation heading above 3%, an ALP win will result in a wages break-out, which will boost inflation. This will in turn require larger interest rate rises by the RBA. If this ends up coinciding with a global slow-down (lead by the US) it could mean Australia has it's first recession for more than ten years, and unemployment heads back up again. Unfortunately Labor policies to boost productivity by increased spending on skills training will take longer to have any impact than would the removal of Work Choices and a resurgence in union campaigns for wage rises. We'll see how things work out over the next three or four years. If Labor ends up with a slim majority and the economy runs into troubles during this period we could end up with a one term Labor government.

Copyright Enough Wealth 2007

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