ECONOMIC OBSTACLES DURING THE ELECTORAL CAMPAIGN:
* ECONOMY: The Morrison government can boast of having an economy that has recovered by leaps and bounds since the 2020 recession and is 3.4% bigger than before the COVID-19 pandemic in the December quarter . Economic growth figures for the March quarter are not released until June, but retail trade data – a key element of economic activity – is released for March on May 4 and for the March quarter on May 10. . The latter will give a board guide on the impact of Omicron, flooding and the cost of living weigh on expenses.
* LABOR MARKET: The recovery in employment has been the defining feature of Australia’s rebound from the recession. After hitting a 22-year high of 7.4% during the severe economic recession in mid-2020, the unemployment rate is at 4%, its lowest level in nearly 14 years. And the Reserve Bank of Australia and the Treasury both forecast an unemployment rate of 3.75% this year, the lowest level since the early 1970s. Labor force figures for March are due on April 14 and for the month of April on May 19.
* INFLATION: The cost of living is likely to be a key part of the election campaign given strong inflationary pressures and the debate over the government’s temporary household support package in the March budget. The annual inflation rate was already 3.5% at the end of 2021 before the impact of the war in Ukraine pushed gasoline prices to record highs above $2 a liter as world oil prices were rising. The consumer price index for the March quarter on April 27 will serve as a reminder of the cost of living pressures households are facing, with economists predicting annual inflation could peak at around 5%.
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* WAGE GROWTH: The missing link in the economic recovery remains a notable improvement in wage growth. In the December quarter, the key wage price index was running at an annual rate of 2.3% and well below the rate of inflation, meaning wages are falling. The Treasury forecasts a reversal in wage growth in the coming years due to low unemployment, but has repeatedly missed the target in its previous forecasts. The wage price index for the March quarter is due on May 18, but wages are more than likely to lag inflation.
*INTEREST RATES: A saving grace for the government, as its debt has increased dramatically due to the response to the COVID-19 pandemic, has been record interest rates. However, the RBA is expected to start raising the cash rate this year as the pace of inflation and job growth beat expectations. Some economists see the May 3 board meeting as “live” in terms of cash rate movement from a record 0.1% after the March quarter inflation figures. However, although a rise during an election campaign is unlikely, that did not stop the central bank from moving during the 2007 campaign – a poll that saw the end of John Howard’s reign as prime minister.
* CONFIDENCE: The weekly ANZ-Roy Morgan Consumer Confidence Index will provide a detailed account of Australians’ mood swings in response to campaign and economic events in the run-up to election night. The budget has helped stabilize confidence and ease inflation fears to some extent with the help of its program to tackle the cost of living and lower gas prices. But the pessimists continue to outweigh the optimists.