What will a Labor Government mean for our economy?
Written and accurate as at: May 27, 2022 Current Stats & Facts
Anthony Albanese has been sworn in as the next Prime Minister after his Labor party clinched victory in the election on Saturday, ousting the Coalition that had been in power since 2013. The votes are still being counted. Several political analysts expect Labor will win enough seats to form a majority government.
At the time of writing, Labor is expected to win 76 seats. The election was also marked by a spectacular swing towards independent candidates and the Greens campaigning on climate change reform and a Federal Independent Commission Against Corruption (ICAC). There was also a strong swing away from the Coalition from female voters.
Liberal politicians are jostling to replace Scott Morrison as party leader, who resigned on Saturday following the election loss. Reports point to outgoing Defence Minister Peter Dutton as a possible frontrunner, after outgoing Treasurer Josh Frydenberg lost his seat of Kooyong.
So, what does it all mean for policy?
Well, this may depend on whether Labor secures a majority in the House of Representatives. It is typically perceived as more difficult for a minority government to pursue their legislative agenda. Political analysts suggest it looks as though Labor, the Greens and independents may form a progressive Senate majority.
While the dust settles, we can compare the costs of the election policies of the major parties.
The projections indicate that Labor’s policies would add an extra $7.4 billion to the deficit over four years to 2025-26 when compared to the Coalition’s policies. This is a fairly small difference relative to the total deficit projected by both Labor and the Coalition. Labor’s election commitments would cost an extra $18.9 billion in spending over the four years, while they also identified $11.5 billion in savings over the same period.
Shadow Treasurer Jim Chalmers advised the difference between the two budgets was comprised of spending on “childcare, investments in training and education, and investment in clear and cheaper energy”.
One thing is certain, investment in cutting greenhouse gas emissions is overdue and is expected to provide opportunities for new markets and employment opportunities. Regardless of the party in Government, sizeable deficits will remain for the coming years. Notably, the Australian Government debt to GDP remains one of the lowest in the world.
While there are still many swirling uncertainties, the election result has brought climate change and the minimum wage to the fore.
The swing towards pro-climate independents and the Greens will put pressure on Labor to take stronger action on climate change. Labor campaigned on cutting greenhouse gas emissions by 43% by 2030 – more than the Coalition’s target of 26 to 28%. Both parties have committed to reaching net-zero by 2050. There are significant and rising economic costs from more frequent and severe natural disasters associated with climate change.
Millions of Australians are potentially in for a bigger pay rise under the Labor Government. During the election campaign, Anthony Albanese stated that his Government would make a submission to the Fair Work Commission to raise the minimum wage by 5.1%; in line with the latest annual growth rate of headline inflation. As of July 2021, the national minimum wage is $20.33 per hour. The Commission reviews the minimum wage annually, with the change usually coming into operation from 1 July. Cost-of-living pressures are weighing on the outlook for spending despite the strength of the labour market. The squeeze on household budgets is likely to be more acute for lower-income households.
Finally, evidence suggests the governing party has limited impact on sharemarkets. Ultimately, economic and interest rate cycles have a dominant impact on investment markets rather than specific policies under each government.