As you would have heard, Anthony Albanese for the Labor Party is the new Prime Minister of Australia. Join us for this week’s episode where we talk through all of the major takeaways from the election itself, and what Labor’s Australia might look like over the next few years
Secondary Voting – The Election Decider
Labor
won the election in what has been touted as a convincing fashion. The
reality, however, is that the major parties attracted between 30 and 35%
of the vote each and the Liberal party actually took more of the two.
The impact of secondary voting in Australia’s political system is hugely
impactful, and it seems odd that a majority government can be formed
after not receiving the bulk of primary votes. Host Andrew Baxter notes
that the world has changed and perhaps our political system should be
reviewed, but perhaps that’s an issue for another podcast. A large
contingent of Independent and Greens candidates winning seats led to
Labor’s majority and this shift in the political landscape could have
some significant consequences for Labor’s tenure.
Politics vs Policies
As
usual, it was a game of politics and not policies over the course of
this election. We saw a healthy mix and smear campaigns throughout the
election campaign from both parties. ‘Gotcha’ journalism was one of the
major smokescreens for both parties dodging making any real commitments
in terms of policy. One of the main policy clashes was approaches to
housing affordability. First, Labor came out with a scheme in which the
government would essentially co-sign on property along with buyers who
would not otherwise be able to afford a home. Host Andrew Baxter points
out that there is a lot that can go wrong with the scheme, particularly
if the value of the house drops and the government finds itself in
negative equity. Is the taxpayer then liable to pay for that? The
Liberal party were then prompted to make a policy of their own in
response to unaffordable housing. The proposal to allow homebuyers to
buy property using their superannuation was a desperate lunge from the
Coalition to respond to Labor’s response to the crisis.
Manufacturing vs Wages
Everyone
wants to be paid more for the work they do, which is why increasing
wages is popular among voters. As an economist himself, Host Andrew Baxter knows
that committing to a high increase in wages is short-sighted and not a
certain way of helping people deal with the rising cost of living. In a
free market, equilibrium of price tends to be reached naturally based on
supply and demand. When you then overlay government interference and
mandated wage increases, you find yourself in an uncompetitive and
inefficient market. 1970’s in Great Britain provides a perfect example
for this. Governments in the Common Market, now the European Union,
would announce that they would pay a set price for a given product from
farmers. What would then happen is that more of that product would be
produced than what was needed, so governments were forced to pay up in a
market where there was a total oversupply. Another point to keep in
mind is that increases in wages have to be paid for somehow. If wages
increase, and super contributions from employers increase in tow, then
employers are set to be parting with a good chunk of their margin. As a
result, we see prices go up, and we are back where we started and
inflation has only been further propped up.
Challenges Facing the Government
Although
Labor won the election, the circumstances mean it will not be the
smoothest period of power. With no majority in the Senate, passing
legislation will be very difficult for the party as constituents from
many parties will oppose certain bills. The Greens are one party with a
large amount of power in the Senate, and last time that was the case the
major change of banning live cattle exports hurt the Australian
agriculture industry badly. Combine this with the major international
headwinds faced at the moment like China’s lockdowns, the war in
Ukraine, supply chain recoveries on the back of Covid, and inflation
concerns, the government need to tread lightly and not making any
drastic changes. Trying to prop up a mostly failed manufacturing sector
would be a mistake, particularly if wages were to increase.
3 Expectations for the Next Year
As a parting prediction, Host Andrew Baxter expects
to not see any major shaking up of policy in Australia, particularly in
the early stages of Albo’s tenure. The largest challenges he predicts
are the impacts of China coming out of lockdowns which have an array of
impacts. Firstly, there is greater demand for some of Australia’s major
exports like coal and iron ore. However, China’s current state means
less demand for oil, thus keeping prices at bay for the time being. Once
these prices increase further, we will see a large spike in the cost of
living once again. Despite the cost of living concerns however, the
single biggest risk is over-interference in the labour market as
increasing wages significantly in an artificial way will have effects
outside of day-to-day people earning more.
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