Labor, Liberal economic policies nearly identical

Economists indifferent to who governs

By Wouter Klijn

Thu 26 Aug 2010

Whatever form the government ends up taking, the Australian economy is unlikely to be much affected, economists say.

After rather dull campaigning from the dominant political parties, the Australian election became unexpectedly riveting when the race turned out to be neck and neck.

The resulting hung parliament is the first at the federal level since 1940, and has created much uncertainty as to who will govern and how this will impact on the various sectors of the Australian economy.

But as for the Australian economy overall, the final outcome does not particularly matter.

Not a bit, economists have said.

"In a macro-economical sense I struggle to see, to be honest, enormous near-term implications stemming from [the election]," Deutsche Bank Australia chief economist Adam Boyton said.

"Both parties more or less present a very similar outlook for the budget; both get back to surplus in the same year."

The Labor Party has said it will return to a surplus of $3.5 billion in 2013, while the coalition projections focus on a surplus of $6.2 billion that year.

"Yes, the surplus in that year is different, but anyone who spent any length of time looking at Treasury's forecasting performance will tell you that it is going to be much more, ultimately, than what has been promised as far as budget bottom line is concerned," Boyton said.

HSBC strategist Andre de Silva agreed.

"Broad economic policies across the parties are similar," de Silva wrote in a report earlier this week.

"The current incumbent government and the main opposition have both pledged to maintain the independence of the Reserve Bank of Australia in implementing monetary policy set on an inflation target of 2-3 per cent."

AMP chief economist Shane Oliver said: "Policy differences between the two major parties are minor.

"None promised significant productivity-enhancing policies during the election campaign anyway, but nor does any party have any mandate for a leftward shift in economic policies.

"While a Liberal/National coalition government would resist less business-friendly policies, the Labor Party is also likely to avoid upsetting business given its debilitating battle with the miners and the knowledge it will only work against the economy longer term."

Finally, UBS economist Scott Haslem said there was little to distinguish the two major parties on monetary and fiscal policy.

"We see no fundamental change to the quality and pragmatism of policy setting in Australia over the medium term, based on the 'known' policy platforms of either party," Haslem said.

But he did warn that reform momentum in the economy could stall as a more difficult Parliament could limit consensus and the flow of policies.

"This is particularly the case under a coalition minority government faced with a Senate now controlled by the Greens," he said.