The Australian Federal Election

The Federal political landscape has become somewhat less stable since the 2007 election with six changes in PM, “minority government” at times and a rise in the importance of independents. This has made sensible visionary long-term policy making harder. The last three and a half years have seen a bit more stability though with Scott Morrison being the longest servicing prime minister since John Howard. Policy uncertainty going into the 21 May election is lower than in 2019 as Labor is not offering starkly different policies to the Coalition this time.

Polls and betting markets

Polls give Labor a two-party preferred lead of around 54% to 46%, although the ALP’s primary support appears to have softened a bit since the election was called. Of course, overall polling needs to be interpreted cautiously as the ALP was ahead going into the 2019 election only to see the Coalition win. As my Canberra based colleague Al Kinloch points out, around 20% of people decide on election day and they often stick to what they know. It’s also less clear in the marginal seats which is what counts. Betting markets give roughly equal odds to both.

Elections, the economy & markets in the short term

There is anecdotal evidence that uncertainty around elections causes households and businesses to put some spending on hold. However, hard evidence of this is mixed and there is no clear evidence that election uncertainty effects economic growth in election years. In fact, since 1980 economic growth through election years averaged 3.5% which is greater than average growth of 3% over the whole period.

In terms of the share market, there is some evidence of it tracking sideways in the run up to elections, which may be because of uncertainty… Read more