Should you blame the election for a fall in sales?

Only one retailer experienced a noticeable sales boost after the 2012 election in the United States. Following President Barack Obama’s re-election last November, US gun manufacturer Sturm, Ruger & Co experienced a 47% growth in sales.

Despite this, elections are typically accompanied by grim predictions of consumer doom and profit destruction.

Here at home, where the September 14 election draws closer, the to-and-fro has already begun.

Roger Corbett, Fairfax Media chairman and Reserve Bank board member, told News Limited that election campaigns are always destabilising for business, particularly in the retail sector. Commonwealth Bank economist ANZ chairman John Morschel and Business Council of Australia president Tony Shepherd criticised the September election date, saying in The Australian that it would increase consumer uncertainty. On the other hand, Argo Investments chief executive Jason Beddow told Fairfax that, irrespective of who wins, the election will boost business and consumer confidence.

Paul Harrison disagrees with all of them. Harrison is a consumer behaviour expert and a senior lecturer at the Graduate School of Business at Deakin University and he says consumers don’t really notice elections.

“We think that there are major changes in consumer behaviour, but generally people seem to do the same things they did earlier,” says Harrison.

That’s a strange idea for political tragics who have been riding a wave of hyperbole over the last three years. Both parties have warned consumers of dire consequences if their counterpart is elected to government in September this year.

However Harrison says the evidence is clear: elections aren’t important to the general population. Over the last three elections years, 2004, 2007 and 2010, consumer confidence stayed steady between 110 and 120.  “The best ways to think about it is that we all have busy lives and we all tend to muddle on through [most of] the time. At a suburban level people just absorb [politics] into their daily work,” he says.

There are exceptions; it’s undeniable that large national or global crises can shake consumer confidence. But Harrison says elections don’t necessarily fall into this category.

“It takes a significant event for us to change our behaviour. There was a [large] shift in behaviour when the threat of the GFC became clear. Y2K [which predicted a technology crash when the century turned] actually did have an effect on our buying behaviour because people thought we’d shut down for a few weeks,” he says.

The majority of the population aren’t engaged enough in politics to notice elections. Even large policy fights like the carbon tax and the mining resources rent tax don’t have enough impact to play a large part in their lives.

“For most consumers, it’s a bit complicated to understand what it means. And so 95% of their retail purchases will continue [as normal]. The other 5% they will put off, but only if they’re already risk averse to [them].”

That 5% exception will mostly be big, expensive purchases. These can be affected by elections, particularly if there’s likely to be a change of government.

“It’s mostly about risk aversion,” says Harrison. “Humans are naturally risk-averse creatures. People who have been thinking about it for a while won’t necessarily change their behaviour. It will only be people who are sitting on the edge, who might be nudged slightly towards no.”

For consumers who are politically engaged, the media can play a role in consumer confidence.

“People respond to the messages in the media. If it looks like there will be an alternative government that challenges your behaviour, people will change [their spending habits]. But once again, it’s not across the board.”

In fact, Harrison says that one thing aspect of the last three tumultuous years of the Gillard minority government has added to consumer certainty. “People think it is inevitable that we’re going to get a Liberal Coalition government and so [they] have probably adjusted their buying behaviour already.

“[They feel] it’s a Shakespearean inevitability that there’s going to be a change of government.”


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