I guess there are at least a few lessons to be learned from the election results. Here are a few that I’ve come to realise…
Before commenting on the election result I will declare my political allegiance by explaining that I became a DLP voter at the time that our mainstream parties decided that running quasi-concentration camps near Woomera was part and parcel of Australian life.
Now that both of the leaders concerned have moved on, I plan to reconsider my affiliation. This is made difficult by the party of the left moving to the right and the party of the right beginning to move to the left. It is clearly within compass that one might inadvertently find oneself voting for the other chaps if one votes for the same chaps as one voted for last time, and vice versa (or is that vice versa the first time?).
Anyway, to matters at hand. From my point of view, the striking thing about the result was that the electorate has decisively evicted an administration that delivered the lowest rate of unemployment in 30-odd years.
This is an outcome that would have been utterly jaw-dropping to a post-Whitlam politician of either party.
What does it mean? Here are my guesses:
Guess 1: Economic issues are of only secondary importance to the voters of 2007 who are concerned more about environmental and foreign policy issues.
I would like to believe this of my fellow voters – but I don’t.
Guess 2: The voter of 2007 recognises that thanks to the Hawke-Keating reforms of the monetary system and the Howard-Costello reforms of the fiscal system (also known as the GST), the government of the day has only limited control over the economy and so it is pointless to chose a government on the criteria of economic management.
In my opinion this view is technically correct – but I don’t think it is widespread.
Guess 3: The voter of 2007 holds the view that the government of the day does have control of the economy – but it’s not really that hard. This may well be correct.
Guess 4: The voter of 2007 takes employment for granted and looks to interest rates as an indicator of economic management. Low employment doesn’t tell them that things are good, but higher interest rates on the credit card used to buy the plasma TV tell them that things are getting worse.
Certainly guess 4 fits with the evidence that the swing against the Coalition was largest in those regions within our schizophrenic economy that are doing it tough, and smallest in those states in the grip of the mining boom – Western Australia and Queensland.
If I’m right about guess 4 there are some interesting implications.
First, if you believe as I do that there are another two or three rate rises on the cards, then you can expect the Rudd Government to become increasingly less popular, and if things do turn sour as a result of events largely outside their control then they may even become a one-term government.
Secondly, it argues that because the voter of 2007 is far more highly-geared than the voter of 1977, monetary policy is a far sharper weapon than before, and rate settings based on historical relationships may well overshoot the mark by a significant margin.
Not for nothing is economics known as the “dismal science” (though there is some conjecture about whether it is in fact a science); but 2008 may be a very interesting year. More economics next week.
To read more Mr Banker blogs, click here.