Will the upcoming Federal Election be won with Policy or History?
We are drawing ever closer to May 18, the day when the nation’s voters will make their way to a polling booth, enjoy a snag in the name of democracy, and ultimately judge our political leaders on whether they should run the country the next three years. This individual judgment will be influenced by a variety of factors, but will essentially boil down to two crucial questions: Firstly, which party’s set of policy is the most sound? Secondly, can this party maintain the same Prime Minister for at least a full term? This could be a difficult decision to make for Australian voters, as they are faced with two major political parties, the Liberal Party and the Labor Party, which have both encountered leadership spills in recent times and offer significantly different policy agendas. Nonetheless, Australians must ultimately determine which one they prefer as more reliable to manage the economy into the times ahead.
Let’s take a look at the central policies of each of the two major parties. The Liberal Party, as the government of the current day, released their budget for the next 12 months on April 2 2019. It included tax reliefs for lower to middle income earners, aiming to lower the 32.5% marginal tax rate to 30% in 2024-25, and billions of dollars in spending on infrastructure projects [1]. This is safe economic policy, with a core directive to bring the budget back to surplus and reinforce the nation’s coffers for a future rainy day, but it’s certainly not stirring a fire in anyone’s belly. It seeks to provide a little bit to everyone in the hope of securing at the very least consideration of a vote without upsetting anyone and losing current supporters.
On the other hand, the Labor Party has taken huge risks with economic policy. Their two trump cards are changes to negative gearing and franking credits. Negative gearing occurs when interest payments and rental expenses are more than the rental income, and, currently, investors can claim the loss as an expense against their taxable income (thus lowering their taxable income). The Labor Party are pledging to overhaul negative gearing so that it will only apply to new properties from January 1, 2020 [2]. This aims to tackle housing affordability and make it easier for first-home buyers to enter the market. The Labor Party is also promising to alter franking credits, which currently rebate dividend recipients for the tax that the company has already paid on their profits, enabling them to avoid double taxation. Under the current dividend imputation system, individuals who pay no income tax will still receive this franking credit from the government, thereby essentially paying negative tax. The Labor Party is vowing to stamp out negative tax payments via franking credits, which will, allegedly, save the Budget around $8 billion per year [3].
It is clear that the Labor Party’s two core economic policies will ruffle the feathers of retired, comfortable voters who stand to lose from the proposals. However, given that these voters are traditionally linked with the Liberal Party, this shouldn’t concern them too much. Indeed, Labor is trying to capture the hearts of lower to middle class Australians, but what may stand in their way of achieving this is the fact that it is complicated policy relative to Liberal promises of tax cuts and infrastructure spending. Changes to negative gearing are also highly controversial due to the unpredictable effect on housing prices, as they could, in fact, lead to a fall in investment and significant falls in property prices [4].
The respective campaigns of the Liberal and Labor parties are boasting economics visions to the Australian public that are seemingly being drowned out by the incessant cry of controversy and party instability. Within the past fortnight, the Liberal Party has disendorsed three Lower House candidates around the country, and the Labor Party has dumped one Lower House candidate for inappropriate comments [5]. These events could be seen to have marginally improved Labor’s prospects as the Liberal Party is without endorsed candidates in these electorates; however, these events could also undermine the persistent rhetoric of the Labor Party, portraying the party as emblematic of stability whilst being unsettled by rogue candidates.
In fact, the recent track record of both parties when it comes to remaining faithful in their respective party’s leader leaves much to be desired. We have watched the revolving door of Liberal Prime Ministers over the past 6 years, as three different men have been sworn in as the nation’s leader. This was closely preceded by two Labor Party insurgencies that many of us may be guilty of forgetting, with separate leadership spills taking place between 2010 and 2013. Indeed, regardless of individual preference and policy agenda, it can be argued that Australian voters are all very much united by a strong desire to see our politicians simply get on with the job of managing Australia’s economy. Yet, as we edge towards May 18, it is unclear which of the two major parties confidently guarantee this sense of security given the looming shadow of recent events.
As the campaigns roll on and the Morrison v Shorten debates begin to fire up, the opinion polls continue to tighten, with the most recent Newspoll putting Labor just fractionally ahead in the two-party preferred at 51/49 [6].
When Scott Morrison was sworn in as the 30th Prime Minister of Australia, the two party preferred vote was at an extremely unfavourable 56-44. However, the Prime Minister has banked on time to erase voter memories of some of the Liberal Party’s darkest days, and it has seemed to succeed in evening out the contest. Still, the history of past events lurks like a dark, unwelcome cloud over the Prime Minister, and he will hope that his party’s policy agenda is enough to retain the support of a majority of Australian voters on May 18.
[1] Lower Taxes. (2019). Retrieved from https://www.budget.gov.au/2019-20/content/tax.htm
[2] Reforming Negative Gearing and Capital Gains Tax Arrangements. (2019). Retrieved from https://www.alp.org.au/policies/reforming-negative-gearing-and-capital-gains-tax-arrangements/
[3] Dividend Imputation Credits. (2019). Retrieved from https://www.alp.org.au/other/dividend-imputation-credits/
[4] Labor’s Negative Gearing Policy A Market Update (2019). (2019). Retrieved from https://sqmresearch.com.au/labors-negative-gearing-policy.php
[5] Chan. G & Evershed. N. (May, 2019). What happens when a candidate is dumped during an election campaign? Retrieved from https://www.theguardian.com/australia-news/2019/may/03/what-happens-when-a-candidate-is-dumped-during-an-election-campaign
[6] Benson. S. (April, 2019). Game on as poll race tightens. Retrieved from https://www.theaustralian.com.au/nation/politics/coalition-narrows-gap-on-labor-as-poll-approaches/news-story/ac86e995e85f02695df961e2c50cf1b8