Gillard has six months to go to the polls

If the Labor party is to have any chance of winning the election, Gillard should call an election in the next six months. After that, the MYEFO tax grab and more bad news from China will sink them.

My advice to Julia Gillard is to call an election within the next six months. Last night on markets there were some scary developments for Wayne Swan’s mini budget, while the Morgan Poll has the ALP a nose in front of the Coalition which has slumped.

Other pollsters have picked up the same trend but have not gone as far as Morgan.

In other words, after being written off Gillard is on a roll and that roll might continue in coming months as interest rates fall.

But further ahead there are some global and local nasties. Last night traders began shorting copper because they believe that China is not going to stimulate further and that Stephen Koukoulas called it correctly when he suggested that the latest China growth figures overstate the real position – something revealed in depressed electricity consumption (Can we trust the Chinese growth figures? October 19).

If the shorters are right then Treasury’s optimistic China and commodity scenarios are wrong.

Treasury based their forward tax estimates on the assumption of a Chinese recovery of some substance. If that does not happen then tax revenues in a year’s time when the election is due will be way down and Gillard will go to the polls with no surplus and in a real mess.

If this scenario proves right, in 12 months Australian voters will understand the implications and blame Gillard.

Back home it was a co-incidence but the day after the Swan mini- budget, AGL announced it was suspending power investment in South Australia and was likely to do the same thing in Queensland.

Now that AGL has broken the ice, expect energy investment cut-backs across the nation. The Government’s carbon tax energy policy is a disaster. It has never been properly thought out and longer term Australia will pay a big price for under investment. In 12 months, voters are also likely understand the full extent of the disaster. At this stage they are ignorant.

Then add the effect of the mini budget. It seems inconsequential to accelerate tax payments but initially it takes $5.5 billion out of large corporations and over time, as the tax spreads to middle ranking enterprises, will take out $8.5 billion.

Many companies will have to borrow that money and, while interest rates are lower, medium and smaller sized business’s banks have not passed on rate cuts to the same extent as mortgages.

In 12 months the tax raid on small and medium business plus other targets will be well under way. And because Swan it putting $390 million behind the tax attack it will affect the trading of small and medium businesses including independent contactors (Six ways the taxman cometh, October 23).

At the last election Tony Abbott did not understand small business. Had he understood he would have won the election. This time around he does understand small business and, if he plays the game correctly, a widespread tax raid could send his support from Australia’s largest employer group soaring.

In a year’s time, in the absence of a China rebound, we will see less employment and less capital investment. And this is being clearly reflected in the Business Spectator CEO Pulse survey (Worry across the boards, October 23).

Add this to the massive cancellation of new mining projects and the picture is not pretty.

Of course our stock market has been firming because of global liquidity and our lower interest rates but, as we will see today, events overseas are starting to reverse that trend.

The time to go to the polls is when the government nasties are not apparent and you can flush out from Tony Abbott his new federalist policies, which lowers duplication with the states but is tough on public servant jobs. In those circumstances and it will be a close fight and Gillard has a real chance of winning.

Six months ago, Julia Gillard was set to be voted out by huge majority. She can gamble that her better polling trend will keep going, but in my view that is very dangerous and right now the opposition is not ready, and the nasties have not yet come to the surface.

Of course, the John Howard philosophy says that elections are hard to win so take advantage of every month the electorate gives you. But John never had the paper thin majority of Julia Gillard.