Prime minister Kevin Rudd may be taking a risk with the schedule for economic data releases in early September, given that it seems he will forgo the option of an August 31 polling day.
Today is the last day Rudd can go to the Governor General to call an August 31 election and if he fails to do so, the poll date is likely to be on or after September 21. In the weeks after August, there are some top tier data that will now be released during the election campaign and depending what those numbers show, it could sway votes.
Between now and August 31, the only big politically sensitive issues on the agenda are the Reserve Bank board meeting on August 6, the labour force data on August 8 and maybe the private capital expenditure data on August 29. It’s unlikely there’ll be a data release that has much impact on the campaigning.
While the economy is travelling well, there is no doubt it is going through a cyclical slowdown as China cools, commodity prices ease and the effects of the tapering off of the mining boom permeate through to other parts of the economy.
As always, economics and economic policy management will be dominant issues in the election campaign. This means that each data release during the campaign will be scrutinised – and no doubt under the mantra that strong data is good for the government and weak data bad.
The risk for having the election a little later is that the current cyclical softening in economic conditions will translate to softer jobs data and possibly a weaker GDP result.
The Australian Bureau of Statistics is scheduled to release the June quarter GDP on September 4 and early indications suggest GDP growth could be as low as 0.5 per cent for the quarter, which would see annual GDP growth edge back to around 2.4 per cent. This is not a problem from a big-picture macroeconomic perspective, but in the optics of an election campaign, a below trend GDP growth rate is not particularly helpful to the government. It may have been better to go on August 31 to avoid this complication.
As things stand the GDP data will be driven by solid gains in export volumes; housing construction is on the rise and household consumption is expanding, albeit at a moderate pace. Business investment is likely to have fallen and at this stage, to a quarterly GDP result around 0.7 per while 2.7 per cent for the year is likely. The government would welcome this. Anything this strong or even stronger would be a boost to the government while anything below 2.5 per cent would see the Opposition crank up its negative take on economic management.
Perhaps more importantly, the August employment and unemployment rate data will be released on September 12. Given the only moderate growth momentum in the economy and the negative leads coming from ANZ job advertisements, the job vacancies series and the hiring intentions data from various business surveys, there has to be some risk that the unemployment rate will print at a 10-year high of 6 per cent. (The last time Australia’s unemployment rate was at 6 per cent or higher was July 2003.)
All of this makes a September 21 election a risky one from the perspective of the regular data releases. Of course the economic data might, as they say, surprise on the upside. At the moment, the Labor government can claim that 966,000 jobs have been created under its economic management and another 34,000 jobs are possible over the next month or two – which would see the tally hit the one million mark. In the final weeks of a campaign, Labor would no doubt get some nice coverage with a focus on “one million new jobs under our management”.
The risk of course is that jobs growth will be sufficiently soft to see the unemployment rate edge up a few ticks, which would mean the Coalition would bang the drum if the unemployment rate approaches a 10-year high of 6 per cent.
And such is the fickle nature of the monthly data that each of those scenarios – one million jobs and a 6 per cent unemployment rate – are equally likely to unfold.
In addition to the jobs and GDP data there are the monthly Reserve Bank board meetings on the first Tuesday of each month. These are unlikely to be controversial. An interest rate cut is very likely next week as the Reserve Bank deals with low inflation and the below trend growth rate. This may spark up interest rates as an election issue, although for the moment this surprisingly seems to be a lower tier issue.
Economic management is about outcomes. That is why the data flow between now and whenever election day is held will be used by the political parties to push their own views, with the Labor Party hoping from some strong data while the Coalition will be pleased to see the numbers weaken.