Rudd's running the gauntlet in the lead-up week

Prime Minister Kevin Rudd has opted for a September 7 election and in doing so has opened up a couple of potential economic data risks which could be key issues in the final week of the campaign. 

The calendar of economic data and events is full of important, market moving and even vote moving information in the final week before we go to the polls on September 7. On September 3 there is the meeting of the Reserve Bank board, which will be complemented by data on building approvals on the 2nd, retail sales and the balance of payments on the 3rd, the critically important GDP data on the 4th and international trade on the 5th.

Each of these numbers, plus those released during August, will be viewed from the perspective of economic management. As I wrote a week ago (Rudd's last chance to avoid an economic wildcard, July 29), any weak data will hurt the government electorally, while strong news will be embraced by the government as it works to reiterate its economic management credentials.

In addition to these releases of official data from the Australian Bureau of Statistics, that final week will also see TD Securities release its monthly inflation gauge, while Dun & Bradstreet’s business expectations survey and the various purchasing manager’s indices for manufacturing, construction and services will also hit the screens.

The data flow is usually something of a lottery for the monthly releases, and even the quarterly information on business investment, GDP and the balance of payments often throws up a data ‘shock’.

The government will obviously be hoping that the flow of news will err on the strong side, especially the GDP outcome for the June quarter just three days before polling day. While it might be pushing it to say the Coalition is hoping for weak data, if the news is soft, expect to see Tony Abbott and Joe Hockey ramping up their rhetoric and economic emergencies and the like.

In choosing September 7, Rudd has ensured that there is only one more monthly labour force release before election day and that comes up this Thursday when the July jobs and unemployment news is released. One problem with going to the polls on September 14 was that the August labour force data are released on September 12. With the forward indicators of the jobs market showing risks of higher unemployment in the next few months – indeed Treasury is forecasting the unemployment rate to rise to 6.25 per cent – the September 7 polling date avoids the risk of a nasty jump in the unemployment rate as the voters head into the polling booths.

After an all but certain interest rate cut tomorrow from the Reserve Bank, the board meets again on September 3 and this meeting could be a doozie if the Bank feels it needs to cut interest rates again.

From this distance, a rate cut in September looks to be an unlikely proposition, but if the data flow before then – plus the news from China and the rest of the global economy – turns sour, an interest rate cut four days from voting could still occur. If so, it would dominate campaigning, at least for a few days.

Statistical and data quirks aside, the economy is in sound shape leading into the election and with policy stimulus coming through via low interest rates, the falling Australian dollar and a slightly larger budget deficit, it looks like a great election to win. Next year is shaping up to have the strongest economic growth since 2007 regardless of what the data flow over the next five weeks has to offer.