The Abbott bounce vs the Rudd stimulus

‘If he wins, you lose’. The slogan for Labor’s new TV ads attacking Tony Abbott, has something for everyone. 

To die-hard Liberal voters, if Abbott wins they lose the carbon tax, mining tax, large budget deficits, 12,000 public servants of questionable value and quite a number of ‘boats’. In those voters’ minds, all good things.

To die-hard Labor voters, if Abbott wins they lose the School Kids bonus, large chunks of health and education funding, $500 million in auto-industry subsidies, carbon pricing, the all-fibre NBN and 12,000 public servants vital for the delivery of services. All quite bad things. 

But all indicators during this most unusual election campaign are that if Kevin Rudd wins, many people will also lose. 

Like Abbott, Rudd has a massive revenue-side fiscal problem which he has vowed not to fix (turning one of the ‘efficient’ fixes, the GST, into a scare campaign), and like Abbott has announced large spending cuts to try to keep federal finances going. 

Under Labor’s austerity drive, announced in the recent economic statement, around 5,000 public servants will vanish via ‘natural attrition’. The statement also deferred $1.1 billion in defence spending, hiked tobacco tax, raising $5.3 billion, deferred or reduced some benefits payments by around $1 billion and squeezed $1.8 billion out of a bank deposit levy. 

Plenty of losers there too. 

Labor’s argument is that Abbott’s commission of audit, to take place after the election, will make unpalatable public service cuts that he dare not name before the election – à la Campbell Newman’s 14,000 public-servant cull in Queensland. 

However the Queensland economy has done pretty well since, and in the latest ABS jobs figures, that state has led the nation in job creation. 

This is the gamble Labor and Liberal voters will take. Back Abbott, and you will see public sector heads roll, but potentially lots of new jobs created via the ‘Abbott bounce’ – a surge in business investment as consumer and business confidence recover. 

Back Rudd, and spending will be slightly higher – though he and Treasurer Bowen still claim to have a road back to surplus in the final year of the forward estimates – but there will still be job losses. But will a re-installed Rudd government bring a surge in business investment and jobs to offset the public sector losses? 

Not likely, though Fairfax papers today report that “$4 billion in private funding would be sucked away from Australia's solar power and renewable energy industries over the next three years if the Coalition wins government” and that a massive roll-out of wind power would take the burden of hitting the 20 per cent RET target – something the Coalition remains committed to at this point. 

Abbott’s decision not to back the extra $500 million Labor will plough into the auto industry will also bring job losses, especially down the supply chain in the SME sector. 

The Rudd plans do shore up jobs that are already in place, and Labor has done well on the jobs creation front during the turbulent GFC years of 2007 to the present day. It has, on the other hand, funded most of its job creation schemes with debt, bringing net federal debt to nearly 11 per cent of GDP. 

So do you vote for the ‘Abbott bounce’ or more of the ‘Rudd stimulus’? 

In tough times, it would be the latter, but Abbott’s campaign success so far indicates that the punters are starting to notice green shoots in the EU and the US, and want to take a punt on the Abbott bounce. 

That could all change with a sudden stock-market slide or similar. But for the moment, the latest Newspoll is showing Labor languishing on a primary vote of 34 per cent – meaning for now, voters want the bounce. 

In one respect, if either man wins, we all lose. The years 2013 to 2016 will not see the tax reforms, IR reforms and infrastructure investment the business community has been clamouring for – all of those promises would be too risky in the current political climate. 

So losers we’ll remain until somebody takes some brave policies to the 2016 election. Don’t hold your breath for that.