Economy predicted to lift after federal election

By Paul Hemsley

A key economic indicator from the Commonwealth Bank of Australia’s securities arm Commsec has confirmed that continued political uncertainty ahead of the federal election this year is acting as a handbrake on business investment, which has been impeding the prosperity of the state economies.

The latest quarterly State of the States report from Commsec said that “all economies should lift once the uncertainty of the Federal Election is finally out of the way later in 2013”.

It is the bank’s acknowledgement of a potential economic boost after the next federal election, which Prime Minister Julia Gillard originally scheduled for 14th September, 2013, but Kevin Rudd is still picking his own preferred date following his reinstatement in the top job in June 2013.

Whichever date Mr Rudd decides upon and regardless of which party wins the election, Commsec has suggested that the result will lead to a greater assertiveness in the business sector because companies will know which political party they will be dealing with over the next three years.

This supposed “uncertainty” leading to the federal election has mainly resulted from doubts among companies in the private sector about doing business with each other and with government because a potential change of parties running the federal government could lead to different demands from the Coalition if it wins at the poll.

As a consequence of the uncertainty, companies are more likely to freeze spending on certain projects for months before the election, which leads to state economies lagging in certain areas such as retail, equipment investment, unemployment, construction work, housing finance and dwelling starts.

The report found that Western Australia was the leading economic performer in the country but has slipped in unemployment; the Northern Territory also “lost ground” and the Australian Capital Territory got a boost through strong population growth, housing activity and a stronger job market.

But the report also found that there has been little change in the performance rankings of the three largest states, New South Wales, Victoria and Queensland – and Tasmania has continuously lagged at the bottom of the relative economic performance rankings.

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