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Can Australia’s Election Winner Energize a Slowing Economy?

Australian Prime Minister Scott Morrison, left, and opposition leader Bill Shorten shake hands before the Sky News/Courier Mail People's Forum in Brisbane, May 3, 2019. (Gary Ramage/Pool via AP)
Australian Prime Minister Scott Morrison, left, and opposition leader Bill Shorten shake hands before the Sky News/Courier Mail People's Forum in Brisbane, May 3, 2019. (Gary Ramage/Pool via AP)
Can Australia’s Election Winner Energize a Slowing Economy?
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Australians have a choice between tax cuts and greater public spending when they vote in general elections on Saturday.

The elections give voters what has been described as the clearest choice on economic policy in years from the two main political parties.

Whoever wins will face an economy growing at likely its slowest rate in 10 years, while the jobless rate has climbed higher. This could lead Australia’s central bank to cut interest rates for the first time since 2016.

Many experts argue that government intervention in the economy could, in fact, prove helpful.

Australia has avoided an economic recession since 1991. Yet there are signs of trouble, as housing prices slide in the cities of Sydney and Melbourne. In addition, wage growth and consumer spending have slowed.

As a result, economists say they expect the Reserve Bank of Australia to cut its main interest rate from a record low 1.5 percent later this year. The economists spoke with the Reuters news agency in late April.

During the election campaign, the center-right Liberal-led ruling coalition and opposition Labor party have each promised budget surpluses. The reason: rising prices for iron ore and coal - the nation’s top export earners.

But while Australian exports are expanding, the rest of the economy is not.

Economic growth is expected to slow to 1.7 percent during the current quarter from one year ago. That would be the weakest growth rate since late 2009.

Voting on wages

Studies of likely voters show Labor holding a narrow lead over the Liberal-National coalition. Experts expect the election to be decided by just a few seats.

The coalition is promising a series of tax cuts, with personal rate reductions set in the April budget to take effect in July.

The Labor Party is more interventionist. It has promised to end major tax breaks. It proposed to set a living wage above the lowest legal rate of A$18.93 an hour to help people meet their needs and avoid poverty. Labor leader Bill Shorten says this election is a “referendum on wages.”

Prime Minister Scott Morrison says Labor’s wage policies would harm the economy. The Australian Chamber of Commerce and Industry supports his position.

Those policies “would force many businesses to choose between cutting the hours of their employees or laying people off,” the business group noted in March.

Different ideas about the role of government

The Liberal-National coalition has publicized its record as a strong economic manager, a message that has affected voters.

An independent study at the end of April found that ‘managing the economy’ was very important for 33 percent of Australians. In fact, 37 percent of those asked said they trusted the coalition to do the job.

Frank Stilwell is an economist and professor with the University of Sydney. He likens concerns about debt and deficits to an “accountant’s view” of the economy.

“Most countries, most of the time, run deficits and that’s fine,” said Stilwell. “The bigger question is how would the winner here respond to continuing depressing economic growth?”

During the 2008 and 2009 financial crisis, the Labor government provided A$8.5 billion in payments to low- and middle-income Australians.

Stilwell said, “It was what we needed, it was very well done and it worked,”

I’m Jonathan Evans.

The Reuters news agency reported this story. George Grow adapted the report for VOA Learning English. Ashley Thompson was the editor.


Words in This Story

consumer – n. someone who uses economic goods and services

quarter – n. a three-month period, such as April through June

referendum – n. a public vote on a proposal or measure

negative adj. lacking good or promising qualities

manager – n. someone responsible for business activities

accountant - n. a person whose job is to keep and inspect financial records

view – n. a sight; the ability to see something

income – n. earnings

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