An election beckons, with all still to play for
The federal election of 2022 is not decided at all. Victory or defeat remains there for the taking. Most voters today are focused on the still unfolding pandemic, fathoming what the latest omicron variant will mean for them and their lives.
Prime Minister Scott Morrison is a formidable campaigner. He will hope that the voters’ bottom line after two years of COVID-19 is that they got jabbed, and they kept their jobs. Strong vaccination rates mean most people are now safe from serious illness. The V-shaped economic rebound as restrictions have eased has brought the fastest monthly jobs growth in Australian history.
By March or May, with a further booster shot campaign, Mr Morrison will still be hoping to capitalise on the economic boom that chief executives are expecting in 2022 as, omicron permitting, Australians go revenge-spending with a huge national household savings pot.
Mr Morrison was sidelined and upstaged during much of the pandemic by state premiers who had practical control of closures and restrictions. For the first time, The Australian Financial Review Magazine’s Power issue did not name the prime minister as the most powerful job in the country.
The Prime Minister will seek to turn that on its head: that he was the leader who leaned against bossy, mostly Labor premiers, effectively eight opposition leaders, and got the country jabbedand reopened.
It will set him up for a steady-as-she-goes election with a tailwind of voters in no mood for more upheavals.
Just to make sure, the Morrison government has seized a pandemic licence to spend. The May budget delivered a $161 billion deficit and gross debt now approaching $1.2 trillion, or half of GDP, with red ink for the foreseeable future.
If the two parties are not to tax or cut their way out of deficit, they will have to grow their way out.
Since then, the midyear update shows a four-year revenue windfall of $106 billion has been consumed by fast-rising disability costs and election promises.
The sales pitch for the budget was that spending on the aged and the National Disability Insurance Scheme would create both jobs and social care in a build-back-better dividend for voters after the pandemic. It buttresses the Coalition against routine Labor charges that the Coalition is mean and indifferent.
Higher military spending and the AUKUS deal, with its nuclear-powered China deterrent, also gives the Coalition security credentials when few voters are unaware of rising global tensions. The government could yet extend the low and middle-income tax offset effectively into an unwise permanent tax cut.
Labor must hope that voters wary of change are even more weary of Mr Morrison, and that a campaign with few policy targets but lots of spin and sledge can be made to rebound into Mr Morrison’s so-called trust issues. The Prime Minister’s skills of deflection and evasion – “I don’t hold the hose” and “it’s not a race” – will leave him open.
His party’s problems with women and this year’s inching progress on climate already mean he will be fighting on new fronts against independents targeting Liberal moderate seats – which is tricky, with parliamentary numbers so tight. And parliamentary ill-discipline on his right flank has hurt one of Mr Morrison’s biggest assets: Coalition unity.
But is Labor creating any compelling case for change? The party needs to win a notional seven seats to form government, and it’s not clear where they might come from. There are several the Coalition could take, and even while down in the national polling, Mr Morrison could thread the needle to a seat-by-seat win as he did in 2019.
The economy still has many more twists to it. Employment is also high because migration is low, but the government will have to bring some skilled migrants in or put growth at risk. Global bank interest rates are set to rise as US inflation is curbed.
If that rattles the Australian mortgage belt, the Coalition will claim it would still manage better. Both parties will have to address the sustainability of the budget, and we will not have long to wait. Unemployment well below 5 per cent is Treasurer Josh Frydenberg’s signal for budget repair, and that’s expected for the next two years.
If the two parties are not to tax or cut their way out of deficit, they will have to grow their way out. But that means breathing life into productivity, which no one has done for two decades.
Mr Morrison once faced in the direction of reform, even if he has never taken the road. Labor is limited to what its controlling union factions will allow, raising the question of how fit the party is to govern the nation. The election result is only going to be the messy start of managing the pandemic legacy.
Via The AFR View
David James Connolly