Resounding Labor victory gives the economy some certainty in Australia

Anthony Albanese has decidedly won a second term as Prime Minister, with the Labor party set to form a majority government. The Labor party also looks set to strengthen its position in the upper house and will likely be able to pass legislation with the support of the Greens, without relying on additional crossbench support. By avoiding minority government, the economy will enjoy greater policy certainty at a time when it is in short supply internationally.

As we flagged in the lead up to the election, both major parties were proposing a slight loosening of fiscal policy. But the difference between the two platforms was not large enough to make a material difference to our forecasts.

The policies proposed in the March Budget now look set to be legislated without challenge. These will provide a modest stimulus to demand in the coming years, most notably the extension of utilities rebates and income tax cuts from next year. Given the negative demand shock set to hit the economy from overseas, this additional support now appears more prudent than it did a couple of months ago. But it will put some additional pressure on the budget bottom line.

Chart 1: Productivity the key to living standards and re-election for the second term Labor government