There is a wildcard hanging over the upcoming election, a factor outside the control of the any politician – it resembles an angry fish, and it is looking for someone to bite.
Question: Over the next 12 months do you think economic conditions in Australia will get better, get worse or stay much the same? Source: Essential Report
It is the long-term trend line on people’s economic confidence, and it shows that after we sounded a collective sigh of relief last year, we are beginning to fear the worst again, a sense of economy insecurity that can affect our work, our home lives – and the way we look at politics.
The story of the fish charts the highs and lows of first term Labor, it also offers some tantalising clues about what happens next. Why a fish? As the graph above shows, the competing stories of confidence and despondency have taken a wild journey over the past two years. With fear surging as the GFC hit, curtailing as stimulus stabilised the economy, but now rising again.
Kevin Rudd inherited a nation fearing the worst – the US sub-prime was not just a theory – big banks collapsed, homes were lost, mass lay-offs. As the word ‘contagion’ was bandied around – it emerged that many Australian local councils had unwittingly invested in the toxic loans to bad security risks. Economists warned us of our unsustainable levels of household debt. The notion of economic carnage in Australia was real.
An immediate impact was banks became tighter in the credit they offered. Businesses (especially small ones) found it harder to raise finance. Workers were laid off (especially in the mining industry where companies were happy to cut and run and wait for conditions to improve). Elsewhere in the economy casuals and contractors found it harder to book I time.
Enter Kevin Rudd with a plan that not only calmed the horses, but worked. He guaranteed our major banks (ensuring the idea of financial collapse would not infect our psyche). With Treasury support, he moved interest rates lower; he sent thousands of dollars to households to keep spending strong. And he unveiled major job-creation programs, that also met key policy objectives in school building and insulation (more of these later).
These measures had two impacts. First it made Kevin Rudd very popular – after all keeping interest rates low and sending people cheques was the template for the Howard ascendancy.
More significantly, the measures worked – unemployment was stemmed, there was sufficient spending to keep many businesses afloat. As the measures kicked in, confidence began to return to the people. And as economists will tell you, economics is a confidence games, good vibes beget success, things looked rosier.
Over the past few months things have begun to change – confidence is down, people are again fearing they will lose their job. So what has happened of late to turn things around again?
The first and obvious answer is the financial crisis affecting Europe – the images of fatal riots on the streets of Greece – and the foreboding in the other ‘PIIGS’ nations – where Portugal, Ireland, Greece and Spain are bracing for further pain, were dramatic. These were not Third World dictatorships, but established members of the European Community.
But I don’t think grabs from the business pages and SBS news headlines are solely responsible for the shift in attitude. I do think these feelings also represent a loss of confidence in the Rudd Government as people witnessed the failings in home insulation and the schools program. If the solution has been mismanaged, then is it really a solution? Are we actually out of the woods?
These falling levels of confidence has been reflected in shifts in Labor’s rating as an economic manager. For most of the government first three years, Rudd defied the trend and led a government being regarded as a better economic manager than the Tories. This number shifts, for the first time, just a few weeks before Rudd was deposed.
One of the big challenges for Julia Gillard will be to wrest this indicator back for the government. Her number one pitch for this election will need to be her competence – her ability to manage issues and rebuild confidence in Labor in a less secure economic environment. It is a tough ask, but first steps have been positive.
The worsening economic mood should be manna from heaven for a conservative Opposition but there are dangers here for Tony Abbott too. The first relates to his personal style, where many regard him as a loose cannon, the sort of person who is less than a steady hand on the till.
Secondly, is his actual policies – it has barely been mentioned, but this election is pitting a Labor Government looking to cut company tax, with a Coalition looking to increase it to fund an expansive maternity leave policy. In an economic beauty contest, this is the sort of thing that can turn eyes.
And finally there is WorkChoices – a seed of doubt in the Australian public about the Liberal brand that is fertilised by economic insecurity. In happy economic times people were prepared to believe a Coalition government would reintroduce labour market deregulation. In tougher times, the prospect becomes plain scary.
A lot like the fish that is lurking around the edges, as our leaders prepare to engage for battle.
Read Essential's ongoing research on the public response to Covid-19.
In this week's report:
- Performance of Scott Morrison
- Performance of Anthony Albanese
- Preferred Prime Minister
- Views towards re-electing the federal Coalition government
- Party trust to handle issues
- Importance of Australia’s international reputation
- Scott Morrison’s impact on Australia’s international reputation
- Views towards Australia’s international reputation