An election is a time for national and economic reflection, with questions about what we can do differently to create a better tomorrow.
Federal election past and future
We embark on this election with a markedly different tone than three years ago. Back then, parties drew battle lines around the topics of future investments and taxation.
This round will assess our navigation of the pandemic and its lasting impacts on society and the economy based on decisions made.
History informs us that the market takes a practical view of elections. While these times raise uncertainties, investors can look beyond the campaign slogans. A view indicated by the 1.8% rise in the market in the 2019 election, despite the opinion polls pointing to a Labor victory on its agenda of tax equalisation and investment reform.
The All Ordinaries perform well in the lead-up to and after an election. For example, in the 14 elections since 1983, the average return of the market during the five-week campaign to election day is 1.74%.
After the results are compiled, the average returns of the All Ordinaries is 4.41% for the three months post-election day as the after-effects of a regenerated government filled with stimulatory promises raise the spirits of both businesses and consumers.
Effects of party leadership changes
When focusing on the numbers, some interesting patterns are apparent. First, there have only been eight out of the 28 periods where returns were negative. The most recent was two elections ago when the market fell 2.6% throughout the five weeks leading up to polling.
A negative period occurred following an election in 2013 when the Coalition took control of the ALP. Following the Hawke/Keating victory in 1983, each of the three changes in party leadership was followed by a negative interval for the market over the short term (Howard/Costello 1996, Rudd/Swan 2007, Abbott/Hockey 2013).
There have only been two intervals where markets were negative, both in the lead-up to and following an election. The 1990 election was won back on the anticipation of a large surplus fuelled by rife asset value growth, which quickly deteriorated into the “recession we had to have”
In 2007, the election was held 24 days after the market’s all-time peak in November, subsequently seeing the GFC’s onset in 2008.
The most outstanding post-election returns of 1983 and 1987 occurred throughout periods of significant economic reform where productivity-enhancing policies radically changed the trajectory of the outlook for Australia.
Making moves to guide the market
Setting the Wages Accord, floating the Australian dollar, tariff removals and financial system deregulation were all designed to make our economy more competitive globally.
Further, the floating of the government-run Commonwealth Serum Laboratories (CSL), Commonwealth Bank, and Qantas buoyed sentiment as investors grasped at the opportunity to acquire Australian iconic brand names.
Those hoping for comparible productivity reforms from either party will be left disappointed for the moment.
Both campaigns are focused on spending rather than solving the constrictions in a time when supply issues, productivity, inflation and labour force problems could impede our development long after polling day.
However, in the short term, these structural issues will likely be washed over by promises of cash support, which should appease businesses and consumers alike.
One day, this issue will need to be confronted head-on. But unfortunately, at this early stage, neither party is focused on that.
Election and property
Since the election was called on April 10, speculation has been rife around how such a politically charged election could impact the property market.
Since COVID-19, we have seen dramatic shifts in property prices and the general migration trends across Australia. With record enrolment numbers announced by the Australian Electoral Commission, it is apparent that people are ready to make their vote count. A topic that many have been passionate about and has garnered significant media attention is the issue of the Australian property market. How does the outcome impact the property market with the election campaign well underway?
Counting down to the election
People will often feel hesitant to list their homes for sale or rent before a federal election. The time between the election to the day of voting will be a limbo period for many. However, this reluctance could play out very differently from the previous elections. This will not be the same election period we experienced in 2016 and 2019. As a nation, we have lived through a long period of uncertainty, but we now appear to have greater assurance as we emerge from COVID-19. Experts predict this will translate to the property market, with confidence remaining steady for buyers and sellers.
The Great Australian Dream
Prime Minister Scott Morrison made headlines in March after commenting that the best way the government can support renters is to help them buy a home. A stance that the Liberals have taken on their plan for housing and homeownership, which they have dubbed “the great Australian dream”. The Coalition Government have taken the approach to implementing policies that support first home buyers, infrastructure, and development. Their re-election promise is to:
- Help more first home buyers solve the deposit issue by raising the number of low deposit guarantees for first home buyers to 35,000 every financial year.
- Deliver high property price caps for the Home Guarantee Scheme to ensure Australians can continue to have a choice when buying their home.
- Escalate the supply of new homes in regional areas by incentivising the purchase of new-build homes. Thus, providing 10,000 low deposit guarantees every financial year for those moving to regional areas, including non-first home buyers and permanent residents.
- Expand homeownership opportunities for single-parent families by increasing the number of low deposit guarantees for single-parent families to buy a home, with a deposit of as little as 2%, to 5,000 each financial year.
- Support more significant investment into affordable housing with an additional $2 billion in low-cost financing for affordable and social, dwellings. Which brings total low-cost financing to $5.5 billion, supporting around 27,500 dwellings.
Safer and More Affordable Housing
Labour has found their election promises to build more social housing, upgrade existing housing, and make homeownership possible for all Australians. Their campaign promises focus on:
- The First Home Buyers support scheme will help 10,000 first home buyers in regional Australia to buy a home a year.
- Creating the $10 billion Housing Australia Future Fund will build 30,000 new social and affordable housing properties in its first five years.
- Each year investment returns from the Housing Australia Future Fund will be transferred to the National Housing Finance and Investment Corporation (NHFIC) to pay for social and affordable housing projects.
- In addition to the above, a portion of the investment returns will be available to fund acute housing needs on an ongoing basis.
Where to from here?
Both major parties have taken a position to ensure that more renters can consider buying their own homes and benefit from the security of homeownership. However, where the Liberals are squarely focused on maintaining this schedule, Labour positions themselves as the social and affordable housing champions. Despite the policies of both major parties, one thing is undeniable – the cost of living is steadily on the rise in Australia and worldwide. Disruptors occurring in the broader world and natural disasters closer to home have played into this increase, with economists predicting expenses continue to rise. In addition, the latest February data released from the Australian Bureau of Statistics shows that monthly household spending has increased by 7.7% compared to last year. This means that the hunger to invest in property for consumers might be there. Still, it might simply come down to housing affordability and access to financial support- both of which are on offer from the major parties. From May 21, we will see where the election results will lead.
Vogue Advisory Group – helping you understand potential impacts on the market
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