ECONOMIC CHANGES DURING THE ELECTION CAMPAIGN:
* INFLATION - Cost-of-living pressures were always going to be a major part of the campaign, even more so after the latest figures showed inflation spiked to 5.1 per cent, the highest level in more than 20 years and well above expectations. The Reserve Bank of Australia expects inflation to reach 5.5 per cent by June - compared to the government's 4.25 per cent forecast - and six per cent by the end of 2022. While the March budget provided an $8.6 billion support package, which included halving fuel excise, petrol prices are on the rise again due to stubbornly high global oil prices sparked by the war in Ukraine.
* INTEREST RATES - Although it seemed unlikely the RBA would raise the cash rate for the first time in more than a decade during the campaign, the central bank could not ignore the unexpected jump in inflation. The cash rate rose to 0.35 per cent from a record low 0.1 per cent, where it had stood since November 2020 and during the depths of the pandemic. Economists expect a rapid rise in the cash rate in coming months, adding hundreds of dollars to mortgage repayments. The last time interest rates increased during a campaign, in 2007, then-Liberal prime minister John Howard lost the election.
* WAGES GROWTH - The missing link in the economy's recovery from the 2020 recession remains a notable improvement in wages growth. As of the March quarter the key wage price index was running at an annual rate of 2.4 per cent, well shy of the rate of inflation, meaning wages are going backwards. The RBA does not expect wages to outpace inflation until the end of 2023.
* CONFIDENCE - Consumer confidence has unsurprisingly been sunk in response to rising cost-of-living pressures, weak wage growth and interest rates on the increase - a bad omen for future household spending and a key component for economic growth. A modest confidence pick-up in response to the cost-of-living support in the March budget proved short lived. The weekly ANZ-Roy Morgan consumer confidence index has dropped for four weeks in a row and to its lowest level since mid-August 2020.
* LABOUR MARKET - The jobs recovery has been the stand-out feature of Australia's rebound from recession. After hitting a 22-year high of 7.4 per cent during the steep economic downturn in mid-2020, the unemployment rate has fallen to 3.9 per cent, the lowest level since 1974. The RBA expects the jobless rate to fall to 3.5 per cent by the middle of 2023. However, employment growth is slowing despite record demand for workers, with fewer people now available to fill positions, partly due to the lack of skilled migration because of closed international borders during the pandemic.
* ECONOMIC GROWTH - The Morrison government can still at this stage boast an economy that has recovered in leaps and bounds from the 2020 recession, despite turning into a high inflation and rising interest rate environment. The most recent national accounts did show the economy stands 3.4 per cent larger than prior to the COVID-19 pandemic. The IMF also upgraded its growth forecast for Australia to 4.2 per cent for 2022 from 4.1 per cent previously, while slashing its global growth prediction to 3.6 per cent from 4.4 per cent. The March quarter national accounts are not due until June 1.
Australian Associated Press
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