How the 2022 federal election could affect your finances

Category: Australia & News

Benjamin Franklin’s famous quote confirms that “in this world, nothing is certain except death and taxes.” In 2022, however, we can add a third certainty to that list – a federal election.

The three-year term won by the Liberal-National coalition in 2019 ends in May this year, so at some stage prime minister, Scott Morrison, will have to call a dissolution and we’ll be faced with the mixed delights of a federal election campaign.

Read on for some of the key issues that could well be important during the campaign, and how the result could have an impact on your personal finances.

The 2019 election result was a surprise

Most political commentators were surprised by the result of the election in 2019. The Australian Labor Party (ALP) were generally expected to win in the period leading up to the election. But, in a shock result, prime minister Scott Morrison was re-elected, and the Liberal-National Party coalition won a narrow majority.

One of the effects of that result is that, even though the ALP has been ahead in the polls for some time, no one is taking anything for granted.

The latest polls tell a mixed message

The first Roy Morgan poll after the traditional Christmas and new year moratorium gave the ALP a 12 point lead over the Liberal-National Party coalition.

Behind that headline figure, however, the polls are more mixed. Scott Morrison is consistently preferred as prime minister over ALP leader Anthony Albanese. Also, on first preference votes, other opposition parties such as the Greens and Clive Palmer’s United Australia Party are predicted to get around 20% of the vote.

Another key factor to remember is that a federal election is effectively 151 different elections – one in each constituency – rather than just one big one. States and regions have been affected by the pandemic and lockdown in different ways, so it’s difficult to transpose any national trends onto local, and more parochial events.

Also bear in mind former UK prime minister, Harold Wilson’s comment about a week being a long time in politics. With social media saturation and rolling 24-hour news, these days a couple of hours can be a long time!

Covid overshadows everything

Clearly the pandemic casts a giant shadow over the election. It’s inevitable that the poll will become something of a referendum on how the government have responded to it.

On the one hand, restrictive lockdowns and the “Fortress Australia” policy that has curtailed movement in and out of the country have proved effective in keeping the death rate remarkably low compared with other developed nations.

On the other hand, the effect on the Australian economy has been massive. The total amount of government debt is now close to $1.5 trillion. This will be a severe headache for whoever wins the election.

One piece of positive economic news is that the rate of GDP growth is bouncing back after the low of Q3 2021, so this key indictor could look very favourable for the government when the election is called.

Like most elections, this one will be all about the economy

Clearly the health of the economy affects the wealth and personal finances of everyone.

The IMF predict growth of a healthy 4.1% in 2022. This is likely to be driven by a widely expected post-pandemic boom as pent-up demand fuels growth. However, the IMF also predict growth to fall to a more anaemic 2.6% in 2023.

There is growing concern at the long-term reduction in business investment. This decline actually pre-dates the pandemic and explains government efforts to boost investment with specific measures announced in the 2021 Budget.

The inflation rate is expected to reach 2.5% in 2022. This will be the highest rate for over a decade and will clearly have a negative effect on the purchasing power of your dollars, and the real value of your super pension fund and other savings.

Higher interest rates are often seen as one measure to keep inflation low. It’s likely that the Reserve Banks of Australia (RBA) will come under more pressure to increase rates from their current historic low of just 0.1%, which will have ramifications for the cost of borrowing and will cause mortgage rates to rise.

What will the ALP do if they win?

One noteworthy aspect of the 2019 election campaign was how effectively Scott Morrison was able to portray the then ALP leader, Bill Shorten, as being an old-style tax-and-spend Labor politician.

Since then, Anthony Albanese has been careful to steer a much more careful path when it comes to outlining his economic intentions. The latest ALP policy platform talks of a “prudent fiscal monetary policy”, and Albanese has even supported some of the tax cuts announced by treasurer, John Frydenberg, in recent budgets.

Besides, government scare stories about massive increases to the national debt under the ALP may not be as resonant with voters as previously, given the current record deficit we highlighted earlier.

The 2021 Budget gave a clear idea of government priorities

Although it primarily concerned itself with measures driven by the pandemic, the May 2021 Budget statement gave a clear indication of government priorities going forward.

There was a re-commitment to the traditional Liberal ethos of lower taxation, but this was mixed with big public spending announcements and investment incentives to help drive economic growth.

Recent months have also seen the government starting to push an orthodox conservative “get out of peoples lives” message. This could have some traction, but may be seen as somewhat contradictory given how involved in your life they’ve been during the pandemic.

Get in touch

If you’re concerned about the outcome of the 2022 federal election and how it may affect your financial planning, we’ll be happy to talk through the issues with you.

Get in touch to find out how we can help.