The economy: where the parties stand

By Emma Griffiths and Lyndal Curtis

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Economic data concludes households are better off than 10 years ago

ABC News

Nothing is more central to politics than the economy, and in this election Kevin Rudd and Tony Abbott have both put it at the core of their bid to win office.

It is at the centre of the policies and promises of the parties and politicians that Australians will vote for on September 7.

Management of the economy can make or break a government, render an opposition irrelevant or give it a powerful weapon.

For voters, it determines the standard of living: jobs, housing, access to healthcare and education, infrastructure and the environment.

To use the phrase coined by one of Bill Clinton's advisers, it really is all about "the economy, stupid".

What aspects of economic policy do the parties agree on?

The ALP and the Coalition both aim for continued economic growth, job creation and low interest rates.

Both talk about the challenges the Australian economy faces with a continued high Australian dollar and the benefits for growth that come from a rising Asian middle class. However, listening to the rhetoric, the major parties agree on almost nothing.

What are the key differences between the major parties?

The key point of disagreement is the strength of the Australian economy.

The ALP points to continued growth, low inflation, low unemployment and low interest rates as well as comparisons with other OECD economies, particularly those in the US and Europe, as a sign of Australia's continued economic strength in the wake of the global financial crisis. Labor argues that its strategy of stimulating the economy during the GFC saved Australia from the worst of the crisis.

The Coalition's main line of attack on the economy is based on the mantra of "debt and deficit".

It says the rise in debt over this government's first four budgets has been bigger as a share of GDP than over any other four year period since at least 1970, when the historical records in modern budget papers began.

It believes comparisons should be made with countries in the region instead of the US and Europe.

It blames the Labor government's stimulus packages, and a continuing high spend, for pushing Australia's debt to unsustainable levels. It also contrasts Labor's repeated deficit budgets with the former Coalition government's run of surplus budgets.

What don't we know about the major parties' policies?

The Federal Budget in May outlined cuts to spending and increases in taxation the Government says are needed to fund its two major reform programs - DisabilityCare (the NDIS) and the education funding reforms (Gonski) - over ten years.

The budget cut $43 billion, including $25 billion of tax rises or tax changes, from spending over the four year budget period (2013-14 to 2016-17).

Shortly before the election campaign began, the new Treasurer Chris Bowen released a mini-budget style Economic Statement, announcing another $17.4 billion in cuts and new taxes.

The update also showed a further revenue black hole of $33.3 billion across the four years of the forward estimates.

The economic update also revealed deeper deficits and a shallower surplus in the financial year 2016-2017 ($4 billion, down from $6.6 billion at budget). The 2013-14 deficit has been pushed out to $30 billion, up $12 billion from the May budget and the 2014-15 deficit is up from $11 billion to $24 billion.

In 2015-16, May's forecast of a "balanced budget" has disappeared and in its place sits a $4.7 billion deficit.

There are likely to be policy announcements from the ALP during the election campaign. The details of those and how they will be funded are unknown.

The Federal Coalition has outlined in the Budget Reply speech some details of its policies and cuts to spending to achieve them, including reserving the right to keep or implement the Government’s $43 billion of cuts without also putting in place the Government's spending. It is also promising to scrap some Labor spending including a twice-yearly supplementary allowance to people on benefits, which was announced as part of the mining tax package.

The Coalition is pledging to make the return to surplus "paramount" but hasn't yet said if it believes that could be achieved in a first term in office.

Useful links

Budget position: historical information on budget surpluses and deficits (table 1), and net debt (table 3)

Budget & MYEFO


Interest rates

Latest domestic economic forecasts

International comparisons

Gross Debt Figure: Updated every week by the Australian Office of Financial Management. (look at Commonwealth Government Securities on Issue).

Net debt: (essentially the gross debt minus the Government’s assets) updated monthly on the Department of Finance and Deregulation website (click on the year then the latest updates)

The gross debt is the amount of Commonwealth bonds on issue. The bonds are used to fund the Budget deficit. Governments also issue bonds in order to keep the bond market liquid. The Government bonds are used for a range of reasons such as a benchmark for the corporate bonds market and used for the futures market. Read more.

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