Elections and employment

The historic record shows there is often no connection between levels of unemployment and a Federal election victory. Contrary to conventional wisdom, changes in the unemployment rate in the six to twelve months before an election do not determine who wins government. Perhaps voters are a little more selfish and less altruistic than they are often believed to be. The last two changes in government – 1996 and 2007 – occurred with the unemployment rate flat or falling, which reversed the trend of 1975 and 1983 where a rising unemployment rate coincided with a change of government. There have been several occasions where a high and rising unemployment rate has not hurt the incumbent which should be of some comfort to the Rudd government in the wake of the recent labour force data which confirmed a gentle uptrend in the unemployment rate over the past year. In what are the only labour force data to be released by the Australian Bureau of Statistics during the current election campaign, the unemployment rate was confirmed at 5.7 percent in July, unchanged from June but up from levels around 5.0 percent a year ago. History shows that in November 2001, in the face of the unemployment rate rising from 6.0 percent to nearly 7.0 percent, the Howard government was comfortably returned. Conversely, the Keating government lost office in 1996 with the unemployment edging down to around 8.5 percent from just under 9.0 percent a year earlier and 11.0 percent during the early 1990s recession. It was a similar story in 2007 when voters comprehensively tossed out the Howard government, and Mr Howard in his own seat, despite the fact the unemployment rate had fallen from around 5.0 percent in 2006 to 4.3 percent when the election was called. There are a few examples where a reduction the unemployment rate coincided with the return of the incumbent. In 1984, 1998, 2004 and 2010, the incumbent was returned to office with the unemployment rate falling. There were other instances, namely in 1980, 1987 and 1990 where a broadly steady unemployment rate saw the incumbent returned. Even the level of unemployment does not help explain election results. Keating won the 1993 election with the unemployment rate near a post-Great Depression high of 11.0 percent, while Howard lost the 2007 with the unemployment rate at a three decade low, just above 4 percent. For the 2013 election campaign, there is a lot of discussion about jobs with the Opposition highlighting the Treasury forecast for the unemployment rate to peak at 6.25 percent next year. The government, on the other hand, is noting that 950,000 jobs have been created while it has been in power and noting that it protected around 200,000 jobs with its policy measures as the global banking and financial crisis loomed large in the period from 2008 to 2010. Opposition leader Tony Abbott is also campaigning on a promise to create one million jobs in the first five years of a Coalition government. This sounds grand until one realises that this would merely absorb population growth and do nothing to reduce the unemployment rate or increase workforce participation. The election history over the past four decades or so shows that the hard facts on jobs and the unemployment rate do not always sway voters. This is clearly because other issues are often at play. Asylum seekers, industrial relations, tax, schools, education and health policies can loom large and work to offset what may be occurring in the jobs market. For 2013, it seems other issues will complement if not overwhelm the news of a rising unemployment rate. Voters seem more concerned with the ephemeral issue of trust, while education, health and aged care, tax policy, interest rates and perceptions of overall economic management issues loom large. The Labor Party and Kevin Rudd will be hoping that it can repeat the performance of John Howard in 2001, when he won the election with a rising unemployment rate. At that time the Tampa asylum seeker issue, the aftermath of the terrorist attack in the US just two months before and some befuddled campaigning from Labor about its approach to the goods and services tax saw Howard record a solid victory. In 2013, Labor is aiming to overcome the issue of rising unemployment with the focus on a deeply unpopular Opposition leader, a progressive platform on education and health, an infrastructure investment agenda including the NBN, and the fact that interest rates are incredibly low. It makes for a fascinating election, as always. Stephen Koukoulas is Managing Director of Market Economics. He writes a daily column for Business Spectator. marketeconomics.com.au