Albo vs Scomo: the real world impacts of pulling a political rabbit out of a hat

You now have just a few days to vote, and as expected both major parties have pulled a few rabbits out of their hats. But it’s quite staggering that even after all the restrictions and lockdowns, the pollies still haven’t worked out that we don’t like being told what to do.
In the COVID scenario, the iron fist was justified to a point in the interests of health and safety. But even with all the financial stimulus provided as compensation, many businesses went to the wall and others continue to do so.
Which is why this week has been a frustrating one for business owners, with Labor Leader Anthony Albanese publicly supporting a wage increase to match inflation. While Albo might be the hot favourite to win the election, telling a small business owner that their staff are all entitled to a 5.1% pay rise does not sit well with me, especially in the context of reduced hours and labour shortages in many industries.

Of course, most business owners want to do the right thing by their employees. Yes, inflation is at 5%, and yes, many of us have not seen a pay rise in years, but if you want the economy to grow rather than recede, then enforcing a pay rise on small business owners already under pressure is not the answer.
But equally inappropriate is using superannuation as a political pawn to enable young people to buy a house. And that’s exactly what PM Scomo has thrown around this week.
While it might seem appealing on the surface, in the long term it will put more pressure on the age pension and make it harder to get. But those interested in short term wins don’t tend to care too much about the long term.

In other news, as we gear up for this Saturday’s election, our share market is absorbing a number of headwinds, including volatile offshore market moves, Covid on the rise in China, escalating bond yields here and offshore, and the prospect of imminently higher local cash rates. It fell a little less than 1% for the month of April, placing Australia quite well in the array of global market returns in $AUD terms, well ahead of the US and most of Europe. The broader US S&P 500 index fell 8.8% in $USD terms, with the tech-heavy Nasdaq slumping 13.2% for its worst year-to-date performance on record. A 4.7% gain the $USD softened the blow when translating these returns into $AUD.
And being two weeks after the RBA last met, the minutes of the meeting have been released, confirming that it considering a sharper 40-point rise in interest rates this month but settled on a “normal” 25 basis point rise (0.25 percentage points) because it would meet again in a month, a strong hint it will hike rates again in June. The market took that as a clear sign it would hike again at its June 7 meeting, and probably by 25 basis points.