Economic direction set to be altered after polls

AUSTRALIA - The Sept 7 election is set to alter Australia's economic direction, with its two candidates presenting very different views about the path to future growth.

But this is unlikely to matter as much - at least not in the short term - as the fact that Australia will again have a leader with a clear majority.

To be sure, Prime Minister Kevin Rudd and opposition leader Tony Abbott have clashed fiercely on the economy, with Mr Abbott's conservative coalition pledging to repeal taxes and cut spending.

But many analysts believe that no matter who wins, the immediate impact of the election on Australia's currency and growth is likely to be positive because it will finally end a period of political instability in Canberra.

For the past three years, a Labor- led coalition has ruled with a razor-thin majority after the 2010 election produced no clear winner for the first time in more than 70 years.

"After this election, businesses and consumers will know where they stand," chief economist at the Australia and New Zealand Banking Group, Mr Warren Hogan, told The Straits Times.

"There will be more political clarity and not as much manoeuvring with minor parties. That will give a boost to confidence."

Australia has been labelled the strongest economy in the developed world by the International Monetary Fund and unemployment is relatively low at 5.7 per cent. But the Australian dollar and interest rates have plummeted in the past year amid concerns about the impact of China's slowdown and a slowing of Australia's decade-long resources boom.

The contest between Mr Rudd and Mr Abbott over the economy and jobs growth has dominated the election campaign and highlighted stark differences between the two men.

Mr Rudd, whose Labor Party receives strong backing from the unions, has expressed deep concerns about the boom's end and wants to focus on non-resources sectors such as manufacturing, education services and tourism.

He is promising to prop up the car industry and has offered to cut tax rates for firms in northern Australia from the national rate of 30 per cent to 20 per cent.

"As the pattern of China's economic growth changes, so too must Australia's own growth strategy for the future," he said on Tuesday. "It means we cannot afford to have all our eggs in one basket."

In contrast, Mr Abbott believes Australia could revive its mining boom and that Labor's new taxes have hampered growth. He wants to abolish the mining and carbon taxes as well as cut company tax rates and reduce the public service by at least 12,000 jobs.

"If our vision is realised, within 10 years Australia will have lower, simpler, fairer taxes," he said on Sunday.

In a positive sign for the opposition leader, polls show voters believe his conservative Liberal- National coalition is better placed to manage the economy. A Nielsen poll published on Aug 10 found his coalition leading on economic management by 56 per cent to Labor's 38 per cent.

Professor Peter Gahan, an expert on Australia's economy from the University of Melbourne, said he believes Mr Abbott - who is projected to win by polls - may want to pursue a more dramatic economic agenda than he has actually proposed.

However, any big changes, particularly in the area of industrial relations and limiting union power, would probably not be introduced until Mr Abbott had proven himself in the first term.

"Part of the coalition's campaign is about not scaring the horses," he told The Straits Times. "We will see a series of inquiries into taxation and competition…. But they have signalled a much more ambitious secondterm agenda."

Get a copy of The Straits Times or go to straitstimes.com for more stories.