Labor’s win is good news for the economy

The new Labor Government can now push forward with more economically responsible reforms for Australians. Stephen Koukoulas reports.

THE TUB-THUMPING ELECTION win from Labor is welcome for many reasons.

Importantly, the debate on economic policy will no longer be polluted by silly ideas of nuclear power plants, 25 cents a litre petrol excise cuts, blowing up superannuation to fund a deposit for a house and the absurdly expensive target for defence spending to hit 3% of GDP.

These ideas that were the bedrock of the Coalition’s Election promises are dead, buried and cremated.

The other reasons that trigger delight with the election result are the resumption of prudent, targeted and productivity-boosting economic policy changes.

The Albanese Government can now reinforce and further build a series of reforms that will make the Australian economy stronger, fairer and decent — not just in the next few months but for years to come.

Now let’s see how Labor transforms the nation

Labor’s winning margin virtually guarantees it two terms of significant reform, with more beyond that highly likely.

Important among those will be maintaining, perhaps fast-tracking, the take-up of renewable power, which is good for the environment and the economy. Within that strategy is a goal to roll out batteries for the household sector, a fundamental aspect of reducing demand on fossil-fuel-generated electricity.

The business sector can now get on with the job of continuing to ramp up investment in renewables, safe in the knowledge that the Government will be fully supportive and indeed, will keep the rules in place to facilitate net-zero emissions by 2050.

The re-elected Labor Government will continue to advocate for real increases in the minimum wage and other awards through the Fair Work Commission. This will continue to unwind the squeeze on household incomes and end the cost-of-living problems that dogged most working Australians when inflation was high and wage growth was low.

This material improvement in household finances will be enhanced by the income tax cuts, already legislated for 1 July 2026 and 1 July 2027.

While outside the direct influence of the Government, the Reserve Bank of Australia (RBA) is poised to deliver a series of interest rate cuts. As these interest rate cuts are delivered over the course of the next 12 to 18 months, household disposable income will be boosted.

There is a range of other economic strategies that the Labor Government will continue to roll out. Education, skills and training are the bedrock of productivity gains. Investment in so-called "human capital" is central to this.

Housing is another area where the dual objective is to add to the supply of dwellings and make it easier for first home buyers to enter the market. Labor’s plan to build more social housing is fundamental to the task of adding to dwelling supply. This will include having financial incentives for local and state government authorities to fast-track land rezoning to allow more dwelling construction.

Amid these and other policy rollouts, the Federal Government will be keeping an eagle eye on the budget position. While there is no pressing need to reign in the budget deficit, which is a puny 1% to 1.5% of GDP over the next four years, Treasurer Jim Chalmers and Finance Minister Katy Gallagher are likely to use any windfall gains in revenue to reduce the deficit and scale back the rise in debt rather than to boost spending.

If, as is likely, the economy returns to stronger growth in late 2025 and into 2026, the Albanese Government can move its budget to a slightly restrictive stance in an effort to trim the budget deficit and silence the "budget deficit chicken littles" who are obsessed with budget surpluses regardless of the state of the economy.

AUSVOTES ECONOMIC FACTS #16: Vote Labor for sound economic policy

The economy is a dominant issue in the Election. From now until polling day, Independent Australia will outline some key facts on the economy that put the kybosh on many of the myths, lies and distortions being peddled in this Election campaign.

Of course, the best-laid plans can and often are blown off course by unforeseeable and unavoidable issues. Witness the 2007-2010 global financial crisis and the 2020 COVID pandemic — two huge factors that upset the Australian economy and government policy.

Fast forward to today, and there is no doubt the Government will be alert to these risks. Potential economic shocks from erratic and misguided U.S. economic policy, geopolitical conflicts and issues that are not able to be forecast are being modelled by Treasury and the RBA, and are in the proverbial top drawer of the Treasurer’s filing cabinet.

But rather than obsessing about those risks, the Government is getting down to the task of reinforcing its agenda from its first three years in office, as well as implementing its array of promises made during the election campaign.

Measuring success

When the next election rolls around, presumably in the first half of 2028, what are some benchmarks to judge the economic policy success of the Labor Government?

In macroeconomic terms, here is a checklist:

GDP growth that has averaged 2.5 to 3% per annum;
an unemployment rate holding between 3.75 and 4.25%;
wages growth averaging 3.25 to 3.75% per annum; and
inflation, which of course is the aim of the RBA, averaging 2.5%.

If during the 2028 Election the macroeconomic scorecard has these outcomes, the Labor Government will have done a great job.

Stephen Koukoulas is one of Australia’s most respected economists, a past chief economist of Citibank and senior economic advisor to an Australian Prime Minister. You can follow Stephen on Twitter/X @TheKouk.