Labor or Liberal? The party that manages our economy best may surprise you
Which of our two major political parties really manages the economy best?
Migration is never an easy undertaking. Aside from a lot of cost and paperwork, it requires quickly developing an understanding of the culture of your destination country.
When I moved from Ireland to Australia in 2010, I grappled with the nuances of three distinctly un-Irish aspects of life Down Under: cricket, Vegemite, and Australian politics. I learned to love the first two, but the third took a little while longer to get my head around.
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Two political peculiarities that initially stood out were the Australian Labor Party's inexplicable adoption of the American spelling and that the Liberal Party were actually conservative. Throughout that period, there was also one thing that almost all the people I spoke to agreed on: that the Liberals had a better track record than Labor of managing the economy.
However, with the 2023 federal budget projecting a surplus for the first time in many years under Labor governance, it might be time to reassess this long-held belief and ask, which of the two major parties has actually been better at growing the economy?
The economic management of a nation is undeniably complex. However, for the purpose of this article, we will simplify the analysis by focusing solely on the change in one economic measure over the past 50 years. The seasonally adjusted gross domestic product (GDP), which represents the market value of all goods and services produced annually, serves as our benchmark.
The table below lists all the Australian prime ministers over the past 50 years, the number of quarters each prime minister predominantly presided over, and the average quarterly change in GDP over that period.
Paul Keating leads the pack with an impressive average of 0.99 per cent GDP growth over his 17 quarters of economic stewardship, followed by John Howard at 0.90 per cent over a much longer period of 47 quarters. Gough Whitlam had a couple of quarters of negative growth in the second half of 1975, resulting in his wooden-spoon average of 0.55 per cent. Anthony Albanese, who took office in May 2022, appears as an also-ran at 0.60 per cent but has a few quarters in hand and plenty of time to catch up.
Examining the entire 50-year span, we find that the Liberals have been in power for 111 quarters, with Labor in office for 89. Averaging the quarterly GDP growth over each party’s periods of power yields an interesting result.
Labor, it turns out, has produced a slightly larger GDP gain on average over the past 50 years when compared to the Liberals. These numbers are far from fully reflective of each leader’s influence. However, what we can say from these figures is that it looks like Labor has done an equal or slightly better job of growing the Australian economy compared to the Liberals.
Economists participating in Finder’s RBA cash rate survey were split over the Australian economy's medium-term prospects. Nonetheless, Labor secured predominantly favourable press coverage and a generally positive response to its 2023 budget.
While the economic trajectory over the next few years remains uncertain, these figures show that it might finally be time to put to bed the myth of a large disparity between the economic-management record of the two parties.
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