Will a Majority Government Deliver Gains for the Property Market?

Will a Majority Government Deliver Gains for the Property Market?


Matthew_RoyalBy Development Finance Partners / Matthew Royal

Australia today bears some striking similarities to the post-war Golden Era presided over by Prime Minister Robert Menzies, an era of prosperity with low interest rates, high levels of home ownership, and low unemployment.

If history is anything to go by, a majority government is more likely to provide greater political and economic stability, and improved investor confidence, than a hung parliament with control in the hands of independents. With the election coming up later this year, now might be a good time to consider the effect on the property market if a majority government, that delivers political stability, is elected.

A look back at the Menzies era

The 1949-1966 period was a time of high investment, high levels of home ownership and living standards, low interest rates, low unemployment, growth in manufacturing, and the attraction of investment capital from overseas. Banking reform was also part of the policy mix – leading to the establishment of the RBA in 1959 when it was recognised that an independent central bank was required.
Menzies believed very firmly in free enterprise, individual effort and reward, low taxes, and in the value of education as a means of empowerment to succeed. His time in office was marked by strong investment in education, transport and industry, health reform, high immigration, and mineral exports – actions directed at stimulating the economy, and providing prosperity and employment for all. This era has sometimes been referred to as the time during which Australia ‘grew up’ into adulthood.


Current events and trends

To draw some parallels with the Menzies era, unemployment is still relatively low at 5.5%, home ownership levels are still high, around the 70% mark according to the ABS, and the RBA has recently reduced the cash rate to 2.75% – its lowest rate since 1960 – in an attempt to boost investor and consumer confidence.
Already a positive effect is being felt with signs that a property recovery is on the way, especially in Sydney, where prices are on a slow rise. BIS Shrapnel is predicting a growth of 19% in the Sydney area over the next three years to 2016. In addition, the current volatility of global equity markets may also serve to make local property a more attractive prospect for investment. The fact that the property market is showing signs of recovery, even in the current uncertain political climate, is very good news.
Other things haven’t changed either. During the Golden Era, Japan became one of our main markets for natural resources, and today it still remains one of Australia’s major export markets and sources of foreign investment. Current global demand for commodities – most notably from Asia – is providing benefits for Australia’s economy. In recent times, the Australian government has also taken steps to stimulate the economy post-GFC, reform and invest in the education system, reduce unemployment, and to boost international trade.
There is no way of accurately predicting the outcome of the election, or its precise effect on the property market. However, it seems only natural that a stable majority government that delivers increased investor confidence, combined with low interest rates and volatility in global equity markets, would create the perfect conditions for another Golden Era in Australia.


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