Australian Election Race Tightens as Labor Poll Lead Cut in Half

(Bloomberg) -- Australia’s looming election contest is tightening after the government clawed back ground in an opinion poll, suggesting last week’s budget largess resonated with a cash-strapped electorate.

The opposition Labor Party is still leading 52 percent to 48 percent, but that is just half its eight-point lead a month earlier, according to a Newspoll published in the Australian newspaper Monday. It surveyed 1,799 voters from April 4-7, and had a margin of error of plus or minus 2.3 percentage points.

Australian Election Race Tightens as Labor Poll Lead Cut in Half

Prime Minister Scott Morrison’s government on April 2 pledged sweeping tax cuts and cash handouts while forecasting Australia’s first budget surplus in over a decade as it bids for a come-from-behind victory. The Liberal-National coalition is already in minority status -- relying on independents to pass legislation -- so Morrison will actually need to win additional seats to hold onto office.

Morrison extended his lead over opposition leader Bill Shorten on who would make the better prime minister, 46 percent to 35 percent, from 43 to 36 in the prior poll conducted March 7-10.

Australian Election Race Tightens as Labor Poll Lead Cut in Half

Interviewees overwhelmingly said the budget was likely to be good for the economy and that they would personally be better off. They also said Labor probably wouldn’t have been able to deliver a better budget in the current economic conditions.

The economy is deteriorating. Australian property prices are tumbling and households are responding by reining in consumption, which accounts for almost 60 percent of gross domestic product. The government’s tax cuts and cash handouts are likely to be important in helping prop up consumer spending; traders are also betting the central bank will need to cut interest rates further to provide additional support.

Australian Election Race Tightens as Labor Poll Lead Cut in Half

The government, in its budget, also announced additional infrastructure spending that should help tide over growth as residential construction winds down. On the positive side, unemployment has fallen in Australia and exports are booming; but like much of the developed world, that’s not translating into faster wage growth.

For Labor, one of its potential problems is a plan to scale back tax breaks on property investment. Economists generally consider this a worthy policy goal; however, given the current state of the housing market it could present a high risk to the electorate.

©2019 Bloomberg L.P.