In part, ANZ Research thinks this reflects a focus on only those tax cuts announced on the night, rather than taking into account the cuts announced last year and in the Mid-Year Economic and Fiscal Outlook (MYEFO) - which households have not yet received because of the delivery mechanism (i.e. a refund payable after 1 July).
“Labor’s plans diverge considerably toward higher tax and higher spending.”
Households will get a considerable cash sum in the second half of 2019 that ANZ Research sees adding around 0.8 percentage points to income. And this will happen regardless of the election outcome, with the Australian Labor party planning to add an additional $A1 billion in cuts to stage one of the Government’s plans.
Beyond that, Labor’s plans diverge considerably toward higher tax and higher spending. Economists don’t yet have the detail required to assess the plans overall.
Meanwhile, recent economic data has mostly been stronger than expected, often by a considerable margin. While some caution about the bounce is appropriate, ANZ Research thinks it indicates the economy has not weakened further in the early part of 2019.
In their view, this should see the Reserve Bank of Australia (RBA) on hold in May, which will challenge aggressive market pricing of rate cuts.
Admittedly, economists do have to get past the first quarter of the Consumer Price Index first. A material downside surprise could trigger the RBA to act on what is view as its subtle easing bias.
David Plank is Head of Australian Economics at ANZ