Economic and Financial Market Update: Same As It Ever Was

By BOQ Chief Economist, Peter Munckton. 

Summary:

• Domestic politics has recently grabbed financial market attention;
• The number of Australian Prime Minsters’ over recent years has been widely remarked upon;
• But political uncertainty has been a feature of other periods of Australia’s history.

Recently we found out that Australia has another Prime Minister. This is now the sixth Prime Minister since the defeat of the Howard Government in 2007 (with the distinct possibility of a seventh following the election due within the next year). The elevation of Scott Morrison led to a flurry of articles about Australia’s unstable political leadership. But is what has happened recently that unusual?

Below is a chart showing the length of service of each Australian Prime Minister since Federation. Each bar represents every period that each individual was Prime Minister and not their total service (eg, the chart includes separately the two periods served by Kevin Rudd). This means that a Prime Minister might be included in the chart more than once (Deakin and Fisher were both Prime Minister on three separate occasions!). Acting Prime Ministers’ (because the PM was overseas or on holiday) are not included.

There are a few points to note:

• The median length of service was Kevin Rudd (first period) of a bit over 2.5 years. Apart from Tony Abbott (and Kevin Rudd’s second stint), all Prime Minister’s since Malcolm Fraser (inclusive) have served longer than the median.
• Howard/Hawke/Fraser/Keating were four of the ten longest serving Prime Ministers in Australia’s history.
• Scott Morrison makes 6 Prime Ministers in the past 11 years. That compares with 5 in the 10 years between Robert Menzies second (and record-setting) term and Malcom Fraser. Australia had 20 different Prime Ministerial reigns in the 48 years from Federation until Robert Menzies second term.

The bottom line is that the recent political instability is not so unusual when looking at a longer-run context. Indeed, perhaps what was more unusual was the relative stability of PM’s between 1975-2007 (and Robert Menzies second term).

While some worry about the impact that political uncertainty may have on the economy and society, often it is changes in the economy and society that impacts politics. In our first 48 years, the Australian Prime Minister had to deal with independence from Great Britain, two world wars and the Great Depression. Between Menzies and Fraser the government of the day had to deal with the Vietnam War, the rise of inflation, and the abandonment of the Gold Standard for setting currencies. And since the end of the Howard term there has been the fallout of the GFC (including the sluggish growth of household disposable incomes) and the mining boom and bust.

We live in interesting times.