Economy still the deciding factor
By CNN's Geoff Hiscock in Sydney
 |  Australia's central bank left interest rates on hold this week. |
| |
|  VIDEO |
 CNN's Mike Chinoy looks at the two candidates running for Australian Prime Minister
|
|
SYDNEY, Australia (CNN) -- Like almost every previous Australian poll, Saturday's national election was decided on voter perceptions of economic management.
For the 13 million voters, the Australian economic landscape is one of record share prices, strong jobs growth, low interest rates, high domestic consumer confidence and surging global demand for Australian commodities.
Together, they add up to an economy that is growing at about 3.5 to 4 percent a year.
Commentators agree that despite concerns about national security, it is still the economy and its impact on health, education and welfare spending that drives Australian voter decisions.
That gave incumbent Prime Minister John Howard a powerful advantage in his bid for a fourth straight term as leader of the Liberal-National coalition government.
"Economic security has dominated this election campaign," John Warhurst, professor of political science at the Australian National University, told CNN Friday.
Since taking office in March 1996, Howard and his Treasurer Peter Costello have enjoyed a good run overseeing the Australian economy.
Despite the Asian financial crisis of 1997-98 and a debilitating drought in 2001-2003, Australians have seen a decade of general prosperity, fuelled in part by a property boom that has lifted family wealth.
Over the past six weeks of the election campaign, Howard stressed his economic management credentials and harked back to the high interest rates of the 1980s and early 1990s, when Labor was last in power.
His pitch was that "people are never bored with prosperity".
In response, Latham promised to "ease the squeeze" on middle income families, to spend more on education, hospitals and the medical system, and to give free health care to people over 75.
At the same time, Latham said Labor would generate surpluses and be economically responsible by making greater savings through public sector efficiency.
But Australia's rosy economic environment of 2004 is likely to come under pressure in the months ahead from global factors such as rising oil prices, a cooling of the Chinese demand for raw materials, and slower growth in the United States.
Australia's central bank has kept interest rates on hold at 5.25 percent for the past 10 months, but a rise could come as soon as December, in the view of HSBC Australia chief economist John Edwards.
Irrespective of what happens in Australia, global interest rates are expected to rise in 2005, and regional observers such as Morgan Stanley's Andy Xie believe the China property bubble that is underpinnng much of the speculative demand in that economy is about to burst.
"The monetary squeeze due to inflation in China and Fed rate hikes in the United States is unfolding. The day of reckoning is months, not years, away," he noted in a commentary this week.
China is Australia's fastest growing market, particularly for raw materials such as iron ore and coal. A cooling of demand from that quarter would flow through to the Australian share market, where big miners such as BHP Billiton and Rio Tinto have been trading at record highs.
The United States is the other key driver of world growth. Again, a slowdown there in jobs and the share market, allied with rising interest rates, will have a significant impact on Australian prosperity.
The outlook then is that the Australian economy's smooth ride may hit some bumps in 2005.
