PETER VAN ONSELEN: Why an early election is Anthony Albanese’s least bad option

Labor must make a delicate political decision: whether to call the election before next year’s budget, set for April, or go for the full term and then go to the polls sometime in May.

Opinions are divided on what impact yesterday’s publication of year-end financial figures will have on their decision.

For his part, the Prime Minister has probably not yet made a decision. He shouts it when he thinks he can win.

Yesterday’s results spell doom for the economy. Next year’s budget will leave a deficit of around $50 billion, making it harder for Labor to buy its way out of political trouble come election time, even if it wanted to (which it does).

Promising more spending, financed by even more debt, does not do much to promote governments as sound economic managers.

But without electoral bribes, Labor could find itself in electoral trouble, suggesting it could go to the polls early, before the budget confirms Australia’s debt burden in a way that people notice. The budget update at the end of the year is not an important political moment. A budget receives much more attention and therefore stands out, especially in an election year.

In an early election, there is a risk that Labor will resemble the Thanksgiving turkey. It is currently trailing in most opinion polls and arguably needs more time to build momentum for a political recovery that could well deliver a majority government.

There are other factors that the government must take into account. With all signs suggesting that 2025 could be economically worse than 2024, the risk for Labor is that as the economy worsens, voters will lose patience with the government.

That would indicate that early elections are the least bad option for Albanians.

In this context, what happens in WA is an important consideration. Right now Labor is doing better in the West than elsewhere, partly because the WA economy is still doing well, and partly because the WA Liberal Party is a disgrace.

But the former could change quickly, especially as commodity prices continue to fall. WA’s economy is almost entirely determined by the success or failure of the mining sector. If things start to turn around in the West, a number of seats that Labor is currently counting on could suddenly be up for grabs.

Going to the polls early covers this risk.

Labor strategists will also look at the likelihood of the Reserve Bank cutting rates early in the new year. If that happens, the government will not want to stand for re-election until such good news has been announced. On the contrary, it will hope to make a leap from a rate cut to an election, arguing that this shift is proof positive of Labour’s good control of inflation.

To make that possible, the elections will probably have to be held after the April budget.

Most economists will tell you that a rate cut is not likely early next year, although the US Reserve’s decision to cut rates for the third time this year has made a rate cut here more likely.

Of course, with the political spin these days, it’s entirely possible that Treasurer Jim Chalmers thinks he can fool voters by presenting a New Year’s budget with a $50 billion deficit, but using the platform for the budget for next year. to inject his second surplus.

How is that possible, I hear you ask?

The intention is for the budgets to focus on what will happen in the coming financial year. This means that next year’s budget, which will be announced in April, should focus on the budget year starting July 1, 2025 and ending June 30, 2026.

But Chalmers and his coterie of spin doctors may think they can deliver next year’s budget, focusing almost entirely on the financial year in which the budget is delivered. That means the financial year we are in now, ending June 30, 2025.

We already know that this financial year will have a surplus, even if a surplus is being eroded almost daily by new spending initiatives announced by Labor. This surplus took into account the budget that was submitted earlier this year.

But who’s to say he won’t try that again?

If you close your eyes, you can already see it: Chalmers proudly standing up in April next year and declaring that the budget is currently in surplus, news we already knew. Announcing the updated figure at the same time as announcing it of spending commitments that will worsen the results of the next financial year, but without even mentioning future deficits.

It’s certainly a contradiction, but Labor may hope that voters will only hear these two parts of the good news separately (a surplus and new spending). And you cannot underestimate the willingness of parts of the media in thrall to Labor to report such disinformation uncritically.

Bear in mind the likelihood that if next year’s budget is in poor shape, which we know it will be, the reality will limit the Coalition’s willingness to make major spending commitments of its own. It doesn’t want to be seen as so fiscally reckless.

Labor will be able to take advantage of this by running a fear campaign that if the Liberals are elected, they will try to fix future budgets by cutting services like Medicare and the NDIS.

They already make this argument. Chalmers recently executed just that line of attack.

So where does all this leave us? Weighing the options Albo has to call the elections, the opposition believes it is more likely that he will stick to his promise to serve the full term and hand over next year’s budget as planned. By hoping to take advantage of the momentum in the budget week, a government can get the election campaign off to a good start.

I’m not so sure about that. The least of the political evils for Labor in my view is calling a snap election just after the summer holidays and trying to stay ahead of the deteriorating economic conditions expected as the year progresses. This also means getting to the polls before the WA economy potentially starts to slow down.

The opposition would use a bad budget to argue that Labor should be expelled after just one term. Reason in itself for Labor to move early to avoid such a risk.

Prime ministers always get nervous when they call early elections. When the polls are tight, they usually hope that something, somewhere, anything, can turn things around in time so they can fight back. A national security crisis, for example, or a scandal facing the opposition.

However, such wishful thinking is not a strategy for a government to determine its own destiny.

Albo’s best chance of success is to go hard and go early, and perhaps even call the election in time to get to the polls before the March 8 state election in Western Australia.