Victoria votes: The economic backdrop

Ahead of the Victoria state election, Bank of Melbourne economist Janu Chan spoke with Westpac Wire about the major issues dominating voters’ minds and facing the economy.  

“Infrastructure is always popular. It boosts economic growth, it supports productivity (and) both parties have got some quite ambitious infrastructure spending plans,” she said.

Four years since winning government from the Liberal Party, Premier Daniel Andrews is seeking a second term when voters head to the polls on November 24. The election is tipped to be closely watched ahead of the New South Wales and Federal elections next year.

Ms Chan said the incumbent Labor government is entering the election with the economy performing well, highlighted last week by official data showing the unemployment rate last month fell to 4.5 per cent and private sector wages were starting to lift, up 2.4 per cent in the past year.

Also, the latest quarterly data showed Victoria’s “gross state demand” running at 5.2 per cent in the year to June – well ahead of national domestic demand growth of 3.4 per cent – spurred by strong population growth and infrastructure work. According to Westpac data, Victoria’s GSP growth outstripped national growth by 0.7 percentage points over the four years to 2016-17.

But like in NSW, Ms Chan said a headwind going forward would be the softer housing market, impacting stamp duty revenues. Consumers were also feeling cost of living pressures.

Melbourne property prices, which rose more than 50 per cent from 2012 to 2017, have declined 4.7 per cent in the past year, according to researcher CoreLogic. Regional Victoria has fared better, showing “strong growth conditions as demand continues to ripple outwards from Melbourne”, CoreLogic said this month.