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Labor victory would hit economic growth, expert says

Economists say the Reserve Bank may be forced to cut interest rates if Labor comes to power because its policies could curb economic growth.

A report, written by Capital Economics, outlines the potential impact a Labor victory could have on the economy.

Capital’s senior Australia and New Zealand economist Marcel Thieliant joins Ross Greenwood to explain the findings.

Mr Thieliant says Labor’s approach to last financial year’s budget deficit would have a “clear near-term hit” to the economy.

“The Labor Party has said they’ll save the savings from the much smaller budget deficit.

“Whereas the Coalition has said that the much smaller deficit will not affect the future trajectory of the Budget, which suggests they will spend those savings.”

He says Labor’s negative gearing and capital gains tax policies could also have a major impact.

“Those changes would depend on how fast they’re legislated and whether they pass through the Senate.

“But if they are legislated it would be another drag on consumer spending.”

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