The Relationship between Credit, Elections, and Party Ideology in Australia

Abstract

Economic reforms since the 1980s resulted in weaker wage growth and the retrenchment of the welfare state. Labor’s declining share of income in conjunction with consistent asset price inflation, created an environment where the electorate increased its demand for credit to which politicians, driven by opportunistic re-election motives, respond positively. The empirical findings suggest that politicians, irrespective of their ideology, introduce policies and manipulate credit growth to maximize their re-election prospects. Moreover, the results indicate that partisan politics in Australia have become less pronounced, suggesting an ideological convergence of the two major political parties with respect to credit.

Keywords:

• political business cycles
• political credit cycles
• partisan politics
• government ideology
• household debt

JEL Classification Codes:

• C22
• H30
• I30
• J38

Additional information

Notes on contributors

Bill Kolios

Bill Kolios is a PhD Candidate in the Department of Political Economy at the University of Sydney, Sydney, Australia.