• Clifford Bennett, Chief Economist at ACY


• 11.05.2022 11:15 am
#stocks , Clifford Bennett has over 36 years of market trading experience and was named the 'World's most accurate currency forecaster' by Bloomberg New York. He has advised some of the world's largest organisations, billionaire investors, and political leaders and spoken at the prestigious APEC summit on reserve currency issues. Clifford is the Chief Economist at ACY Securities.

After predicting a Scott Morrison win at the last election, my forecast for an ALP victory this time round remains on track. In fact, not only will the ALP win, but it could turn into a landslide. The Prime Minister’s personal unpopularity is growing.

We do not have Presidential elections in Australia but they have always felt that way. Australians like to think of themselves as a fair dinkum bunch, though that is waning, they still are keenly interested in the character and motivation of their Prime Ministers. They will excuse errors if they were made through good intention. Many voters feel, and we all have our individual views, that the Prime Minister thought himself to be an actual President. He certainly had huge favour in the Liberal Party after the last federal election. Which seemed to miss the point that the ALP lost the election with its extreme global warming and taxation policies. It was more a case of the ALP losing, than the Coalition winning.

The Prime Minister has carried a lot of credibility from that win that is now seen a little more like an Emperor with no clothes.

There are very important policy issues that differentiate the two parties. The latest step by the ALP suggesting the minimum wage should rise by 5.1%, the latest inflation number, will be considered by most people as a necessary action to buffer the huge impost currently being experienced by the Australian people. Due to the RBA being asleep at the wheel and too much Covid-stimulus.

While business and some market economists will see wage rises as a further inflation threat, this politically, fails to appreciate that when working families, having stretched on mortgages, are struggling already and desperate for help. It is all very well for prices to go up when a family is in a position of excess cash flow in the first place. It is entirely different when a family was already at full stretch and now extreme price hikes abound.

The inflation number is all very well, but does it capture the price of lettuce having risen 100%? Then there are petrol prices. A peak seen for the moment but still sky high. The Morrison government temporarily halved the fuel tax, but this is perhaps the most oppressive of working families tax across the whole system. It should and must be immediately taken out of our economy. There is nothing egalitarian about adding taxes to people trying to get their children to school, get to work, to be productive regardless of having a low income.

These are the issues on peoples minds heading to the polls. Combined with personal unpopularity, it makes it very difficult indeed for the government to be re-elected.

Markets are only beginning to recognise there may be some recalibration risk to the downside on the change of government that is now staring them in the face. This, on top of a global stock sell-off which is no temporary affair, is going to generate tremendous caution among investors over coming weeks.

Both the Australian equity market and the Australian dollar will remain under significant strain. My set long ago target of 65 cents for the Australian dollar this year, risk 58 cents in 2023, both remain in place. My call for a further 20% decline, minimum, for the local bourse is also clearly on track.

There are plenty of financial market tools to act accordingly to these changing circumstances.