Interest rates and the 2004 Australian Election

Abstract

During the October 2004 Australian federal election campaign the expected or possible effect of the election outcome on interest rates was a key point of differentiation between the Australian Labor Party and the Liberal–National Party coalition. The purpose of this paper is twofold. First, we examine whether this effect was a significant factor in the election outcome, as measured by the percentage swing towards the coalition in each electorate. Second, we use standard methodology from financial economics to examine whether the election outcome had an effect on interest rates. Contrary to media coverage of the campaign, we find that the election result did have an effect on interest rates but that the possibility of interest rate changes was not a dominant factor in the election result.