It’s the economy, stupid!

George W Bush (Sr) had polled over 90% approval months after the Gulf war, and yet lost the election to Bill Clinton in 1992. Clinton’s campaign strategist James Carville coined the phase: “It’s the economy, stupid!” which focussed attention on the state of the economy under Bush and why the Americans would be better off with Clinton. Bush lost the elections with only one term in office, Clinton then took the White House for eight years and the rest is history.

2012 will be a year when once again, the economy will be in focus, both in the United States and Australia.

The US will have their Presidential elections later this year and Barack Obama is under increasing pressure. The Republicans are firming up with Mitt Romney as the frontrunner to challenge Obama, and at the same time, Obama is under intense pressure. When he came to power in 2008, Obama was able to galvanise the population with his vision for the future. His plan to renew America was based on fixing the economy, making healthcare affordable for all, achieving energy independence and keeping America secure. Since then, he has been bogged down with issues on all fronts with an economy fast going nowhere, his healthcare reforms being watered down and other plans moving very slowly. In October 2011, Obama’s approval rating was at all time low of 38%. A President coming into re-election has to have an

BY PAWAN LUTHRA

approval rating of at least 50%, according to Gallup polling.

However things seem to be changing and the President is gaining some traction.

This has been reflected in the Gallup polls showing the president having a 46% approval from American adults, the highest level since October, and a big runup after starting the month of December at 41%. This has been attributed to lowering of unemployment figures in the US.

The unemployment rate fell to 8.5% in December 2011, the lowest since February 2009. From 1948 until 2010 the United States’ unemployment rate averaged 5.70%. Recent figures showed an increase of 200,000 jobs in the US, to the previous month. The pundits predict that if the trend continues, Obama will retain the White House in 2012; otherwise we may well see another one-term President.

In Australia, no leader has won government if their party rating is 30%, where the Labor party mostly languished in the latter half of 2011.

In Australia, while the unemployment rate is low, there is generally a lack of confidence in the economy. The share market is down, business confidence is taking a battering, home sales - in spite of reducing interest rates - are going southwards. Add the high Australian dollar affecting the tourism industry and the strong decline in the overseas student market, the year ahead will be challenging.

Indian businesses in Australia, already under pressure with a lower student population, will need to tighten their belts as a tough year beckons.

One expects that the new play in Canberra will be the state of the economy in 2012. While the Labor party has managed the economy well, it has yet to sell its message to the community. 2012 will also be the year when carbon tax will come into play with its ‘carrot and stick’ approach.

Changes in tax rates and handouts to pensioners and lower income earners will play well to Labor’s strength, yet the danger of inflation increase due to labour shortages fuelling higher wages may well take centrestage in Canberra. Fair Work Australia will release their report on wages etc., in May, just months before the carbon tax and while the business community will be looking to Tony Abbott to champion their cause, the unions and their government powerbrokers such as Bill Shorten will be brushing off their ads on work choices (which destroyed former Prime Minister John Howard) to use against the Coalition.

It will be all about the economy in 2012, in various parts of the globe!