Labor a threat to the economy? Now there’s a surprise

A Labor government is a threat to the economy? Tell us something we don?t know, Captain Obvious. Quote:

Banks, property, builders, health insurance and energy giants are all tipped to suffer under a Labor government, Macquarie analysts say.

One winner, however, would be infrastructure developers, Macquarie says in an assessment of the impact of Labor policies should Bill Shorten win next year. End of quote.

In other words, it?ll be a repeat of the same sort of socialist Ponzi schemes that Labor so disastrously oversaw the last time they had their claws on the Treasury. ?Building the education revolution? (they just love their Maoist slogans), pink batts, the National Broadband Network: the only people who got rich from Labor?s incompetence were cowboy contractors. Quote:

Macquarie analysed sectors it believed would be most impacted by Labor?s proposed policies – banks, utilities, energy, property, builders and insurance.

?With a few exceptions, the current policies are likely to be at least marginally negative to earnings per share, though many are already in base case estimates,? Macquarie?s research says.

Assessing flagged Labor reforms to negative gearing and franking credits, as well as energy policy, Macquarie analysts said the impact of a Labor government was likely to be felt by the banks as well as utility and energy companies. End of quote.

If builders think they?re going hit another taxpayer-funded jackpot, they might want to think again. Quote:

Nor would the property and building sectors be spared.

Proposed changes to negative gearing had the potential to impact the already fragile market, the analysts added, and while the effects on house prices was difficult to estimate, sentiment concerns could put further pressure on the banks.

?Fundamentally, banks are likely to experience a contraction in credit and earnings growth,? Macquarie said.

?With falling house prices, the benefit to investors from negative gearing has diminished, particularly when combined with the inability for investors to claim depreciation expenses on existing properties.

?Furthermore, if property prices were to decline while rents broadly remain unchanged, the implied benefit from negative gearing would be marginalised.?

Macquarie said the attractiveness of bank shares would be likely to diminish as a result of Labor?s proposed changes to franking credits, which could affect long-term valuations and prompt investors seeking high yields to look to infrastructure and REIT stocks, the Macquarie analysts said.

The changes, which would affect all shares held by investors in a zero or low-rate tax environment, could be more significant given retail investors? overweight position to bank shares.

Macquarie said private health insurers would be impacted by Labor?s suggested 2 per cent cap on average premium price rises.

?The potential of capped pricing creates significant margin risks for the health insurance industry,? the analysts said. End of quote.

As Thomas Sowell shows at length in his book Basic Economics, such price controls never work. In fact, their usual results are shortfalls in supply and, perversely, a rise in costs.

But then, ?basic economics? is not the sort of thing Labor politicians ever seem interested in. Quote:

One winner from a Labor victory could be infrastructure development, which features prominently in ALP policy, Macquarie said.

?With the recent election success in Victoria, as well as feedback from infrastructure planning agencies, this certainly seems to be possible,? the analysts said. End of quote.

In other words, very, very rich contracting corporations are going to get even richer building white elephants and roads to nowhere, all on the taxpayer dime.

Kiwibuild, anyone?

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