Sunday, April 28, 2013

The Sawford Formula

The Sawford formula is a shorthand way of saying, "it's the economy stupid". It is a rule of thumb based on the notion that the state of the economy is a good predictor of election outcomes. According to the formula, if two or more of the inflation rate, the unemployment rate and interest rates rise over a full, three-year electoral cycle, the government will lose. So let's have a look.

On the unemployment rate, at this stage it is up (albeit only marginally) over the life of the latest electoral cycle (in dark pink on the right hand side of the chart).

 On inflation, at this stage it is down (again only marginally) over the life of the latest electoral cycle.

On interest rates, we are currently 150 basis points better off than we were at the commencement of the latest election cycle.

If the Sawford formula is to believed (and the current trends continue), we will see a return of the Labor government come September 14. While such a result is against the current wisdom of crowds; some would argue that the Sawford formula predicted the return of the Keating Government in 1993 against the wisdom of the punditry at the time.


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