Which political party is best for business investment?

Private sector business investment is one of the hardest economic indicators to fake. Surveys can tell us how businesses say they feel, but investment tells us what firms actually do with their money. When businesses spend on machinery, buildings, engineering work and intellectual property, they are making a concrete judgement that future demand will justify more capacity. For that reason, real private business investment is one of the best revealed measures of business confidence, even though it is also influenced by interest rates, commodity cycles and tax settings.

This analysis uses the Australian Bureau of Statistics seasonally adjusted chain volume measure of total private business investment from the national accounts. Quarterly growth is calculated as the quarter-on-quarter percentage change in the level series. For each Prime Minister, Treasurer, decade and party grouping, the arithmetic average of those quarterly growth rates is then multiplied by four to express the result as an annualised pace. Quarters are attributed to the office-holder or government in place at quarter-end.

The results are striking. On the Prime Minister comparison, Julia Gillard ranks first, with private business investment growing at an annualised average pace of 12.3 per cent, followed by Paul Keating at 9.5 per cent and John Howard at 9.2 per cent. At the other end, Tony Abbott records the weakest result at -9.4 per cent, while Malcolm Turnbull is also negative at -1.9 per cent. Anthony Albanese currently sits at 4.8 per cent annualised: clearly positive, but below the strongest periods in the sample.

The Treasurer chart is more volatile and must be interpreted carefully because some tenures are short. Chris Bowen tops the raw ranking, but that result is based on just one quarter. Among more substantial tenures, the strongest outcomes are Ralph Willis at 13.6 per cent, Peter Costello at 9.2 per cent, and Wayne Swan at 6.7 per cent. At the weak end, Joe Hockey and John Kerin are clearly negative.

By decade, the 1980s and 2000s stand out as the strongest periods for business investment growth, at 7.9 per cent and 7.6 per cent annualised respectively. The 1990s are solid at 5.1 per cent, the 2020s so far are running at 4.5 per cent, and the 2010s are by far the weakest decade in the sample at just 1.3 per cent.

The party comparison is closer than many would expect. Labor-governed quarters average 5.4 per cent annualised growth, against 4.5 per cent under the Coalition. That is an edge to Labor, but not an overwhelming one, and it should not be read as a pure verdict on causation. Business investment depends not only on government policy, but also on the mining cycle, global growth, financing conditions and the broader profit outlook. Still, if the question is when Australian businesses were most willing to commit real capital to the future, these charts provide a disciplined starting point.