
The value of shifting to four-year parliamentary terms
17.03.2025 - 04:10
This research quantifies significant benefits of extending Commonwealth House of Representatives' terms from three to four years. While Australia's states and territories have adopted four-year terms, the Commonwealth remains among only eight countries globally with three-year or shorter terms.Our analysis shows potential gains of $59-71 billion over 20 years through reducing election frequency. Benefits include $4.6 billion in avoided direct costs, $40.7 billion in enhanced business investment from reduced electoral uncertainty, and $14-26 billion through improved government policy.
It is often argued that four-year terms in Australia would deliver significant economic benefits. Currently, the Commonwealth House of Representatives operates on three-year terms, while every state and territory Lower House has already shifted to four-year terms. Globally, Australia's federal system is an outlier, with only eight of the 186 countries with active legislatures maintaining terms of three years or less.
This research note quantifies the potential benefits of shifting from a three-year to a four-year term in the Commonwealth House of Representatives, building upon the Susan McKinnon Foundation’s 2025 discussion paper. We analyse three categories of benefits; reduced direct election costs (e.g. the costs to the Australian Electoral Commission (AEC) and political parties), indirect economic benefits (e.g. delays and reductions in business investment) and policy implementation benefits (e.g. more reforms and better reforms from governments). Based on conducting five elections over 20 years instead of six, we estimate the total benefits over a 20-year period to be between $59 and $71 billion depending on the size of each of these categories.
We estimate the value of avoided direct costs to be $4.6 billion over 20 years. Avoiding these direct costs is the clearest, most tangible benefit from adopting four-year terms. Direct costs include the cost of conducting elections incurred by the Australian Electoral Commission (AEC) worth $1.6 billion, the opportunity cost of voters’ time worth $1.5 billion, and political party costs worth $1.5 billion.
We estimate the indirect economic benefits to be worth $40.7 billion over 20 years. For the purpose of this analysis, we have focused on business investment and the disruption to usual government business.
Studies show that increased uncertainty during election periods results in deferred and in some instances permanently lost business investment. We estimate that the benefit in avoiding this reduction in investment by adopting four-year terms is around $40.5 billion over 20 years.
The remaining $0.2 billion reflects disruptions to usual government business during the caretaker period - when governments operate under restricted decision-making conventions before and during elections. While this estimate relies partly on anecdotal evidence, its relatively small size (0.4% of total indirect benefits) means that it has minimal impact on our overall findings. Additional indirect costs, such as market stability effects and foreign exchange fluctuations, have been identified qualitatively in the literature but have not been quantified in this analysis.
The relationship between electoral terms and policy-making effectiveness presents the most complex analytical challenge. Supporters of four-year terms argue shorter terms promote political expediency over good governing. Drawing on research by Alesina et al., we estimate that the benefits of adopting four-year terms is between $14-26 billion over 20 years. Their cross-country analysis finds that reform implementation varies significantly with electoral timing. Market-liberalising reforms, which typically reduce regulatory restrictions, occur less frequently in election years and can negatively impact incumbent vote share unless implemented early enough for economic benefits to materialise. Conversely, regulatory tightening tends to increase during election years. The electoral success of any reform appears closely tied to economic conditions, with voters generally opposing reforms during economic contractions while sometimes supporting them during expansions.
Precise quantification of longer parliamentary terms' benefits faces significant methodological challenges. Distinguishing between correlation and causation proves particularly difficult given numerous external factors.
It is important to note that election days serve as important fundraising opportunities for local communities - from school P&C committees to charities running cake stalls, raffles and sausage sizzles. The economic activity generated through these grassroots initiatives, while modest in macroeconomic terms, provides valuable support. This research note is not trying to discount the value of a democracy sausage, both to the consumer and the vendor.
Read the full research note here.
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The value of shifting to four-year parliamentary terms
This research quantifies significant benefits of extending Commonwealth House of Representatives' terms from three to four years. While Australia's states and territories have adopted four-year terms, the Commonwealth remains among only eight countries globally with three-year or shorter terms.Our analysis shows potential gains of $59-71 billion over 20 years through reducing election frequency. Benefits include $4.6 billion in avoided direct costs, $40.7 billion in enhanced business investment from reduced electoral uncertainty, and $14-26 billion through improved government policy.
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