Australian Election 2016: The worst possible outcome for business?
While politics in Britain faces unprecedented uncertainty and change, things are only mildly better in Australia as the Liberal-National Coalition appears to have turned its previously strong lead into a hung Parliament. Chris Sheedy reports.
Votes are still being counted. The final seats are too close to call without the 1.1 million postal votes having arrived. But as it stands at the time of writing (July 4) the Coalition holds 68 seats, the ALP (Australian Labor Party) holds 67 and five seats have gone to crossbenchers. There are 10 seats left.
Without reaching the magic number of 76 seats, neither party can form a majority government.
The result is a hung Parliament in which a minority government may be formed with the support of crossbench MPs, as occurred under ex Labor leader Julia Gillard’s watch. This makes the passing of legislation more difficult as each bill must be negotiated with various independents or minor parties.
Some minority governments are able to thrive in such an environment - Gillard’s government famously passed more legislation in 700 days than Tony Abbott’s Coalition did during the same period. But it does nothing for business confidence.
The 'worst possible' outcome?
The business world is understandably becoming nervous. Political uncertainty is not good for long-term stability, and Australia has had more than its fair share of political change over the last decade.
“This election result is the worst possible outcome for Australia. We need certainty and an environment for long-term policy making,” said John Brogden, Managing Director and CEO of the Australian Institute of Company Directors.
“With the chance of another hung Parliament a real option, Malcolm Turnbull, Bill Shorten and the crossbench MPs in the House of Representatives must give a commitment they will move swiftly to form a government. Australia cannot afford weeks or months of uncertainty.”
“For the sake of our domestic economy and international reputation we need a swift outcome … We need our leaders and decision-makers to think of the country rather than their own agendas.”
The Council of Small Businesses of Australia (COSBOA) also expressed serious concern about the current status of the election, although its commentary mainly revolved around what it believes to be false arguments and misleading information peddled during the campaign.
“We are concerned that the Labor Party is embracing the needs of a few big unions and their big business partners, where most union members are to be found,” said Peter Strong, CEO of COSBOA.
Credit rating under threat?
Australia’s prized AAA credit rating, said Marie Diron from Moody's Investors Service, will only be directly under threat if the current bipartisan commitment to reducing the budget deficit is jettisoned by the new government.
Mervyn Tang from Fitch Ratings said the AAA rating may be in danger if a stable government is not formed.
“Political gridlock that leads to a sustained widening of the deficit would put downward pressure on the rating, particularly if the economic environment deteriorates,” he said.
Warwick McKibbin, former Reserve Bank of Australia board member, didn’t mince words. “Our credit rating must be hanging by a thread,” he said.
“The election outcome is clearly the worst possible outcome for the Australian economy. What distressed me was that so many politicians were very happy with the outcome. It is clear that self-interest rather than national interest now dominates politics and this bodes badly for the future of Australia.”
The impact on tax
The business tax cuts proposed by Malcolm Turnbull in the months leading up to the election are themselves now compromised.
“Uncertainty is the word of the day,” Innes Willox, chief executive of Australian Industry Group, said to the ABC.
“Business craves certainty and stability and what this election has so far given is uncertainty, not just for the week ahead or a month ahead but for a long time ahead.”
“What's the tax regime that they're going to have to deal with? What incentives are there around investment? What are the issues around hiring a new apprentice or a new trainee or hiring new staff?
"We may go into a period of some weeks of those sort of decisions being deferred or delayed, unfortunately.”
The Australian Chamber of Commerce, in the meantime, is pushing for goodwill on all sides of Parliament, for the sake of the nation.
“Whichever major party forms government, they will need to build a constructive relationship with the crossbench to get things done,” said CEO James Pearson. “The business community is ready to play its part in contributing to the development of sound policies. We cannot afford three more years of policy gridlock.”
“The minor party MPs and Senators wake up today with great responsibility on their shoulders. We call on crossbenchers in both the House of Representatives and the Senate to move beyond the narrow agendas on which they campaigned, to make decisions in the national interest.”