Infighting in Australia’s ruling Labor Party has opened the door for Tony Abbott’s Liberal-National Coalition to seize the reins of government in September’s elections.
After nearly six years of Labor rule, what changes might be in store for the world’s 12th largest economy?
The likelihood of a return to power by the center-right Liberal-National Coalition increased substantially on March 21st, when current PM Julia Gillard’s predecessor Kevin Rudd decided against challenging the current PM for party leadership, resulting in Gillard running unopposed and a number of Rudd supporters quitting the ministry.
The public’s disdain for disunity was on display in the latest Newspoll published Tuesday, which predicted up to 30 Labor lawmakers could lose their seats in September, including Treasurer Wayne Swan. Gillard’s personal standing crashed to a 19-month low, with the government’s support eight percentage points below the levels it was at going into the last election in 2010.
Barring a return to the leadership for Rudd, who polls suggest could potentially propel the Labor Party to victory, the Liberal-National Coalition is likely to register a landslide victory at the September 14th poll.
While Abbott has avoided getting into details on cost, his manifesto ‘A Strong Australia’ promises to “build a powerhouse economy through lower taxes, more efficient government and more productive businesses that will deliver more jobs, higher wages and better services”.
The former Howard government minister pledges to “create at least one million new jobs” within five years through economic policy changes, including eliminating the “carbon tax,” cutting government spending, reducing taxes, eliminating some business regulations, repealing the mining tax, boosting road infrastructure and launching a new “Colombo plan” involving increased exchanges with Asia, as well as more foreign language study.
No hardened Keynesian, Abbott vows to get “government spending down and productivity up so that borrowing reduces, the pressure on interest rates comes off and taxes can responsibly come down,” pointing to A$50 billion in potential savings identified at the 2010 poll.
“It would be dangerous complacency to think that economic stagnation only happens to other countries. After all, it is not so long ago that [Singapore’s] Lee Kuan Yew thought that Australians were destined to be the ‘poor white trash of Asia’,” Abbott warns.
However, Treasurer Swan slammed his Coalition rival Joe Hockey for failing to release details on the costs of his policies, and claimed there was an “A$70 billion shortfall” in the Shadow Treasurer’s policies announced in 2011 and an “A$11 billion hole” in its pledges for the last election.
In a statement following the release of the latest gross domestic product data, Swan noted that the Australian economy’s 3.1 percent annual growth rate had outstripped “every major advanced economy and the vast bulk of the developed world”.
“Not only is our economy more than 13 percent larger than when the government came to office, but unlike many other advanced economies, we have solid growth, low unemployment, contained inflation and low interest rates,” he stated.
Sector winners and losers
Despite the political rhetoric, analysts like Merrill Lynch’s Joshua Kirkwood believe there will be only a modest, short-term impact on Australia’s economic policies should the government change hands.
The healthcare sector is seen by Kirkwood as benefitting from more policy certainty, along with the possible privatization of government insurer Medibank. In the financial sector, banks could benefit from a possible deposit guarantee levy, while the superannuation industry has welcomed Abbott’s pledge not to make “adverse unexpected changes” to superannuation in his first term.
Australia’s mining industry has campaigned strongly against the government’s carbon pricing scheme and mining tax, and would likely be one of the key winners of a Liberal-National Coalition electoral victory. While there are no indications of a flow-through share scheme similar to Canada’s to boost exploration spending, miners could expect a more beneficial investment regime.
Similarly, steelmakers and energy companies could benefit from lower energy costs, although the Coalition has pledged to maintain renewable energy targets. At the same time, the renewable energy sector might incur losses resulting from the repeal of the carbon taxes, the revenue from which was invested into developing renewable sources.
Other losers from a Coalition government include education, which could miss out on A$5 billion of spending promised under Labor’s “Gonski” reforms, while the public sector could be looking at a substantial downsizing.
With Centrebet assessing Labors odds in September as one in six compared to the Coalition’s A$1.11 return per every dollar waged, business groups are already preparing for a new government from September.