Pacific Money

Australia: Turnbull Pledges Growth as Elections Called

Recent Features

Pacific Money

Australia: Turnbull Pledges Growth as Elections Called

In the wake of the budget, the Australian PM has confirmed that Australia will go to the polls on July 2.

Australia: Turnbull Pledges Growth as Elections Called
Credit: Malcolm Turnbull via 360b /

The phony war is finally over after Australian Prime Minister Malcolm Turnbull interrupted the nation’s Mother’s Day festivities by formally declaring elections for July 2. Amid a slowing economy and narrowing opinion polls, will voters share the love by gifting Turnbull his first election win as leader?

As previously flagged by The Diplomat, Turnbull finally made his move Sunday to call a poll after Treasurer Scott Morrison had handed down his first budget earlier the same week, an economic blueprint that succeeded in not upsetting too many important opinion groups but at the cost of another projected deficit, this time amounting to A$37 billion ($27 billion).

Like his treasurer, Turnbull pledged to keep the focus on “growth and jobs” in his press conference announcing the nation’s first double dissolution election since 1987.

“At this election Australians will have a very clear choice; to keep the course, maintain the commitment to our national economic plan for growth and jobs, or go back to Labor, with its higher taxing, higher spending, debt and deficit agenda, which will stop our nation’s transition to the new economy dead in its tracks,” he said.

The leader of the center-right Liberal-National Coalition pledged to support the continued transition of the world’s 12th-largest economy to becoming the “new economy of the 21st century” through an “innovation and science agenda,” including defense industry investment such as a new agreement with Singapore, under which the city-state is expected to invest A$2.25 billion ($1.6 billion) in expanding its bases in the eastern state of Queensland.

Turnbull also pointed to Australia’s recent trade pacts with China, Japan and South Korea and the Trans-Pacific Partnership as boosting exports to Asia, while noting measures in the May 3 budget aimed at promoting small businesses, cutting corporate taxes and encouraging female employment.

The Liberal leader then attacked his main rival, Opposition Leader Bill Shorten, for his Labor Party’s proposal to increase capital gains tax on investments and reduce property tax concessions, while blasting his party’s “shocking and tragic experiment” in government on border protection that saw “50,000 unauthorized arrivals by sea and over 1,000 drowned at sea.”

Shorten responded by declaring he would fight the election on the issues of education, environment and health – areas where Labor has traditionally rated highly – along with creating a “fairer” economy.

He also criticized Turnbull for backtracking on issues such as climate change and gay marriage, which the centrist leader has sought to downplay amid opposition to change from the more conservative elements of his own Coalition.

“There’s one prediction that I can reliably make about what will happen after July 2. The Liberal Party will go to war with itself again. They view this election as a skirmish before they can settle scores with each other. Mr Turnbull’s problem is that I think that eight months ago, many people hoped that he could change the Liberal Party, [but] the Liberal Party has changed him,” Shorten said.

Debutant Leaders

Just how much change at the top Australian voters can accept will be shown in the upcoming poll, which follows a tumultuous period in Australian politics with four different leaders in barely five years. Both Turnbull and Shorten will lead their respective parties for the first time into a marathon 55-day campaign, the second longest in Australian history.

According to recent opinion polls, the Coalition and Labor are virtually tied 50-50 in the two-party preferred vote, but Turnbull has maintained a comfortable lead in his own approval rating over his main rival.

Should Labor win, it would become the first opposition party in 85 years to regain government after just one term out of office. But the Coalition’s 90 to 55 seat majority in the lower house puts it in the box seat to retain government, despite a decline in support for Turnbull following the ending of his political honeymoon.

In foreign policy, the major parties’ bipartisan approach was seen recently when Labor defense spokesman Stephen Conroy described the decision to hand France a A$50 billion submarine contract a “real victory for the people of Adelaide.” The two major parties are unlikely to stray too far from domestic matters during the election campaign, apart from the issue of “border protection” and asylum seekers, where the Coalition has long maintained higher voter approval ratings.

Turnbull can point to the Coalition’s success in securing trade pacts with the nation’s major Asian trading partners as indicative of the government’s businesslike focus on diplomacy. However, critics have rapped the government for further trimming its foreign aid spending in the latest budget to just 0.23 percent of national income – well below the U.N. target of 0.7 percent.

But with the submarines acquisition and new base deal with Singapore, Turnbull will have plenty of opportunities to maximize his Coalition’s perceived advantages in defense matters.

Yet should the millionaire former internet entrepreneur, lawyer and investment banker retain office, he will face tougher scrutiny from critics over economic reform.

Ratings agency Moody’s has warned that the treasurer’s pledge to restore the budget to surplus by 2021 would prove “challenging” due to moderate nominal gross domestic product (GDP) growth. Total government debt has risen rapidly since 2009 and stood at 36 percent of GDP in 2015 compared to around 10 percent a decade earlier.

Meanwhile, lower wages and inflation along with weaker export prices have seen the government’s GDP growth targets reduced to 2.5 percent in fiscal 2016 and 2017, compared to previous forecasts above 3 percent, while the outlook remains subject to the risk of the “low inflation, low wage growth and low productivity growth being experienced in many advanced economies could become embedded in lower potential growth over time.”

“For Turnbull and the Coalition there is a dangerous gap between the reforms needed to create the Australia that Turnbull promises to build, and the very limited first installment included in his first budget,” said the Australian Financial Review’s Alan Mitchell.

“The states still have a large hole in their fiscal positions that almost certainly will require more tax reform, the economy still is facing the slowest growth in per capita incomes since Word War II which will demand more painful microeconomic reform, and all of these pre-existing weaknesses could be made worse by the risks hanging over China and the weak recovery in the advanced economies.”

With the Reserve Bank of Australia taking the dramatic decision before the budget announcement to cut official interest rates to a new record-low of 1.75 percent due to “lower than expected” inflationary pressures, the Sydney and Melbourne housing boom cooling, government revenues flagging and unemployment rising in the mining states, there are plenty of challenges ahead for the election winner should he wish to continue Australia’s 26-year economic winning streak.