Australia’s election sparks political and economic uncertainty

Australia’s election sparks political and economic uncertainty

With what is looking like a one-seat majority of 76 seats to the main opposition Labor Party’s 67 in the House of Representatives, the Turnbull government has barely held on to power in Australia’s July 2nd election. However, with an increasingly possible hostile Senate and party infighting, many are wondering whether this government will be able to create the stability the Australian economy needs.

After eight days with no clear result in the Australian election, Prime Minister Malcolm Turnbull’s government has sustained a wafer thin majority to retain power. It has been a rocky road for Australian politics, with the Australian public craving for some form of ‘stability’ and the threat of a hung parliament hanging squarely over the future of political and economic decision-making.

However, with a constant changing of leadership and infighting from both the former Labor government and the current Liberal one, successful policy agendas have not been implemented. In September 2015, PM Turnbull ousted former PM Tony Abbott in a leadership row due to a lack of popularity with Tony Abbott’s conservative agenda and low poll ratings. Many believed that Turnbull’s popularity as a politician and more center-right approach to political decision-making would bring the coalition back into power and give them a stronger mandate to push necessary budget savings.

What was perceived to be a clear win for the Conservatives, however, has turned out much differently. Turnbull’s Coalition government has had a massive swing against it in the election, leading to gains for the opposition Labor party and several other minor parties in the House of Representatives.

In the Senate, the desired outcome of removing minor parties who held the balance of power for the last term has led to the same result, with minor parties once again becoming key power brokers. PM Turnbull has many challenges he must face both externally and internally. Many are wondering whether it will be possible for PM Turnbull to push through his economic and political agenda. The alternative would be  the same political atrophy and instability which has plagued Australian politics since 2010.

A possible hostile Senate

The double dissolution election was called over proposed industrial relations legislation that was twice rejected by the Senate. The gamble was that in calling a double dissolution, a more amiable Senate would be voted in and allow a backlog of government-sponsored legislation to go through.

This legislation included several contentious savings programs from the previous Abbott government. However, what has occurred is the opposite, with minor parties once again maintaining their position as kingmakers for any future policy that will be presented.

Although the outcome for the makeup of the Senate is weeks away, it appears that the government will be facing up to 10 new minor party candidates. This will make negotiation and compromise essential for the Turnbull government in order to get its policies through. Moreover, the elections have brought back into the political scene former parliament member and One Nation leader Pauline Hanson.

Hanson may provide the key for legislation to pass the hostile Senate. She is a controversial, populist right-wing figure who has propagated xenophobic policy towards immigrants, including Australia’s Asian and Muslim communities. Whether the Turnbull government will make a Faustian bargain with her party is yet to be seen. Turnbull, though, faces his biggest cross-bench ever and will need to address all parties involved.

Internal infighting

Not only will the Turnbull government have to deal with a hostile Senate, but the Liberal/National Coalition is rife with party infighting and tension. Since the ousting of former PM Tony Abbott, the Coalition’s more conservative wing has sought to undermine PM Turnbull at every opportunity.

Turnbull has been tied down to unpopular policy from the Abbott era, including a controversial refugee policy and an expensive plebiscite for gay marriage (rather than a parliamentary vote.) The conservative branch of the coalition has held Turnbull hostage, but now it will be seen whether winning the majority will vindicate his policy platform.

The infighting, however, will not stop as the Conservatives have blamed the loss of seats on Turnbull’s ignoring of the ‘silent majority’ of conservatives in Australia. Senator Cory Bernardi has championed the conservative cause, but is also looking to establish a right-wing movement within the party.

This movement, called the ‘Australian Conservatives’, will be mostly comprised of former Abbott backers who are staunchly anti-gay marriage and anti-climate science. This continued destabilisation poses the greatest risk to PM Turnbull’s agenda. Without a full party backing his mandate, he risks political paralysis and being held ransom by a few disgruntled right-wing and eccentric backbenchers.

Increasing economic uncertainty

The Australian economy has been under-performing since the resource boom came to an end several years ago and commodity prices have continued to fall. The Australian economy has seen around 25 years of uninterrupted growth, which enabled it absorb the shock of the 2008 Global Financial Crisis.

However, slowing GDP, diminished Chinese demand, and spiralling debt makes the future outlook somewhat bleak. The Australian political scene has been in paralysis for the last six years, and successive governments have failed to deal with the economic challenges as they have presented themselves.

The Turnbull government must implement necessary economic reforms, including changes to negative gearing and superannuation tax breaks. Additionally, a serious attempts at budget repair is needed. This has been on the agenda throughout successive governments, but no policy implementation has been successful.

However, these reforms all rely on political stability. Credit rating agencies, including Moody’s and Standard & Poor have already put Australia on notice. Australia faces three years of ‘fiscal policy wilderness’ if significant economic and fiscal reform cannot pass through the Senate. If there is continuing political atrophy, then Australia will start to look less desirable to foreign investors and recession will look more and more likely.

Overall, Australia faces uncertain times and, despite the Turnbull government’s thin majority, it will take real leadership and compromise to shift Australia towards the path of positive political and economic growth. However, with the issues that are plaguing the Coalition and a possible hostile Senate, it is anyone’s guess as to whether this can be achieved in the next three years.

Categories: Asia Pacific, Politics

About Author

Iain MacGillivray

Iain MacGillivray is a GRI Commissioning Editor and an Independent Political Risk Analyst who focuses on Australian, European, and Middle Eastern Politics. He has worked as a Senior Academic Tutor in Middle Eastern Politics at the University of Melbourne and has been a freelance journalist for many years. Iain currently holds a Masters of International Relations from the Melbourne School of Government, University of Melbourne and is currently undertaking a Masters of Middle East Studies at Middle East Technical University (ODTÜ) in Ankara, Turkey.