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Australian 2013 Election: the Tribe Has Spoken

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Australian 2013 Election: the Tribe Has Spoken Australian 2013 Election: The tribe has spoken Economic research note 9 September 2013 As widely expected, the Liberal/National Coalition has Australian election: The tribe has spoken easily won the Australian Federal election held over the Australians went to the polls over the weekend, voting on a weekend. full House of Representatives (150 seats) and a half Senate (76 The Coalition increased their seats in the Lower House seat) election. from 72 to a projected 89, easily giving them a strong majority. As widely expected ahead of the election and as signalled by a number of opinion polls, the election has resulted in a change In contrast, the number of seats held by the ALP dropped of government. to an estimated 57 from 71. The Liberal/National party coalition, led by new Prime Minister However, the new Senate, which does not sit until 1 July Tony Abbott has defeated the incumbent Australian Labor 2014, could be problematic for the Coalition, as there Party (ALP) minority government, led by Kevin Rudd. could be up to 8 Senators from smaller parties/Independents and up to 10 Greens. With swing of 4.1% away from the ALP, some of which went to smaller parties and Independents, the Coalition now looks With the Coalition likely to have 33 Senators, they will 1 need to secure the vote of 6 of the smaller party like they will hold 89 seats in the House of Representatives , Senators (or the ALP) to pass legislation. well up from their previous number of 72. This gives the Coalition a comfortable majority of 13 in the House (i.e. 76 The risk of a ‘double-dissolution’ election over the next votes are required for a majority). The Coalition parties 12-18 months, therefore, remains in place. received a primary vote of 45.3%. Nevertheless, with Australia once again having a strong majority government the expectation of an In contrast, the ALP has dropped from 71 seats previously improvement in business sentiment remains in place. (note, the ALP governed as a minority government), to now holding just 57 seats. The ALP’s primary vote fell sharply to just For now, investors should expect the Coalition to 33.8%. proceed with their plans to abolish the Carbon price and mining tax and begin implementing policies around The number of Independents in the House has likely fallen boat arrivals, paid parental leave and infrastructure. from 6 to 3, while the Greens have held onto their one seat. Inquiries into the role of government, the financial See the following table for more details. services industry and taxation are also planned. Perhaps more significantly, in the Senate the Coalition has seen their seats decrease from 34 to 33, while the ALP is expected to have dropped to 25 from 31. The number of Green Senators is expected to rise to 10 from 9, while the number of Independents is expected to jump sharply to 8 from 2, thanks to Australia’s quirky preferential voting system. See the following table for more details. Importantly, this new Senate will not take their seats until 1 July 2014, meaning that the Coalition government will need to deal with the current Senate – controlled by the ALP and Greens – until then. With 8 Independents likely to be in the Senate, the Coalition will need to secure the vote of at least 6 of these to pass bills (i.e. to add to their 33 seats to give a majority of 39). Ryan Felsman Stephen Halmarick James White Senior Analyst, 1 Head of Economic and Senior Analyst, This is based on predictions from the ABC. The official AEC count, which is not yet Economic and Market Market Research Economic and Market Research Research completed, has the Coalition with 86 seats, while 4 remain undecided. 1 First State Investments There has been a general sense in Australia that the various Australian Upper House (Senate) – from 1 July 2014 trials and tribulations of the minority ALP government that has existed for the past three years, under both Kevin Rudd and Pre- 2013 Not up Previous New Total Election Election for Re- Total Julia Gillard, has reduced business confidence. election Now that Australia, as is usually the case, has a majority Coalition 18 17 16 34 33 government with a strong mandate the expectation (hope) is ALP 18 12 13 31 25 that business confidence will return. This, in turn, could be an Greens 3 4 6 9 10 important driver in supporting the Australian economy Independents 1 7 1 2 8 through its transition away from mining related capex growth 40 40 36 76 76 to growth more broadly supported by the consumer, net Source: Australian Electoral Commission. exports and residential construction. Key Ministerial roles: One limiting factor to this view, however, may be the risk of a The key Ministers in the new government are likely to be “double dissolution” election (a full House of Reps and full closely related to the Shadow portfolios that were held prior Senate election) within the next 12-18 months. to the election. PM in-waiting Abbott and his ministry are likely This could come about if the Senate (either the current or the to be official sworn in by the Governor General at the end of new Senate from 1 July 2014) refuses to agree to the abolition this week, or early next week, once all votes are finalised. of either the Carbon price or Mining Resource Rent Tax (MRRT) Prime Minister, Tony Abbott, Leader of the Liberal Party. – both taxes the Coalition campaigned hard on during the election. Deputy Prime Minister and Minister for Infrastructure and Transport, Warren Truss, Leader of the National Party. Indeed, the Coalition has gone so far as to state that the election was a ‘referendum’ on the Carbon price and that the Treasurer, Joe Hockey. ALP and Greens must now respect their mandate on this issue. Foreign Affairs and Trade, Julie Bishop, Deputy Leader of Given both the ALP and, especially, the Greens fought hard to the Liberal Party. have both the Carbon price and MRRT introduced, it will be hard for them to vote for their removal (indeed, the Greens Finance Minister, Andrew Robb. could be expected to refuse to vote as such). Employment Minister, Eric Abetz. The challenge for the Coalition will, therefore, be to convince Defence Minister, David Johnston. enough Senators, either the ALP or Independents, to agree to their policies. Attorney-General, George Brandis. Through a rather complicated constitutional arrangement, a Regional Development Minister, Barnaby Joyce. stalemate over the abolition of the Carbon price and/or the MRRT could be broken by holding a ‘double-dissolution’ Industry Minister, Sophie Mirabella. election, which then would see a vote on their policies by a Communications Minister, Malcolm Turnbull. joint sitting of both Houses. Education Minister, Christopher Pyne. However, such a political option from the Coalition takes time and would likely not occur before the end of 2014 or early Energy & Resources Minister, Ian Macfarlane. 2015. This would clearly have a negative impact on the expected rebound in business confidence post this weekend’s Immigration Minister, Scott Morrison. election. Environment Minister, Greg Hunt. Australian Lower House (Representatives) Health Minister, Peter Dutton. Financial Services and Superannuation Minister, Mathias Pre-Election 2013 Election Cormann. Coalition 72 86 – 89 ALP 71 57 – 57 Agriculture Minister, John Cobb. Greens 1 1 – 1 Independents 6 2 – 3 Senior positions within the ALP In doubt 0 4 – 0 For the ALP, the weekend defeat is expected to lead to some Total 150 150 significant changes in leadership, although there were already Source: First number is current Australian Electoral Commission data; sweeping changes when Kevin Rudd resumed the party second number is ABC predicted result. leadership in late June. Kevin Rudd has already announced that he will not re-contest the leadership of the ALP, while former Deputy Prime Minister 2 First State Investments and Treasurer (under PM Gillard) Wayne Swan has stated that A reduction in spending measures associated with the he will remain a back-bencher. carbon price. The two main candidates for leadership of the ALP, at this A reduction in Australia’s foreign aid. stage, are: A two years delay in the process of increasing Australia’s Bill Shorten, former Minister for Workplace Relations and compulsory superannuation contribution from 9% to Education; and 12%. Anthony Albanese, former Deputy Prime Minister and An inquiry into the Role of Government, to focus on the Minister for Infrastructure, Transport and reduction of duplication between the Federal and State Communications. governments and to improve the efficiency of Other potential candidates for a leadership position could government spending. include Penny Wong, former Senate Leader and Minister for An inquiry into the Financial Services industry. Finance, and Chris Bowen, former Treasurer. An inquiry into Australia’s Taxation system. Priorities of a Coalition government While, as noted above, the Coalition may have some difficulty An increased focus on government funding of nationally in implementing their full policy agenda, what we know from significant infrastructure spending and increased their election campaign is that the Coalition will focus on the cooperation between the Federal and State governments following policies: on infrastructure. Abolition of the Carbon price. The development of a longer-dated maturity structure for Australia’s government debt market, including the Abolition of the MRRT. possible introduction of 30 year bonds. Introduction of a new paid parental leave scheme. A cut in the company tax rate from 30% to 28.5%. The introduction of a 1.5% levy on large companies to help fund the paid parental leave scheme.
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