CMAX Advisory closely follows political developments internationally and analyses implications for businesses operating in Australia.
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This week's top story
2 December 2019
Difficult final week looms for PM
The final days of 2019 are not going as planned for Prime Minister Scott Morrison, who has not only been dragged into a controversy engulfing one of his ministers, but has also seen a key piece of legislation defeated.
Mr Morrison spent parliament‘s penultimate week defending Energy Minister Angus Taylor, who has been embroiled in a controversy over an allegedly forged document that he used to ridicule Sydney’s Lord Mayor and her council over travel costs.
News of a police investigation into the controversy caught Mr Morrison by surprise in parliament and he later rang the head of the New South Wales police force – who happened to be a former neighbour of the prime minister – to confirm an investigation was under way.
While the prime minister saw nothing wrong with the call, several commentators, including former Prime Minister Malcolm Turnbull and a former anti-corruption commissioner, were less impressed with a prime minister ringing the head of a police force investigating one of his ministers over potentially criminal conduct.
To top off what had been a difficult parliamentary week for the government, one of its marquee pieces of legislation aimed at making it easier to de-register labour unions (a political and financial ally of the opposition Labor Party) was killed off in the Senate.
The government assumed it had the numbers in the upper house to see the legislation through, but in the final vote One Nation caught the government by surprise and voted with Labor and the Greens to defeat the bill.
Central bank puts pressure on government
The head of Australia’s central bank has once again put pressure on the federal government to step in and get the economy going with increased spending.
Reserve Bank of Australia Governor Dr Philip Lowe has downplayed the likelihood of the central bank moving to unconventional monetary policy to stimulate the economy any time soon. In a speech to economists, Dr Lowe said while negative interest rates or injecting money into the economy are useful in the face of a financial crisis, there can be negative consequences.
While Dr Lowe said the central bank would start contemplating such options once interest rates reach 0.25 per cent (they are currently at a record low of 0.75 per cent), he would expect the federal government to intervene before that point with increased spending.
He also said that by pushing the boundaries of monetary policy, central banks were letting politicians off and making all the difficult decisions for them. His message to Treasurer Josh Frydenberg was clear: monetary policy has pretty much run its course and the ball is now in the government’s court.
The government did, however, receive support for its surplus agenda, with credit ratings agency Standard & Poor’s warning that Australia’s AAA credit rating would be at risk if the government is forced to significantly boost spending to stimulate the economy.
The latest economic growth figures for the September quarter are released this week, while Mr Frydenberg will hand down his mid-year budget review later this month.
Climate change a growing concern
Australians are increasingly concerned about the environment and climate change, according to a major survey into national attitudes.
Now in its 12th year, the Scanlon Foundation’s annual Mapping Social Cohesion survey measures Australians’ attitudes on a range of topics. In its latest survey, the economy and job security remained the top concern.
However, concern over the environment and climate change recorded the equal largest annual increase since the surveys began, up from 10 per cent in 2018 to 19 per cent.
The result is a mixed one for the federal government, which tends to successfully prosecute the argument that it is a better economic manager than the opposition Labor Party. Indeed, its focus on delivering a budget surplus is a key aspect of its pitch that it is better at managing money. In that sense, the electorate’s key concern – the economy – chimes with the government’s perceived strength.
However, the rising concern over the environment and climate change leaves it vulnerable since it is not seen as being overly active on environmental protection or climate change. Images of Prime Minister Scott Morrison fondling a lump of coal in parliament certainly do not help in that regard. Nor does his dismissal of concerns over the link between emissions and fires.
With a widespread drought and unprecedented fires burning across the east of the country, voters’ minds may increasingly focus on the environment and climate change.
Minister rejects criticism of Defence work
Minister for Defence Industry Melissa Price has rejected claims Australian businesses are not being involved in major defence projects.
The Australian Industry & Defence Network (AIDN) has called for an urgent review of the Australian Industry Capability (AIC) Program, saying it “is not facilitating development of sovereign industry capability or business opportunities for the local Australian defence supply chain to the extent envisioned”.
The industry body says its members are reporting “significant frustration” in getting Australian industry involved in major new defence programs such as Sea 1000, Sea 5000, and Land 400 Phase 2.
Speaking at a media event in Darwin, Ms Price rejected the criticism.
“I don’t agree with that. I don’t agree with that at all, and in fact that’s not my experience. As I said at the outset, every day I’m coming across new participants in our defence industry supply chain. So, I don’t accept that at all,” she said.
However, the minister conceded more needed to be done at a federal and state level to bring local suppliers into major programs.
“We actually need to make sure we’re identifying those companies who’ve got capability, and often they don’t know they’ve got capability. So rather than waiting for them to walk through the door we, as the federal government, together with state and territory governments, have actually got to drag these companies through the door to make them realise that there are enormous opportunities across naval shipbuilding but also on Land 400,” she said.
Grattan takes aim at hospitals and doctors
With few ideas for meaningful reform currently on the table from the private health sector, the Grattan Institute has published its proposed solution to at least part of the problem: inefficiency in private hospitals and excessive medical fees charged directly to consumers.
According to the Grattan Institute’s latest report, almost two thirds of increases in private health insurance benefits paid out by insurers to members over the past decade are due to escalating hospital costs. The overarching aim of its proposed reform is to contain that growth through improved efficiency and productivity of private hospitals. Specialist fees are also a big contributor (around 14 per cent of all cost growth), but this is mostly attributable to a small portion of doctors charging well above the scheduled Medicare fee.
The Grattan Institute’s proposal aims to integrate clinical and financial accountability into one single source – private hospitals, which is the group with the better management capacity for doing that, and for negotiating fair and reasonable fees with doctors. As such, the risk of high costs, and the responsibility for keeping costs down, would essentially shift from private health insurers to private hospitals.
While private health insurers have been supportive of the Grattan Institute’s proposals, private hospitals are completely opposed, saying the report is misinformed and will have unintended consequences for premiums. A fundamental issue is that private hospitals are not employers of doctors, nor do they want to be.
While the Australian Medical Association is yet to formally comment, it will need to tread a delicate path trying to please both GPs and hospital-based specialists. The Royal Australian College of General Practitioners (RACGP) supports Grattan’s ‘hospital in the home’ proposal.
The med tech sector is yet to form a position, but a worry is that it would encourage private hospitals to use cheaper devices instead of the best device for a patient’s needs.
ACT chief pushes for faster rail to Sydney
ACT Chief Minister Andrew Barr is again pushing the case for faster rail between Canberra and Sydney, saying better signalling and tracks will significantly improve travel times.
Appearing at the western Sydney Boomtown summit, Mr Barr said the focus should be on improving the current infrastructure, rather than developing a high-speed network.
Mr Barr says that cutting the journey time between the two cities from the current five hours will build the case for high-speed rail down the track.
Mr Barr said he has held discussions with the NSW Premier, Deputy Premier and Transport Minister about delivering faster rail services between Canberra and Sydney.
The ACT and NSW have been considering faster rail since the federal government’s release of the Faster Rail Prospectus in 2017. Research has shown that 57 per cent of Canberrans would travel by train to Sydney if the travel time was between two to three hours.
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