CMAX Advisory closely follows political developments internationally and analyses implications for businesses operating in Australia.
We develop a weekly report of the most important political and economic news in Australia, utilising our understanding of complex political issues and processes to inform companies of relevant developments and forecast likely outcomes.
This week's top story
PM dismisses early election talk
Prime Minister Scott Morrison has dismissed speculation of an early election in 2021, telling colleagues that he intended to go the full term.
Recent polling puts the government ahead of the opposition, with Mr Morrison also leading opposition Leader Anthony Albanese in terms of net approval and preferred prime minister. The strong polling, and the opposition’s difficulties in gaining traction amid the pandemic, had led to speculation Mr Morrison would seek an early election to increase the government’s slim majority in the lower house.
However, Mr Morrison told colleagues that elections are “too hard to win” and he intended parliament to run for the full term. He also warned against complacency and said political cycles go through bad and good times.
Without a trigger for a double dissolution election, when the Senate rejects the same bill twice, the earliest date for a standard election is 7 August 2021, with the latest date being 21 May 2022. That would still leave open the option of a late 2021 election, although commentators note that this would mean much of 2021 would be an election campaign, simultaneously distracting the government and giving the opposition political oxygen.
The next litmus test for the government is this weekend’s state election in Queensland, where Mr Morrison had spent time campaigning on behalf of the Liberal National Party. The state was widely seen as helping the Coalition with its surprise federal win in 2019, although Labor Premier Annastacia Palaszczuk is considered to be in a strong position given her government’s handling of the coronavirus outbreak.
Retail softens amid concerns over business
Retail turnover has dropped across most of Australia, as the Reserve Bank warned more small businesses will fail next year and other data revealed the number of payroll jobs had fallen for every age group other than those under 20.
According to data from the Australian Bureau of Statistics, retail sales fell 1.5 per cent from August to September, with food and household goods falling after recording a sustained period of higher sales during the pandemic. The September result is now the second straight month of contracting retail sales growth.
Every state and territory other than the Northern Territory recorded a decline in retail trade – which accounts for about 35 per cent of consumption – in September, although growth was still higher than the same time last year.
Meanwhile, the Reserve Bank of Australia (RBA) has warned that more small businesses will fail next year, and it has encouraged companies to hibernate until the pandemic eases. In the minutes of its latest board meeting, the RBA said a significant share of businesses had built up their cash buffers to cover at least six months of expenses.
“Members also noted that, for some businesses, their best survival strategy would be to hibernate until economic conditions had sufficiently normalised. Business failures had been substantially lower in 2020 than in preceding years because of insolvency moratoriums and the various support measures. However, business failures were expected to rise, particularly for small businesses,” it said.
The central bank also noted that while the domestic economy was doing better than others, unemployment and underemployment would remain high for an extended period.
The RBA’s observation came as data revealed that in the fortnight to 3 October, the number of payroll jobs for young Australians increased by 2.8 per cent. However, the number of payroll jobs fell for every other age group over the same period.
Shadow Treasurer Jim Chalmers urged the federal government to maintain its financial support payments in an effort to sustain the economy.
“Ripping support out of the economy in the middle of the worst recession in almost 100 years will only make the downturn deeper, the jobless queues longer and force more business to close,” Dr Chalmers said.
Australia to join Malabar 2020 exercises
Australia will participate in the Malabar 2020 joint naval exercises following an invitation from India, marking the first time it has joined the exercise since 2007.
Australia will join key regional defence partners India, the United States and Japan for the joint naval exercises in the India Ocean next month, with India’s invitation marking a move away from New Delhi’s previous reticence to have Australia join.
India’s aversion stemmed from fears of prompting a Chinese backlash. However, China’s more aggressive stance with India, particularly its incursions into the Himalayas, appears to have forced New Delhi’s hand.
The exercises also mark a strengthening of the diplomatic “Quad” of Australia, India, Japan and the US and a willingness of the four countries to maintain a rules-based order in the region.
Defence Minister Linda Reynolds said Malabar 2020 marked a milestone opportunity for the Australian Defence Force and the relationship between the countries.
“High-end military exercises like Malabar are key to enhancing Australia’s maritime capabilities, building interoperability with our close partners, and demonstrating our collective resolve to support an open and prosperous Indo-Pacific,” she said.
Foreign Affairs Minister Marise Payne said the announcement was an important step in Australia’s deepening relationship with India.
“This builds on the Comprehensive Strategic Partnership, to which Prime Minister Morrison and Prime Minister Modi agreed on 4 June 2020, and which I progressed with my counterpart, Minister of External Affairs Jaishankar, this month when we met in Tokyo,” she said.
New industry board members appointed
The federal government has added five new members to the Industry Innovation and Science Australia board, which will oversee industry roadmaps and implement the government’s five-year manufacturing plan.
Among the appointees were Dulux Group chief executive Patrick Houlihan, FinTech expert Scott Farrell, and space technology entrepreneur Alex Grant. Ag-tech expert Sarah Nolet and Woodside Energy’s Lauren Stafford have also been appointed to the board, which is led by former IBM boss Andrew Stevens and Chief Scientist Alan Finkel.
“These appointments will ensure the board has the necessary skills, expertise, and connections to the Australian business community to reshape and reignite Australian manufacturing – as well as delivering advice more broadly on how to innovate,” the Minister for Industry, Science and Technology, Karen Andrews, said in a statement.
Mr Houlihan, who takes over as chair of the Murdoch Children’s Research Institute next year, told media that he saw opportunities for Australian manufacturing in medical science and research. “The whole medical field is somewhere where Australia is just clearly at the leading edge,” he said.
As part of efforts to boost Australia’s manufacturing base, the federal government released its modern manufacturing strategy, which lists six manufacturing priorities – resources technology, food and beverage, medical products, recycling and clean energy, defence and space – along with a A$1.3 billion modern manufacturing fund.
Directors want more infrastructure spending
Company directors want more investment in infrastructure, reforms of industrial relations and a Green New Deal, according to the Australian Institute of Company Directors’ sentiment index.
The index also found that climate and energy policy remain the two most important short-term priorities for company directors and that 76 per cent of directors called for large-scale public investment in renewable energy and greening the economy.
In the short term, directors would like the federal government to focus on climate change (45 per cent) and energy (43 per cent), followed by tax reform (34 per cent), infrastructure (32 per cent) and productivity growth (30 per cent).
“Earlier this year directors overwhelmingly favoured a radical policy reset to guide the recovery phase. This survey reveals that directors want a smarter, more innovative Australia that invests in infrastructure and a shift towards green energy,” AICD chief executive Angus Armour said.
Other key findings from the index include the impact of Covid-19 remaining the top issue “keeping directors awake at night” (but has dropped from 68 per cent to 41 per cent of responses), while a majority of respondents still believe government spending on infrastructure is too low.
Pacific leaders call for action on Covid-19
Pacific Islands Forum leaders have drafted a statement to be considered at the special session of the United Nations General Assembly on Covid-19 in December.
The document, Protecting the Health and Well-being of the Blue Pacific, is part of the region’s response to the impacts of the global pandemic, with the forum saying there was a need to address the pandemic’s disproportionate impacts on vulnerable groups in the region.
Founded in 1971, the forum comprises 18 members: Australia, Cook Islands, Federated States of Micronesia, Fiji, French Polynesia, Kiribati, Nauru, New Caledonia, New Zealand, Niue, Palau, Papua New Guinea, Republic of Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.
Ministers discussed the statement at the recent Pacific Foreign Ministers Conference, where Tuvalu’s Foreign Minister said developing countries need economic support during the recovery, but also ongoing medical assistance.
“Ministers highlighted the need for cooperative, multilateral approaches to allow equitable access to trusted and certified Covid-19 tests, treatments and vaccines and ensuring their accountable and transparent procurement and distribution,” he said.
Ministers also highlighted the need for co-operative multilateral projects that would ensure equitable access to trusted and certified Covid-19 tests, treatments and vaccines.
Forum Secretary-General Dame Meg Taylor said Pacific leaders would push for a fair share of any successful vaccines when they deliver the statement at the UN Assembly in December.
She also said the state of health services in the region needed to be addressed.
“If some of these countries were to have cases of Covid-19, the impacts would be devastating on the people socially and economically,” she said.
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