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
Lockdowns to hit growth in September
Federal Treasurer Josh Frydenberg expects Australia’s September quarter to be in the red, given that more than half the country’s population has been in lockdown as a result of Covid-19 outbreaks.
“We were probably expecting that the September quarter is a negative, let’s wait and see what happens in the weeks ahead. To have your two biggest states, New South Wales and Victoria, in lockdown is a big blow,” Mr Frydenberg said.
“Treasury estimates that having these three states with South Australia in lockdown, is costing around A$300 million a day. Again, that is going to play out in many ways, but that’s why our economic support is there,” he added.
About 14 million people have been under lockdown orders across New South Wales, Victoria and South Australia, with the NSW lockdown likely to have the most significant impact, given the state contributes about 33 per cent of national output. Victoria’s lockdown will also weigh on the economy, given the state accounts for about a quarter of national output.
That was reflected by a fall in retail spending as lockdowns in the east of the country began to take hold. Spending across the country fell by 1.8 per cent in June, with further falls expected in the coming months as a result of stricter lockdown rules in Sydney, Victoria’s extended lockdown and a new lockdown in South Australia.
Economists say the economy has bounced back strongly from previous lockdowns, but the extent to which spending returns to its previous levels will depend on the degree of income support from the government during the lockdowns. That should allow households to resume spending once restrictions on movement and trading are lifted.
The economic recovery will also rely on the pace of the vaccination rollout, with CommSec Senior Economist Ryan Felsman saying a “V-shaped” recovery could “quickly become W-shaped if persistent Covid-19 outbreaks aren’t brought under control”.
Political pressure rises over vaccine rollout
Australia’s vaccine rollout is continuing to extract a political price, with the federal government suffering a fall in support, and voters marking down Prime Minister Scott Morrison’s performance in a crisis.
However, the negative perception of Mr Morrison is not translating into a boost for his political opponent, Labor leader Anthony Albanese, despite increasing support for the opposition among voters.
Two polls out last week revealed voters taking a more critical look at Mr Morrison’s performance during the pandemic, with the Guardian Essential poll revealing he had suffered a 15 percentage point drop in perceptions that he is good in a crisis.
Some 73 per cent of the 1,100 respondents believed Mr Morrison plays politics and avoids responsibility, a six-point increase since March. That issue came to a head when Mr Morrison repeatedly refused to apologise for the slow pace of the vaccine rollout. Mr Morrison later said he was “sorry that we haven’t been able to achieve the marks that we had hoped for at the beginning of this year”.
Meanwhile, the latest Resolve Political Monitor, conducted for The Sydney Morning Herald and The Age has revealed a decline in voter satisfaction with Mr Morrison, reversing months of support to cut his net performance rating to -1 per cent.
At a party level, the Essential poll revealed that Labor has led the Liberal-National Coalition on a two-party preferred basis since March. The Resolve poll of 1,607 voters also found a decline in primary vote for both major parties over the past month, with the Coalition dropping from 40 to 38 per cent and Labor declining from 36 to 35 per cent.
Despite the increasing dissatisfaction with Mr Morrison’s performance, he holds a clear lead as preferred prime minister, favoured by 45 per cent of voters, compared to 24 per cent for Mr Albanese, according to Resolve. The opposition leader’s net performance rating also fell, to -16 per cent from -13 per cent in the previous survey.
Parliament to go into public lockdown
Parliament House will go into public lockdown from next Monday due to the Covid-19 situation around the nation, particularly in New South Wales.
Parliament is set to resume on Tuesday 3 August, but the arrangements will come into effect on Monday 2 August and remain in place until Friday 3 September. Prime Minister Scott Morrison has been in isolation in Canberra after returning from Sydney in order to attend parliament.
There are fears the sitting period could become a super-spreader event, particularly if there is possibly an outbreak in the Australian Capital Territory.
A joint statement by the Presiding Officers said Parliament House will be closed to the general public, including the galleries in each chamber.
The numbers of members and senators attending sittings in person will also be substantially reduced, to be coordinated by party whips. Remote participation for those unable to attend will be facilitated and supported.
Parliamentarians have been requested to only bring essential staff to Canberra and Parliament House, which is expected to be limited to ministerial, shadow ministerial, party spokesperson and whips’ staff.
“Members and Senators and their staff should only sign in those persons needing to conduct essential business and sponsors should ensure their visitors leave the building immediately following the conclusion of their business,” the statement said.
Allies call out China over cyber attacks
Home Affairs Minister Karen Andrews says China has undermined international security, after Australia joined the US and other Five Eyes nations in calling out Beijing over its global hacking activities.
The US, along with its allies, have revealed details of the Chinese government’s role in cyber attacks around the world, including this year’s attack on Microsoft Exchange Server email software, which caught out businesses and governments around the world.
“This targeted thousands of computers and networks worldwide, including in Australia. It opened the door for cyber criminals to exploit the private sector for illicit gain. All countries, including China, should act responsibly in cyberspace. In the past, Australia has publicly attributed malicious cyber activity to Iran, China, Korea, North Korea, and Russia,” said Ms Andrews.
“Australia publicly attributes cyber-incidents when it’s in our interests to do so, especially those with the potential to undermine global economic growth, national security, and international stability,” she added.
Ms Andrews said the Australian Cyber-Security Centre had identified targeting and compromises of Australian entities, which primarily affected businesses and organisations rather than individuals.
Months of work by US intelligence, in cooperation with Australia, the UK, Canada and New Zealand, as well as the European Union and the North Atlantic Treaty Organisation (NATO), culminated in a consensus to call out China’s activity and provide fresh details of its state-sponsored cyber attacks.
The co-ordinated exposure of China’s role in cyber crime is part of US efforts to strengthen the defence of allies against such attacks, as well as an attempt to undermine any Chinese attempts to single out individual countries for retribution.
WA joins Zero Carbon Certification Scheme
The Western Australian government has become a founding member of the Smart Energy Council’s Zero Carbon Certification Scheme to boost the state’s renewable hydrogen industry.
The industry-led scheme aims to accelerate the development and deployment of renewable hydrogen, green ammonia and green metals, such as green steel and green zinc, in Australia and around the world.
The Smart Energy Council’s scheme will certify the renewable hydrogen, green ammonia or green metal has been made from renewable energy sources, and provide an embedded carbon rating. It will operate as a tracking system for the amount of greenhouse gas emissions connected with the production.
As a founding partner, the state government will collaborate with the Smart Energy Council and its domestic and international partners to develop and implement the scheme.
It came as the state’s Hydrogen Industry Minister, Alannah MacTiernan, welcomed the announcement of a major hydrogen proposal that could scale up to become one of the world’s largest renewable energy projects.
The Western Green Energy Hub, in WA’s Goldfields-Esperance region, aims to produce up to 50 gigawatts of renewable energy across 15,000 square kilometres, delivering up to 3.5 million tonnes of renewable hydrogen or 20 million tonnes of green ammonia each year.
Report plots Darwin Harbour’s future course
The Australian Strategic Policy Institute (ASPI) has released a special report examining the status of Darwin Harbour in the current strategic context, and highlighting the need for a unified, Commonwealth-led strategy to ensure it serves Australia’s strategic and economic interests.
The report, Lead me to the Harbour!, focusses on the changing strategic environment and its implications for the harbour. The key shift is the increase in geopolitical uncertainty caused by competition between China and the US, a situation that is shortening the warning time Australia will have to prepare for a major conflict.
While refraining from an extensive list of recommendations, ASPI’s report includes a range of proposals for the federal and Northern Territory governments to pursue in relation to Darwin Harbour.
The report’s only formal recommendation is the commencement of a “national discussion” that will develop a fully funded “Darwin Port and Harbour national security and economic strategy”.
However, a number of suggestions are built into the document, including that the federal government should work with the Northern Territory government to consolidate and coordinate existing investment plans, in order to leverage them for a greater overall outcome.
The federal government should also develop a long-term, well-resourced strategy for the Landbridge-owned Port of Darwin, either allowing the China-linked Landbridge to retain the lease, while taking action to mitigate security risks; buying back the lease; facilitating the transfer of the lease to another private body; or building a new port facility at a nearby location such as Glyde Point.
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