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Australian Weekly Report

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

16 September 2019

Tax cuts not boosting spending

Two business surveys have shown that cuts to taxes and interest rates are not boosting spending, casting doubt on the government’s claims that economic growth will improve as the cuts flow through the economy.

The latest NAB Business Survey found that confidence and conditions declined in August, with a drop in forward orders and a decline in capital expenditure. Meanwhile, the Westpac–Melbourne Institute Consumer Sentiment Index fell 1.7 per cent in September after climbing 3.6 per cent the previous month.

The NAB survey found that both confidence and conditions declined further in the month and are continuing their run of below-average results, with both trading and profitability weakening. NAB Group’s chief economist, Alan Oster, said that even though conditions in the retail sector improved, the sector remains weak.

He said it was another indicator that household consumption has remained weak and that “it looks like the tax cuts have had little impact on household consumption or have not been large enough to offset increasing weakness in the sector”.

Meanwhile, the Westpac-Melbourne Institute Consumer Sentiment Index revealed that half of tax cut recipients will spend less than half of their payments, while a quarter of respondents said they would save the full payment.

The result is not overly surprising, given consumer uncertainty about the economy, combined with Australia’s high levels of household debt. Figures from the Australian Bureau of Statistics show that the household-debt-to-income ratio hit a new record of just under 200 per cent earlier in the year.

In that environment, tax refunds are more likely to go into the bank to save for a rainy day, or to pay down debt – it is no coincidence that Westpac’s “time to buy a major household item” sub-index dropped 2.8 per cent. Consumers, it seems, are not coming to the economy’s rescue.

Other news

Government digs in over embattled MP

The federal government is digging in behind an embattled MP whose previous links to Chinese government propaganda organisations, and her comments on Beijing’s actions in the South China Sea, are causing it difficulties.

Hong Kong-born Gladys Liu narrowly won the Victorian seat of Chisolm at the 18 May federal election. However, her previous role as an office-holder for two groups that were later rolled into China’s United Front propaganda arm have embarrassed the government.

In a television interview she said she could not recall whether she had been a council member for two China Overseas Exchange Association chapters from 2003 to 2015 and repeatedly refused to criticise China over its activities in the South China Sea.

While embarrassing for the government, the larger issue is the longevity of the MP in the seat. The opposition Labor Party has been pressing the government on the issue, and questioning whether Ms Liu is a “fit and proper” person to sit in parliament.

Given the government only holds 77 seats in the lower house, Prime Minister Scott Morrison will be loath to cut the MP loose and force a byelection. Ms Liu only won the seat by 1,090 votes against her Labor opponent and a repeat performance by the Liberal Party is in no way a certainty. So far Mr Morrison is accusing the Labor Party of making racist slurs and has dismissed Ms Liu’s comments as a “clumsy interview”.

A loss would cut the government’s numbers to 76, the bare minimum for a majority. It could also make for awkward conversations for Mr Morrison when he visits the US this week, given the current US administration’s hawkish position on China, and Secretary of State Mike Pompeo’s comment that Australia “can sell your soul for a pile of soy beans, or you can protect your people” when it comes to choosing Beijing or Washington.

Opposition puts all options on the table

The federal opposition is reassessing its policy platform following its shock defeat at the 18 May election, with current leader Anthony Albanese to soon start outlining a new direction for the party with a series of policy statements.

Mr Albanese has backed the approach proposed by one of his closest allies, senior frontbencher Mark Butler, who says the party’s review of its policies needs to be “deep, broad and ruthlessly unsparing”. The policy reset will likely see the dumping of a number of policies around higher taxation and spending.

Former Labor leader Bill Shorten, who led the party to defeat in May, says he believes some of the party’s policies will need to be abandoned or voters will not believe the party had learned any lessons.

However, the Labor Party’s President, Wayne Swan, said the review should not discard all the tax increases and the party’s philosophy of redistribution, arguing that the opposition only narrowly lost the election.

While debate over the opposition’s policy agenda is set to intensify, it is in no hurry to settle its positions. It is more than happy to let the government take the heat for a spluttering economy, and the “clumsy” interview by one of its newest MPs.

Government urges firms to train more

The federal government is urging the private sector to invest more on staff training, saying it is not just a job for government.

Federal Minister for Employment, Michaelia Cash, said business investment in workplace training has been going in the wrong direction for some time, and businesses need to do their part. The Senator’s comments were backed up by Prime Minister Scott Morrison, who said the government would not invest in what he described as “dud” training programs.

The Shadow Minister for Education and Training, Tanya Plibersek, said the government had dropped the ball on training by cutting funding from vocational institutions, meaning there were not enough skilled workers.

The comments from Senator Cash and Mr Morrison repeat an increasingly common refrain from the Coalition since its election win, which can be summarised as “don’t look at us”. On economic stimulus it is putting the onus on states to spend more on infrastructure, on consumers to spend more and on industry to invest more.  On training it is now saying business needs to invest, not the government. The problem will come when no-one listens, or lacks the cash to act without government intervention.

Collins maintenance may stay in Adelaide

The federal government is reportedly set to abandon plans to relocate deep maintenance of the Collins-Class submarines from Adelaide to Perth.

South Australian Senator Rex Patrick says documents he has obtained under Freedom of Information laws show that ASC has made an interim recommendation to the government to leave the Collins-Class full cycle docking (FCD) in Adelaide.

Defence officials have spent years investigating moving FSD to ASC’s facilities in Perth and a change of course would have a significant impact on French designer Naval Group’s plans to build Australia’s A$50 billion next generation fleet of submarines. Keeping the capability in Adelaide would mean less space for the shipyard.

The Australian Financial Review reports that Defence officials are exploring ways to modernise Adelaide’s submarine shipyard so it can carry out deep maintenance of the Collins-Class boats alongside construction of the new submarine fleet.

Senator Patrick says the interim study identifies multiple risks if the work is moved to Western Australia, including the loss of skills, the need for Western Australia to develop a workforce from scratch, and the need to develop new facilities in Western Australia at considerable cost to the taxpayer.

“It makes no sense to spend over a billion of taxpayer dollars to shift an important national security asset from one place to another on a political whim,” Senator Patrick said.

Calls for national telestroke service

The Stroke Foundation is calling on the federal government to take action over the poor health outcomes for stroke patients in regional areas. According to an Australian Broadcasting Corporation report, rural stroke outcomes are worse than their metropolitan counterparts due to a knowledge gap.

The Stroke Foundation told the ABC that the answer to improving rural stroke outcomes is implementing a national telehealth service. Victoria, South Australia and Western Australia now have ongoing telestroke services funded by their state governments. Tasmania will soon have one. The federal government has put A$9.4 million towards a centralised stroke telehealth service for New South Wales, which is jointly funded with the state government. Meanwhile, Queensland and the Northern Territory do not have specialised telestroke services.

The President of the Rural Doctors Association of Australia, Adam Coltzau, told the ABC that a telestroke system would be beneficial for regional hospitals that had diagnostic equipment, but not all do.

Early detection improving survival rates

A new global study has found Australia has better cancer survival rates than other similar high-income countries, thanks to earlier detection.

The study, published in The Lancet Oncology journal by the International Cancer Benchmarking Partnership, reviewed 3.9 million cancer cases from Australia, New Zealand, the UK, Norway, Ireland, Canada and Denmark.

It compared the one- and five-year survival rates for seven types of cancer: bowel, oesophageal, pancreatic, stomach, rectum, lung and ovarian.

Australia had the highest five-year survival rate in all but lung and ovarian cancer. The five-year survival rate in Australia for oesophageal cancer was 23.5 per cent, stomach cancer 32.8 per cent, colon cancer 70.8 per cent, rectal cancer 70.8 per cent and pancreatic 14.6 per cent.

Queensland Olympics bid hangs on HSR

A fast-rail link between Brisbane, the Gold Coast and Sunshine Coast will be crucial to Queensland’s bid to host the 2032 Summer Olympics.

A delegation led by Queensland Premier Annastacia Palaszczuk has met International Olympic Committee President Thomas Bach in Paris to discuss a southeast Queensland Olympics in 2032.

Australian Olympic Committee President John Coates, who is part of the delegation, has warned that the IOC would be unlikely to consider southeast Queensland’s bid if the region did not build a high-speed rail network between the three urban centres.

A HSR system would reduce travel times between the three centres – which would jointly host the Games under the bid – as well as ensuring local rail capacity would be sufficient to cope with the added demands of an Olympics.

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