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
Fire response shatters public trust
Two major surveys of public opinion have shown confidence in the federal government has plummeted in the wake of the fire crisis.
The Australian National University’s (ANU) poll of 3,249 Australians found a “significant and substantial decline” in the federal Coalition’s vote from 40 per cent in October 2019 to 35 per cent in January.
As well as a drop in party support, Prime Minister Scott Morrison also saw a drop in voters’ perceptions of his leadership. In a rating of confidence in party leaders, Mr Morrison scored an average of 3.92 out of 10, down from his June 2019 rating of 5.25.
With the survey finding fewer people intending to vote for the Coalition, commentators noted the results will be of concern for the government, particularly as previous national disasters have tended to increase support for the incumbent government.
Meanwhile, global communications firm Edelman has released its annual Trust Barometer, which was supplemented following the fire crisis. It found that trust among what it calls the “informed public” fell nine points to 59 from an all-time high of 68 before Christmas.
Earlier polls had found Mr Morrison’s popularity had suffered in the wake of the government’s response to the fires. The latest Newspoll shows the government pulling back some ground, although it still trails Labor on the two party vote, 49 to 51 per cent, and its primary vote is below what it was at last year’s May election, at 38 per cent.
IMF warns on fires and coronavirus
The International Monetary Fund has warned the Australian economy faces a double threat from fires and coronavirus.
In a post on the organisation’s IMFBlog, Managing Director Kristalina Georgieva said climate-related events such as fires, cyclones and floods typically cut annual economic growth by 0.4 percentage points in affected countries.
Singling out the Australian fire season, she said the human and economic toll of climate change “confronts us every day”. “Moreover, these types of events are becoming more frequent, particularly in the poorest countries and those least able to cope with the impact.”
Ms Georgieva said coronavirus was the most pressing uncertainty and a “stark reminder of how a fragile recovery could be threatened by unforeseen events”.
If the coronavirus is contained quickly, the Chinese economy would bounce back quickly, suffering a sharp drop in GDP growth in the first quarter of 2020, but only a small reduction for the entire year. “Spillovers to other countries would remain relatively minor and short-lived, mostly through temporary supply chain disruptions, tourism, and travel restrictions,” she said.
However, if the outbreak was long-lasting and became more serious, the economic impact will be more damaging. “Its global impact would be amplified through more substantial supply chain disruptions and a more persistent drop in investor confidence, especially if the epidemic spreads beyond China,” Ms Georgieva said.
S&P Global Ratings has warned Australia will be among the worst affected in the Asia-Pacific from the outbreak in China, with fewer students and tourists travelling to the country and commodity prices falling. The ratings agency has cut its Australian growth forecast by 0.5 of a percentage point to 1.7 per cent for 2020.
It came as Qantas said it would cut flights across Asia, with reduced travel expected to reduce its earnings this year by A$100 million to A$150 million.
Northern airbase gets A$1bn upgrade
The federal government has approved a $A1.1 billion upgrade to the Northern Territory’s RAAF Base Tindal to provide a forward operating base for US aircraft, including strategic bombers.
The upgrade of the facility – located at Katherine in the Northern Territory – will include runway extensions, fuel stockpiles and support for large aircraft such as US Air Force (USAF) B-52 strategic bombers and RAAF KC-30 air-to-air refuellers.
The 2016 Defence White Paper identified northern Australia as a strategically important location, both for national defence and as a forward base for regional engagement. The upgrade of RAAF Base Tindal will boost the RAAF’s ability to carry out joint operations with the USAF in the Indo-Pacific.
It will also support the arrival of the F-35A Joint Strike Fighter and Tindal has been named as a forward base for the MQ-4C Triton drones.
Under the US Force Posture Initiative signed in 2011 between Australia and the United States, the two countries committed to joint funding for military infrastructure projects and included an increase in the annual rotation of US marines through Darwin to about 2,000.
Latest PHI figures stir devices debate
Young Australians are continuing to abandon the private health insurance sector, according to the latest data from the private health insurance regulator.
The latest Australian Prudential Regulation Authority (APRA) figures show that overall, about 9,400 people dropped their private health cover in the final three months of last year, meaning 44 per cent of Australians now have basic hospital cover.
The APRA data also revealed that out-of-pocket costs for hospital visits rose 3.2 per cent in 2019, leaving patients facing, on average, a A$300 bill for a hospital visit.
The data also revealed that the use of orthopaedic prostheses rose by only 0.1 per cent (while total prostheses utilisation rose by 6.6 per cent). Total benefits paid for prostheses rose by less than 1 per cent for hips; and decreased for knees (-0.5 per cent).
The APRA figures also show that despite the growth trajectory for health care demand and an increase in net profit to A$1.44 billion for the year, private health insurers:
- paid less for medical services (down 1.3 per cent);
- paid for fewer medical services (down 3 per cent);
- paid for fewer hospital episodes of care (down 2.7 per cent); and
- paid for fewer hospital days (down 2 per cent).
Following the release, the private health insurance sector took at the medical devices industry, with Private Healthcare Australia (PHA) releasing a statement saying that “medical device companies are continuing to drive up the volume of sales of their products to offset government measures to reduce inflated prices”. However, the chief executive of the Medical Technology Association of Australia (MTAA), Ian Burgess, said medical device manufactures have cut their prices upwards of 40 per cent in the past three years.
Royal Commission into fire season
The federal government’s inquiry into the summer’s fire season is set to begin, with a specific focus on preparedness for future fire seasons.
Former Australian Defence Force (ADF) chief Mark Binskin will head the Royal Commission, and be assisted by former Federal Court judge Annabelle Bennett and leading environmental lawyer Andrew Macintosh.
The inquiry’s terms of reference cover a range of matters across federal, state, territory and local governments and include preparedness and recovery, natural disasters, hazard reduction, wildlife conservation and development approvals.
There will also be a focus on when the federal government can step in to offer assistance, including the deployment of the ADF. Mr Morrison suggested during the crisis that the federal government was constrained in offering assistance due to constitutional concerns.
The commissioners will also investigate whether the findings of previous royal commissions and inquiries have ever been acted on.
The trio are due to deliver their findings to the federal government by the end of August.
The fires over the 2019-20 summer killed more than 30 people across the country and destroyed thousands of homes.
Inquiry into fatal train derailment
Investigations into a fatal rail crash between Sydney and Melbourne continue, with claims that drivers had refused to use a section of track where the passenger train derailed.
The service from Sydney to Melbourne, with 153 passengers on board, came off the tracks about 45 kilometres north of Melbourne last week. The driver and another member of staff were killed in the incident.
The Australian Transport Safety Bureau is investigating the cause of the derailment and will release a preliminary report within 30 days, although the final investigation could take months or even years.
The XPT service is run by NSW TrainLink and uses the Australian Rail Track Corporation’s North East line tracks, which it shares with V/Line.
The Rail Tram and Bus Union’s state secretary Luba Grigorovitch said the section of track where the incident occurred was awaiting maintenance. She said “conditions were altered and V/Line drivers rightly refused to traverse this section over the past week”.
Concerns raised over WA Huawei decision
The Western Australian government is under pressure over its decision to award Chinese telco Huawei a A$206 million contract to build a mobile data network for the state’s public rail system.
Under the contract, the company will build 80 radio masts, similar to mobile phone towers, along Perth’s passenger rail corridors. Huawei won the contract despite being banned from mobile networks around the world – including Australia’s 5G network – over security concerns.
The state’s Liberal opposition says the government was warned that there security implications of awarding the contract to Huawei.
Using documents released under Freedom of Information laws, the opposition says the Department of Premier and Cabinet, which advises Premier Mark McGowan on security matters, warned that security implications could extend to the government’s Metronet project.
The federal government banned Huawei from supplying 5G equipment on national security grounds in 2018 over concerns Chinese intelligence might be able to hack into the network. However, state governments have shown they are willing to do business with the Chinese telco, offering it an alternative route into Australian infrastructure.
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