Business leaders were never optimistic about the outcome of the federal election but few predicted it would be this bad.
Everything corporate Australia was praying would not happen, now has. It now faces the prospect of a hung parliament or a government with such a slim majority it will not have a mandate to implement economic reform.
Regardless of which major party wins government, business faces a hostile Senate. As one academic puts it: “Economic illiterates and populists have done well”.
This means more anti-business sentiment. Do not assume Labor’s failure to secure a clear lead means the banking royal commission idea is dead.
However, the over-arching concern is the uncertainty and policy vacuum that will follow.
With Brexit throwing global markets into turmoil and the Australian election non-outcome, a Trump victory in the United States would be the final nail in the coffin for investor confidence.
A hung parliament comes at the worst time for business because the economy needs all the help it can as it makes its uneasy transition away from the mining boom. Many of the Coalition’s economic policies, including company tax cuts and industrial relations reform, will end up on the backburner.
Many economists are already predicting a downgrade to Australia’s AAA credit rating, given the likelihood of higher deficits if things like high-end superannuation concessions are scrapped.
Tax cuts for small businesses with turnover of less than $2 million are still a safe bet, as that policy is supported by both the Coalition and Labor.
There is a cloud over the Coalition’s caps to superannuation with rumblings from within the party about scrapping the policy, although others think it is wiser to stick with the initiative given the lack of backlash in the electorate around the move.
All eyes will be on Nick Xenophon, who will have the balance of power role in both houses. While he has promised initiatives to revive manufacturing, any company with gaming interests should be worried.
While Labor’s chances of forming a majority government looks slim, it does not necessarily mean its call for a banking royal commission is dead. That idea is also supported by Xenophon and the Greens.
The contrast to the initial euphoria in the business world last year, when Malcolm Turnbull replaced Tony Abbott as Prime Minister, is staggering. A string of mergers and acquisitions by companies are also on hold until the outcome is clearer.
With the Foreign Investment Review Board (FIRB) in caretaker mode, this could have implications for the $9 billion takeover of ports and rail giant Asciano.
Courtesy : afr.com