AUSTRALIAN ELECTIONS – 2 July
In light of the UK Brexit vote, the gravity of the upcoming Australian elections on July 2nd is now even higher.
Given the volatility and turmoil the Brexit debacle has caused, believe it has worked in favour of the
Liberal-National coalition and current Prime Minister Malcolm Turnbull. Voters are likely to be far more
vigilant of the chaos created from the vote to change and instead elect to keep the current government in order to “keep things the same”.
A Liberal-National is seen as a more market friendly choice and economically more supportive/progressive.
However, polls are extremely tight with latest polling suggesting a 51/49 split in favour of the Coalition.
Given the surprise of the Brexit vote any outcome appears possible at this stage.
Election Focus – Likelihood and Impact of Australian Elections
This weekend’s Australian election is seen as a key driver in the performance of both the general economy and the domestic sharemarket over the next 3 years. The gravity of the outcome is now even more significant given the decisions by the UK to leave the European Union. Party polices will be imperative to guide the economy from its fading mining boom and ever increasing budget deficit and return to a growth led by Chinese demand and global tourism.
Australia has experienced a prolonged period of political insecurity over the past 9 years with 6 prime ministers over the timeframe. Both Labour and the Liberals have had standing prime ministers replaced by alternative party members as internal party politics cause fractions within individual parties.
Australian prime ministers 1996-2016
The marathon 8 week campaign is the longest on record and is the first double dissolution since the 1987 election.
The latest polls collected by Newpoll shows the Coalition has edged ever so slightly
ahead of Labour for the first time in the campaign. It gives the Coalition a 51/49
advantage leading into the final week. The poll incudes the shock Brexit decision and
is the first poll to gauge the effect. It appears that the Brexit vote has played into the
favour of the Coalition as heightened voter concern has shifted sentiment to stability
and certainty over a voter for change. It appears that the Coalitions gain has actually
come at the expense of the smaller and independent parties.
For the fourth consecutive Newspoll, Mr Turnbull’s lead as the preferred prime
minister over Mr Shorten stayed at exactly 15 points as both men dropped one point.
Mr Turnbull was judged best by 45 per cent with 30 per cent for Mr Shorten and 25 per
cent still undecided.
Turnbull, is campaigning on a platform of jobs and growth, promising tax cuts for
companies and stability in uncertain economic times. Labour leader Bill Shorten, is
promising to invest more in public services such as health, education and childcare and
a crackdown on alleged rule breaking by banks.
The results in the Senate election are also important. It is likely neither the coalition
government nor Labour will win a majority in the powerful upper house. This will force
whoever wins power to negotiate with the Green party and independents
Policy Polling
The economy is the key issue for voters at virtually every election. We review the policy
of both Labour and the Liberals on key economic areas of focus.
Economy & Debt
Coalition
- The Coalition has attempted to position themselves as responsible economic managers
- A more prudent focus on spending and budget with deficit reduction a key issue to address
- Projections included in the 2016-17 Budget predict a deficit of $37.1 billion, down from $39.8
billion in 2015-16 - They expect to return to a balanced budget by 2020-21
- Net debt would peak at $356.4 billion in 2018-18 then starts to decline
- Labour has positioned themselves as capable of economic reform, while looking after the little
guys. - Labour is looking to increase spending which would see the budget deficit increase $16.4 billion
over the next four years - Labour estimate that they will return the budget to balance at the same time as the Coalition in
2020-21, but its deficits would be deeper for the first four years, - Extra spending is set to be allocated to Medicare, education, and infrastructure.
Unemployment
Coalition
- The Coalition does not have a specific unemployment target, saying it wants it to be as low as
possible. - The Government has established a ministerial working group to consider policy options to
protect foreign workers from exploitation.
Labour
- Labour is promising to work towards ‘full employment’ and has nominated a target of 5 per cent
unemployment. - Labour is proposing to increase the penalties for employers who deliberately avoid paying their
employees properly.
Negative Gearing
Coalition
- The Coalition has ruled out negative gearing as a money saving measure, claiming it would
reduce the value of family homes. - They say they will make housing more affordable by working with state and local government
to link transport projects with housing to increase supply.
Labour
- Labour wants to limit negative gearing to new housing from July 2017 and half the capital gains
tax discount available to assets held for more than a year. - They say this would improve the budget bottom line by $32 billion over a decade and improve
affordability.
Banks and Regulation
Coalition
The Coalition has promised to boost funding to Australia’s financial sector watchdog by $120 million over
four years.
They say this funding would be sourced from the bank under a user pays model and would allow the Australian Securities and Investment Commission to step up their surveillance capabilities.
Labour
Labour says only a Royal Commission will suffice when it comes to stamping out misconduct in Australia’s
banking a finance sector.
They estimate the Royal Commission would span two years and cost $53 million.
Superannuation
Coalition
- A dozen superannuation changes, designed to save $2.88 billion over four years, were
announced in the 2016-17 Budget. - They include lowering the caps on concessional super contributions, such as employer
payments, to $25,000 a year, and limiting the amount of super that can be transferred into zero-
tax retirement phase accounts to $1.6 million. - They also announced a new tax offset for lower-income earners and claim only four per cent of
super account holders would be negatively affected by the changes.
Labour
- Labour wants to reduce the tax-free concession available to people with annual superannuation
incomes from earnings of more than $75,000. - Under the plan future earnings would be tax-free up to $75,000 a year, with the remainder taxed
at 15 per cent. - They also want to reduce the Higher Income Super Charge (HISC) threshold from $300,000 to
$250,000. - They say these measures would save $1.9 billion over the forward estimates.
Company Tax
Coalition
- The Liberal-National Government wants to progressively cut company tax rates for small
businesses to 25 per cent by 2026-27. - They also want to broaden the definition of small business from those with an annual turnover
of less than $2 million to those with turnover of below $1 billion in 2022-23.
Labour
- Labour supports cutting the company tax rate in a bid to foster growth but they don’t believe
the thresholds should be broadened. - They anti giving tax relief to big businesses.
Personal Tax
Coalition
- The Turnbull Government’s 2016-17 Budget included tax changes to curb bracket creep for
middle income earners. - The income threshold for the 32.5 cent tax bracket will be broadened from $80,000 to $87,000.
- They will also remove the temporary deficit levy of two per cent on income over $180,000, as
originally planned.
Labour
- Labour supports changing the third tax bracket to prevent bracket creep, but thinks the deficit
levy should stay. - They don’t believe Australia’s Budget position justifies cutting taxes for high income earners.