Issue 03 | June 2013

Australias Labor Party Goes Head-to-Head with Opposition

as Parliament holds last sittings before Federal Election.

On May 14, Australias Labor Party (ALP), led by Prime Minister Julia Gillard, introduced its 2013-2014 Budget the last budgetrelated announcement to be made before the Federal election scheduled for September 14.

The budget came hot on the heels of Gillards recent announcement setting the countrys next federal election for the fall. Following the election announcement, several significant legislative activities have been pushed forward in anticipation of Australias Federal Parliament sitting for the last time on June. Although the Gillard government announced the election in an effort to end ongoing speculation, one unintended side-effect has been that every major legislative and policy decision announced this past year has been received as part of the ALP Governments re-election strategy. The budget itself has been met with a lukewarm reception by Australias business community and more broadly from the Australian electorate. In addition to key measures for a National Disability Insurance Scheme (NDIA) and a major structural change to school funding (Gonski reforms), the budget includes several reduction measures to counter Australias growing deficit and abandons previous promises of reducing corporate taxes. The budget also includes the reduction of overall revenue receipts by $A17 billion and introduces a renewed promise to return to a surplus by 2015-2016.

Even before the budget came out, the ALP Government was receiving historically low approval ratings in all major opinion polls. Published June 3, the latest poll had the government at 30%, with the Opposition, currently led by Tony Abbott, at 47%.%. In Australias preferential voting system, this puts the two-party preferred voting intention at 42% for the ALP and 58% for the Opposition. Many pundits and commentators now doubt the Gillard Government will win the September election with most predicting a landslide loss. In an effort to change the tide, the party has been selling its budget and its long-standing record in government to the electorate and the Opposition. Meanwhile, the Opposition has replied to the budget by criticizing the ALP and proactively putting forward its own policy agenda. If the Opposition wins, it has promised to repeal the Gillard Governments unpopular carbon and Mineral Resource Rent (MRRT) taxes, while committing a future Coalition Government to greater fiscal responsibility and accountability, and a reduction in spending by outsourcing some government functions. Australia is now in an earnest election campaigning mode where the level of debate will undoubtedly escalate.

Policy debates to note will revolve around personal and corporate tax (which will also affect foreign investment); large scale infrastructure programs offering opportunities for overseas companies; the governments approach to the $43 billion National Broadband Network (NBN); and its expenditure on health and education. The difference in attitude by the two main parties towards foreign investment is also of note the Leader of the National Party (the junior Coalition Party) recently questioned the high level of foreign investment in agricultural assets, setting the scene for a robust debate on this topic. With all these areas in the background, the coming election will undoubtedly bring major changes to Australias current political landscape, and most importantly, to the personalities within it. As September 14 nears, it will be imperative for both local and foreign companies to closely watch the election results, and to understand who Australias new political players will be and how they may change the course of business for the coming years.

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Australias mining and resources boom has been one of the reasons the country has avoided falling into a recession following the global financial crisis that rocked most of Europe and the United States.

From Boom to Bust:

The Uncertain Future of Australias Mining Industry

With a strong reliance on trading partners like China to buy raw materials such as iron ore, the countrys mining sector has enjoyed recent boom years, with unprecedented growth and high demand for both large and small mining companies. The current mining boom has created what many refer to as Australias two economies: one relying on the continued strength of major economies like China to buy commodities, and the other focused on traditional manufacturing, agricultural and service sectors which have not fared as well in recent years. This is partly the result of private sector employment growth in the mining and resources sectors, with a large part of that located in Western Australia. As a result, wages for miners and related employees have been very high for example, a typical crane driver can earn up to $A200,000 (equivalent to $194,740 USD) a year on a mine site while the same job at a non-mining related construction site in Sydney or Melbourne pays half this amount. Indicative of this mining boom, housing prices and rents have risen in Western Australia, while in the rest of the country (particularly cities like Sydney and Melbourne), they have stayed flat. Share prices and profits for miners have also been very healthy, but have continued to remain flat in other industries. However, trouble for Australias mining industry is on the horizon: as Chinas economy starts to show signs of a slowdown and the Chinese government shifts it focus to driving domestic demand, many worry that Australias narrow focus on mining and
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Industry share of Business Investment*

resources will soon lead to a major bust. Adding to this uncertainty is Australias fluctuating currency. Most recently trading as high as $1.08 against the U.S. dollar, Australias high currency has made the country very expensive to live in, visit and to do business in. Although a strong dollar has allowed many Australians to travel and invest overseas, it has also made Australian assets too expensive for potential investors, resulting in a significant slowdown in local tourism and foreign investment two historical driving forces behind Australias economy. But a shift is coming in recent weeks, Australias dollar has started to contract, bringing it below parity with the U.S. The prediction of some currency strategists is that the dollar

will settle between 85 and 90 cents a reduction in value that has been welcomed by business, government and those dependent on a more affordable currency. At the same time, large miners are seeing change at the top and finetuning their investment plans. BHPBilliton recently appointed Andrew McKenzie with a clear mandate to cut costs (resulting in a positive market response) and, due primarily to pricing issues, the future of the $300 billion North-West shelf LNG program is being scrutinised against future demand and cheaper supplies from other countries. For now, this is good news, but only time will tell if Australias falling currency will lead to a more secure future for its mining industry and commodities market.

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Source: Reserve Bank of Australia

news.com.au

Sydneys Lowy Institute and the Increased Importance of Think Tanks in Australia
One of the key outcomes surrounding the growth of public policy discussion in Australia has been an increase in the number of privatelyfunded think tanks.
Frank Lowy and Prime Minister Julia Gillard pose for photographers prior to delivering the Australian Multicultural Council lecture at Parliament House on September 19, 2012 in Canberra, Australia. (Source: Stefan Postles/ Getty Images AsiaPac)

As in the United States and the UK, these bodies provide a forum for the exchange of ideas, and for informed debate on matters of national and international significance that can influence the policy direction of governments, companies, political parties and key opinion leaders. Think tanks also provide an opportunity for formulating a point of view on the issues that impact the country and its place in the world. In Australia, one of the most significant such non-profits to be established has been the Lowy Institute for International Policy. Started in 2003 with a gift from its founder, Westfield Group Chairman Frank Lowy, the Institute is regarded as Australias leading organisation for the discussion and promotion of foreign policy, and is ranked as one of the worlds leading organizations in this area. The Lowy develops and executes a range of different research programs, holds regular forums with
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senior policy influencers including local and visiting politicians, ministers and heads of state, and provides commentary on global events. It contributes to major forums in other countries and its people regularly comment on world events. In a democratic society like Australia, a country with one of the most multicultural communities of any country, the politically unaligned Lowys activities provide a platform for the exchange of ideas and views that can and do impact debate. Much of the debate and activity of the Lowy focuses on macro issues, while keeping a core thread connected to Australias engagement with the rest of the world. Recent debates and forums have ranged from reporting on BRIC countries like India, China and Brazil and their relevance to Australias future, to Australias military engagement and defence expenditure in Afghanistan and Iraq, and even the importance of football on international relations.

While the level of discussion in Australias parliament often descends to a farcical, point-scoring level, the reasoned exchange of ideas at Institutes such as the Lowy has a clear role to play in promoting balanced and informed (even civilized!) debate. In the realm of public affairs, partnering with the Lowy institute is one of the most strategic ways to fully understand the landscape, perceptions and issues facing any client. Its also one of the best ways to start developing a balanced conversation with those stakeholders who matter most.

For more information about the Lowy Institute, visit www.lowyinstitute.org

Malcolm Turnbull:

The Man with Australias Broadband Future in His Hands

Malcolm Turnbull, Shadow Minister for Communications and Broadband, is one of Australias most prominent and closely-followed senior politicians.

Elected to the Federal Parliament for the Sydney House of Representatives seat of Wentworth in 2004, Mr. Turnbull served as Leader of the Opposition from 2008 to 2009 and is currently the Shadow Minister of Communications and Broadband. If Australias Liberal-National Party Coalition (the current Opposition) is elected, it is expected that Mr. Turnbull will continue to serve in Cabinet with the same portfolio of responsibilities. Most notably, this will include oversight of the contentious National Broadband Network introduced by the governing ALP Party, which is expected to cost Australian taxpayers a minimum of $A43 billion. Highly regarded as a successful businessman, Mr. Turnbull was a practising lawyer before getting into politics, advising prominent Australians such as the late media tycoon Kerry Packer. He has also worked as an investment banker, founding a merchant bank with the former Premier of New South Wales Neville Wran, and from 1997 2001, held the position of

Chairman of Goldman Sachs in Australia. As a result, he is considered to be one of the few politicians in Australia with broad business experience. Outside of business and politics, he and his wife Lucy (a former Lord Mayor of Sydney) are active patrons of the arts and are often involved in a number of pro-bono activities. Arguably the wealthiest member of the Federal Parliament, Turnbull has appeared in Australias Business Review Weekly (BRW) Rich List with a fortune of some $A200 million from investments primarily made in the first dotcom boom of the late 90s. He is also a highly-engaged social media user, with active accounts on both Facebook and Twitter. With over 160,000 Twitter followers, Turnbull is one of Australias most proactive Tweeters, using the platform to communicate his electoral, political and shadow ministerial activities and views. He particularly enjoys a strong following among the 18-25 age group. Should Mr. Turnbull be sworn in as a Minister in September, expect his portfolio area to be one of the most interesting of the new Parliamentary term.

Public Affairs Perspectives: Asia Pacific is published by Edelman 2013 Daniel J Edelman Group. For further information please contact:
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