By Wayne Cole, Reuters
SYDNEY — With Australia’s election just days away business leaders want one thing for certain — certainty. Just give us political certainty, they cry, and we’ll be happy to abandon caution and spend like drunken sailors. Australian business and consumers have been on a three-year roller-coaster ride of minority government with changes of leadership, epic legislative struggles and policy reversals culminating in what has amounted to a seven-month-long election campaign. The return of some political stability is a tempting thought since a long bonanza in mining investment is rolling over and the rest of industry needs to pick up the slack if Australia is not to face some tough times ahead. Typically elections have only a fleeting impact on business, largely because the major parties’ economic polices are pretty centrist, with all committed to budget surpluses over time and to an independent central bank.
But this time the mood has become so self-reinforcingly somber that a decisive outcome could provide real relief. “This election could be different,” said Paul Bloxham, HSBC’s chief economist for Australia. “It’s clear that uncertainty over tax and regulations has been a hindrance to investment. Just the thought of some certainty should lift business confidence and give a timely boost to the economy.” Figures from Deloitte Access Economics showed there were AU$452 billion (US$405 billion) of investment projects underway or committed at the end of March, but there was another AU$477 billion-worth up in the air. Such is the desire for stability that opposition leader Tony Abbott felt he could win votes by promising his government would be one of “no surprises.” Needless to say business favors the conservative Liberal-National Coalition led by Abbott, which according to the opinion polls, is likely to win a clear majority on Sept. 7. The ruling left-of-center Labor Party won kudos for its management of the global financial crisis, but has since been criticized, fairly or not, for making policy on the run. The implementation of a carbon tax and a new mining resources tax went badly, while constant changes to regulation had business leaders tearing their hair out. Worse Than Greece? It’s a tight network for upper management in a nation of only 23 million and the gloom became pervasive over time. The Australian Industry Group’s suite of business surveys, for instance, are bleak by any measure. Its performance of manufacturing index, known as the PMI, the lowest of any developed country. Bizarrely it is even below that for Greece, an economy that has shrunk by almost a quarter in the past five years. Australia hasn’t suffered a recession for 22 years and was the only rich-world nation to dodge a slump during the global financial crisis. National Australia Bank’s well-regarded measure of business sentiment slipped to an eight-month low in July, to be well under its long-run average. “Whether it’s a Labor or Liberal win, a decisive election result is likely to be positive for business confidence,” said NAB senior economist Spiros Papadopoulos. However, he also noted that survey results for the past 15 years did not show much of a lasting boost following elections. Neither was it clear that consumers would suddenly throw aside their post-crisis caution and go on a spending spree. One measure worth watching will be the monthly survey of consumers by Westpac and the Melbourne Institute. This has shown a huge gulf between party supporters, with Coalition voters markedly more pessimistic than those who identify with Labor. A clear Coalition victory could therefore lead to an outsized increase in confidence, at least for a few of months.