Business and retailers breathe a sigh of relief
It was the Steven Bradbury federal election where the favourite defeated himself. The 2019 election was Labor’s to lose after more than three years of turmoil and struggle in the Coalition ranks, but Opposition Leader Bill Shorten overcooked his magic pudding of big spending projects, tax reforms and political sweeteners.
For business, the sigh of relief is palpable as voters opted for stability over the most expansive agenda proposed by an opposition party since Gough Whitlam in 1972.
The election was almost entirely fought on Labor policies. These strained credibility with their costings, and seemed likely to create bigger budget blowouts or even deeper raids on taxpayers’ pockets.
For retailers and business generally, the election result should provide a more certain and stable economic outlook, something that has been lacking for most of the past four years.
Business and consumer confidence should be expected to improve with Prime Minister Scott Morrison able to secure more unity in the Coalition ranks after his remarkable, and virtually solo, campaign effort.
Confidence underpins spending, and with the removal of Shorten’s retirement savings plans, other tax measures and the uncertainty about negative gearing changes on the housing market, spending should lift in coming months.
An increase in consumer spending will also be helped along by the first tranche of tax cuts promised by the Coalition government from July 1.
Speculation has heightened in recent months about the likelihood of a further cut in interest rates by the Reserve Bank. Such a cut is more likely following the re-election of the Morrison government than if Labor had won, as the Reserve Bank would have had to weigh in the potential economic consequences of the Shorten policies.
However, this columnist remains sceptical of the value or effectiveness of further interest rate cuts or whether the banks would even have the capacity or preparedness to pass on any cuts to the official rate.
One of the areas the Reserve Bank is monitoring closely is employment levels and it may well find that the re-election of the Coalition generates some improvement in the jobs market. Certainly retailers and the hospitality industry have been cautious with hirings in recent months, given the industrial relations and wages policies of Shorten’s agenda.
Even before the election, Shorten had the audacity to tell the Fair Work Commission it would need to dance to a Labor government’s tune in wage and penalty rate determinations in future. But the battle on wages and penalty rates will continue, with the union movement doubling down on an ambitious agenda it had expected to implement under a Labor government. Its first salvo is a claim for a $50 a week increase in the minimum wage.
The penalty rates issue will continue to be a fierce political debate, with Labor unlikely to back away from its election stance and the union movement maintaining its pressure, but the gradual reduction in rates determined by the Fair Work Commission will proceed.
Further, there could well be some structural or personnel changes to the Fair Work Commission itself, with the prospect of fewer roadblocks in the Senate due to changes in representation.
There will still be legislative changes for the franchising sector following the Senate Inquiry findings. However, they would be expected to be a lighter touch in regulatory terms than would have been drafted by a Labor government.
Nonetheless, the Australian Competition and Consumer Commission and other regulatory bodies will be on notice to improve their oversight of businesses after both the Senate franchising inquiry and the Banking and Financial Services Royal Commission.
The re-election of the Coalition government ensures a more predictable outlook and arguably a better administration following a reset by Morrison after stabilising the Coalition and then taking it to an improbable victory at the polls.
However, the incoming government faces significant challenges such as employment levels, energy policies, the disproportionate growth in public sector costs and an elusive budget surplus.