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Corporate Confidence: a struggle for Government

Written by Genevieve Norton

February 18, 2015

While the Australian political landscape is frustrating at best, you can’t say it’s dull. Despite last week’s attempted leadership spill, corporate confidence continues to plague the Abbott Government with murmurs of leadership instability, a problematic Senate cross bench and the failure to pass substantive saving measures to address the budget shortfall.

While criticism can be levelled at the Government, business leaders are also frustrated by the tactics of the Opposition and cross bench senators who continue to block budget-saving measures, crippling the Government’s ability to address the structural challenges facing the economy.

A recent Deloitte CFO Survey found that the biggest driver of CFO pessimism has been the impact of Federal Government policy uncertainty, and was found to be at similar levels to the Deloitte Q2 2013 survey, when pre-election confidence in the then Gillard/Rudd Government hit rock bottom. This uncertainty was echoed by Telstra CEO, David Thodey and CBA CEO, Ian Narev, who recently aired their frustrations on the impact of political instability on corporate confidence.

Beyond Canberra, we have a new government in Queensland and, in a matter of weeks, NSW will head to the polls. Here we provide a snapshot of what’s happened over the past week and what’s on the political horizon in Australia and how it may impact corporate confidence.

The Federal Government

  • Abbott’s approval rating remains at 24%.
  • Labor leads the Government 57-43 according to Newspoll.
  • Corporate confidence continues to plague both the Government, the Opposition and the Senate.

One week on from the leadership spill that threatened the Prime Minister, the Government has quickly moved forward with its agenda to reconnect with its core support base and prosecute two central policy areas: namely the economy and national security.

Over the past week, the Prime Minister has canvassed reforms to the oversight of foreign land ownership, citizenship, welfare reform and counter terrorism.

Abbott’s fortunes over the coming weeks and months will be entwined with the success of the economy and specifically the 2015/16 Budget. The drop in the Australian dollar will help boost export industries, including manufacturing, mining and tourism, which is good news for the Prime Minister.

Unfortunately for Abbott, he doesn’t have a lot of room to move and every decision or comment he makes is dissected and critiqued, absorbing the oxygen from real policy debate.

What Next?

According to Newspoll, Malcolm Turnbull sits at 64% as preferred Prime Minister to Tony Abbott. Unless the back bench begins to see improvements in the Government’s performance and the polls, the party will most likely turn to Turnbull to get them across the election line.

New South Wales

  • Election six weeks away on March 28.
  • Baird most popular political leader in Australia.
  • Latest poll puts the NSW Government at 53% to 47% on a two party preferred basis.

Premier Mike Baird remains the most popular leader across the nation and, despite the proposed electricity asset sales causing voter disquiet, the popularity of Baird means it will be very hard for the newly elected Labor Leader Luke Foley to beat him.

The key issue in this election will be the Government’s proposed $20 billion electricity asset sales to fund an aggressive infrastructure plan versus the policy platform that Labor will reveal over the coming weeks. Labor’s refusal to support the asset sales means the likelihood of a substantive infrastructure plan is limited and therefore it’s likely they will campaign on issues around service delivery.

What Next?

Baird should win the election but will have a bigger fight in passing its proposed electricity asset sales in the NSW Upper House.

Queensland

  • New Premier Annastacia Palaszczuk forms minority government.
  • Labor has 44 seats in the 89 seat Queensland Parliament with the support of independent Peter Wellington.
  • Announced slimmed down Ministry from 19 to 14. Eight women in the Cabinet with five first time MPs.

In Queensland, new Premier Annastacia Palaszczuk has been able to form Government on the slimmest of margins. However, with the ever present danger of by-elections and resignations, a strong stable government will be one of the new Premier’s biggest challenges.

The new Labor Government has been elected with the Budget in better shape than the one they left three years ago, largely driven by the public service cuts delivered by the Newman Government.

What Next?

The question remains whether the new Government will push a recruitment drive to rebuild public service numbers or take the opportunity to invest these savings in vital infrastructure after voters’ clear rejection of Newman’s asset privatisation plan.

Citadel-MAGNUS advises clients on a range of stakeholder engagement topics, including how to navigate the complexities of government and the impacts of government policy on business conditions.

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