14th June, 2022
Historically, the Coalition represented the interests of business owners while the ALP represented the interests of their employees. But modern Labor is pretty pro-business, writes Nigel Bowen.
The ALP retains its foundational commitment to preventing workers from being exploited. But it long ago abandoned any anti-business sentiment.
Famously, the Hawke and Keating Labor governments implemented a raft of free-market reforms from 1983-1996 and, except for some post-WorkChoices tinkering with the industrial relations system, it’s difficult to paint the Rudd or Gillard governments as anti-business.
And, echoing Bob Hawke, Prime Minister Anthony Albanese has frequently expressed a desire to lead a country “in which unions and business work together for the common interest”.
So, what do we know about the incoming government and how is it likely to work with private interests?
Before the election, Albanese released a ‘Better Deal for Small Business’ suite of policies and pledged to:
The sum of these statements indicates the ALP wants to make life easier for small businesses, but of course we’ll have to wait to see how these good intentions play out in the weeks and months to come.
While Albanese didn’t unveil a ‘Better Deal for Mid-Sized and Big Businesses’ plan, there’s no indication he wants to raise taxes on larger businesses or burden them with excessive regulation.
Before the election, Albanese delivered a speech to corporate leaders in which he stated he wanted both profits and wages to rise. He also listed a series of objectives – regulatory reform, cheap and reliable energy, more training and education, affordable childcare, and investments in productivity-enhancing infrastructure – with plenty of upside for businesses of all sizes.
That’s the good news.
The bad news is that, like many incoming governments before them, Albanese’s cabinet may be overwhelmed by events beyond its control.
Before the election, Treasurer Josh Frydenberg was keen to talk up the economy, pointing out it bounced back strongly from the pandemic-era lockdowns.
Frydenberg emphasised that unemployment was at half-century lows and that Australia had maintained its AAA credit rating. He also predicted that strong economic growth would continue and that Australia’s trillion-dollar debt would rapidly shrink.
Australians would now be hard pressed to describe Frydenberg’s pitch as anything more than wishful thinking at best.
Frydenberg’s successor, Dr Jim Chalmers, argues the Australian economy, like many others, now faces “big challenges” in the form of surging inflation, falling real wages and rising interest rates. He also notes a tight labour market is a mixed blessing and that acute skill shortages are putting a handbrake on economic growth.
It’s an open question whether politicians and policymakers around the world will be able to deftly manage challenges such as soaring energy and food prices, rising interest rates, massive debt burdens and geopolitical instability and stick a ‘soft landing’ that prevents a recession.
The new Treasurer and new Finance Minister are now going through Frydenberg’s final budget line by line looking for expensive projects that can be cancelled or delayed.
We can expect Chalmers will bring down his first Federal Budget in October — but beyond introducing “policies to get real wages growing again” and measures to ease cost-of-living pressures, it’s not yet clear how the new Labor government plans to avoid a serious economic downturn.
Even in a best-case scenario, business owners should be prepared for the comedown that was inevitably going to arrive following the sugar hits of, firstly, 14 years of unprecedentedly low interest rates and, secondly, the 2020-2021 stimulus payments.
If you’re a business owner or homeowner with, for example, a $500,000 loan and interest rates rise from 2.5 percent to five percent, you would go from paying $12,500 to $25,000 in interest a year. This leaves you with a lot less money to spend. If the asset you own is now worth less because higher interest rates mean fewer potential purchasers, you’ll be even more inclined to save rather than spend your money.
If things go well, reduced spending soon tames inflation, consumers open their wallets, and the economy quickly gets back to normal.
If things don’t go well, supply constraints mean food and energy prices continue to skyrocket and consumers continue to cut their spending. That means sole traders and small business owners reliant on discretionary spending – Uber and food-delivery drivers, travel agents, clothes shop owners, proprietors of cafés, bars, restaurants and hotels – start to struggle.
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Since the election was called, there has been ongoing updates, discussion points and soundbites from new ministers as they assume their various portfolios, giving us a fair indication of at least some of the business items on their agendas.
Business lobbies have been crying out for more migrants, especially skilled ones, for many months. Now the election is out of the way, the Federal Government is likely to (quietly) allow temporary and permanent migration to increase significantly, albeit not to the extent the business lobby would prefer.
Albanese answered “action on climate” when asked what he wanted his political legacy to be. And, given its monstering at the hands of Teal independents, it’s unlikely the Liberal Party will stand in his way as he attempts to end the partisan ‘climate wars’ that have made it hard for Australian businesses to plan for the future.
Australia enjoyed three decades of economic growth prior to the Coronacession primarily due to China. If we are heading into economically turbulent times, it would be helpful to mend fences with our largest trading partner.
Our recent change of government, plus China’s eagerness to woo Albanese, means there might be a mutually face-saving way to reset the Australia-China relationship.