Shareswatch Australia

Australian stock market investing, ASX charts, analysis & market forecasts.

Shareswatch Australia header image 2

The great Australian election hangover.

September 16th, 2010 · Greg Atkinson · 36 Comments

Well after a few weeks of uncertainty following the federal election in Australia, the Australian Labor Party (ALP) has managed to pull together a ragged alliance and hold onto power. Some people say that a minority government will be a refreshing change and can work well, but I believe that the coalition that Julia Gillard has put together will result in few tough decisions being made and could end up damaging the Australian economy.

The Australian Greens are in a powerful position within the Gillard lead government of potential chaos. Although they hold only one seat in the Lower House they will hold the balance of power in the Senate and as result have been able to sign an agreement with the ALP that allows them to punch above well above their weight.

The problem with this arrangement is that the Greens and the ALP have many areas where their policies collide. Take for example uranium mining, the Greens want it stopped whereas the ALP say they support mining and the export of uranium and long as it is used for peaceful purposes. (e.g. power generation).

The Greens position regarding uranium mining is baffling since according to their website:

“The Australian Greens believe that:

climate change poses the greatest threat to our world in human history and requires urgent local, national and global action.”

As I have written before in Are climate change and global warming dangerous distractions? I seriously doubt climate change is the biggest threat we face on planet earth but if it is, why would you oppose the mining of uranium when it can be used to as fuel for a new generation of nuclear power stations which in turn will help address climate change issues?

Again according to the Greens website they believe:

“nuclear power is not a safe, clean, timely, economic or practical solution to reducing global greenhouse gas emissions.”

In fact the opposite is true; nuclear power in the 21st century is safe, clean, economic and is a practical solution that could be used to significantly reduce greenhouse gas emissions in Australia and other developed economies.

Besides if the Greens are worried about the economic viability of nuclear power then they better look at solar and wind power as well because they aren’t exactly cheap options either in terms of cost versus power generated.

So under the current government nuclear power is unlikely to ever be seriously considered in Australia whilst the Greens/ALP alliance remains in place. The Greens are even opposed to the use of nuclear technology for medical research, so this means Australia is likely to fall further behind in all fields related to nuclear technology under Gillard’s reign.

To remain in power, Prime Minister Julia Gillard needs the support of a gaggle of 3 so-called “Independents” who are have been putting their own lust for power and influence ahead of national interests, Sadly however, they have to be able to wield more power than they should have ever been allowed to do so, and now their inflated egos are able to influence policy making on a national scale.

Take the National Broadband Network (NBN) for example. In order to win the support of the Independents, Gillard has agreed to alter the deployment of what she says is critical infrastructure, so that it is rolled out across rural areas first.

That’s right folks, the Government is going to spend billions rolling out a broadband network across some of the most sparsely populated areas in Australia ahead of the major cities just to keep three Independent MP’s happy.

This tells us a lot about how decisions will be made under the current regime. Anything too difficult will be placed in the too hard basket, whereas anything that involves splashing money around to maintain power will get priority.

This approach is not going to build confidence across the business community and impress overseas investors. In just a few years Australia’s reputation as an investment destination has slipped from being considered rock solid to bordering on unstable.

Isn’t also amusing to see that the Gillard Government plans to hold a “tax summit” not long after the Henry Taxation Review was basically printed, made into attractive booklets and then used as door stoppers.

As some readers may recall, back in January 2010 I wrote in an article entitled Why the Ken Henry taxation review will achieve little about how Henry’s report would basically be shelved and that is exactly what has happened.

The only recognisable part of Henry’s work left is the Mineral Resource Rent Tax (MRRT) which is a watered down and heavily modified version of the Resources Super Profits Tax (RSPT) which in turn is a very twisted version of what was in Henry’s report.

Now we are back to square one and some sort of taxation summit will be held where the Greens and the Gillard aligned semi Independents will try and use their newly obtained power to influence taxation policy at a national level. Be afraid, be very afraid.

I wonder if the taxation summit will dust off any of the suggestions that came out of Kevin Rudd’s “Australia 2020 Summit”?

So we are likely to move into yet another year where taxation reform will be discussed yet again but nothing tangible will happen. As sure as night follows day, nothing will significant will take place on the taxation front under the current Government because it will simply be impossible to reach a consensus view amongst the ALP/Greens and Independents.

What this means is that business owners, companies, investors and individuals are going to left guessing about what future tax changes might be made.

Will some of Henry’s suggestions be put back on the table? Will the GST be up for review at the planned tax summit? How much influence will the Green have? Will we see a carbon tax or emissions trading scheme being reworked and introduced over the next few years?

Perhaps the Gillard lead minority government is refreshing or trendy for the Canberra press gallery or for the caffe latte guzzling inner city crowd who believe they make up the Australian intelligentsia, but for people who run a business, manage their own superannuation fund, investors or anyone trying to plan their financial future, the current situation is a mess.

At best we can hope that the hangover from the election becomes too painful and a remedy is sought as soon as possible via another election. At worst, the nation will simply live with the pain for 3 years and if that happens, the long term effects will be felt across the economy for many years.

36 responses so far ↓

  • 1 Jason D // Sep 16, 2010 at 11:08 am

    Thanks again Greg i really enjoy your articles.

  • 2 Senator13 // Sep 17, 2010 at 8:52 am

    Yes agree – very good article and really puts into perspective the messy situation we now have.

  • 3 Jason D // Sep 17, 2010 at 9:05 am

    I think we need to start running a book on when we return to the poll and who will make the first stuff up

  • 4 Vince. L // Sep 17, 2010 at 10:33 am

    I pick February/March 2011. I reckon the Independents will feel the heat when they are back in their electorates over Xmas and then one or more or them will swap over to the Libs/Nats to try and save their skin.

  • 5 Ross T // Sep 17, 2010 at 11:24 am

    Pretty accurate summary, however the independents were always going to side with the ALP cos they are the big spenders and you always go with the money.
    Perhaps the most annoying part of the Gillard confirmation is her continued glee at the treasury black hole “discovery” in the coalitions costings. It was mostly to do with treasury assumptions and I note the treasury failed to discover similar holes in the ALP bottom line – 5billion in the NBN and about 100 for the Green agreement. Meanwhile the apolitical treasury idea seems to have disappeared.
    The Greens seem to have hit the ground running and are digging holes for themselves (with the media) trying to enforce their 28Billion pa Carbon tax and now refugee accomodation as well.
    Meanwhile the global warming exaggeration continues with a new minister in charge. Ironic that he has a beachfront house isnt it? – More do as I say — not do as I do.

  • 6 Biker // Sep 17, 2010 at 12:37 pm

    “…I reckon the Independents will feel the heat when they are back in their electorates over Xmas…”

    You’re right, Vince. Crook already collected his marbles and went home… . πŸ˜€

  • 7 Greg Atkinson // Sep 18, 2010 at 7:34 am

    Ross what truly amazes me is that Gillard and Co. continue to play up the global warming issue but don’t do anything practical to reduce CO2 emissions.

    The $43 billion dollar NBN for example will actually increase C02 emissions especially during construction.

    If the Government was so concerned about climate change why not get going with a high speed rail link between Sydney and Canberra for example? Or how how about addressing the problem of peak hour congestion in the major cities?

    I see Kevin Rudd is still so worried about global warming that he is back in the air and off flying overseas again….ever heard of video conferencing Kev? What an ego driven little man he is.

  • 8 Biker // Sep 18, 2010 at 9:27 am

    Well, one could argue that Labor’s subsidies for solar electricity systems constitutes a practical initiative, Greg.
    We’ve now commissioned five systems for rental homes and our initial experience indicates that homes with solar electricity and or solar HWSs are much sought after… and leased quickly.

    “Or how how about addressing the problem of peak hour congestion in the major cities?”

    Perhaps government subsidies for EVs are on the way?!~ πŸ˜€

    Hate the Greens, but I _love_ clever, cost-saving technologies!

  • 9 Greg Atkinson // Sep 18, 2010 at 11:01 am

    Biker solar panels on homes are not all that energy efficient. Sadly people don’t factor in the energy that goes into making, transporting, and installing them. I guess they do have some overall net benefit especially..but I wonder how much.

    Home solar panels are also not very cost effective as a stand alone option, that is why the government provides a subsidy. Take away the rebate and the ROI is not very good. Might be good for property developers, some home owners etc but as a national policy it is a bit of a stunt. (especially when so many of the panels are imported)

    Overall it’s true I guess that having solar panels on a home are better than not, so they are green but at a macro level they are not what I could cost effective as such.

    If we were serious about saving energy we would fix up the transmission network, the losses from overhead wiring and old infrastructure are enormous. I reckon $43b would do a lot to improve things but it seems that sort of money is destined to help people download Youtube clips πŸ™‚

  • 10 Biker // Sep 18, 2010 at 8:07 pm

    “the losses from overhead wiring and old infrastructure are enormous…”

    Completely agree on this. ALL our properties have underground power.

    “(Solar electricity) Might be good for property developers, some home owners etc but as a national policy it is a bit of a stunt. (especially when so many of the panels are imported)”

    I think they’re ALL imported. We have no problem with that.
    For folk like us, the current subsidies are brilliant. We add $10K of value for less than $2K. We claim on the $2K. Tenants halve their electricity bills.

    In our view, it’s just good business… using our smarts… . πŸ˜€

  • 11 GoWest // Sep 19, 2010 at 7:15 pm

    The Global warming issue is a vote magnet / feelgood issue, so the ALP loves using it as an excuse to employ mates and spend money on vote winning projects. The simple fact is we are paying a lot more for power and gas than we should, mainly due to govt taxing. As I noted the carbon tax is just another tax grab from our insatiable politicians. Solar panels dont last forever and every solar panel pushes up the overall cost of electricity for everyone simply because backup generators are need to cover periods when the panels dont deliver power. The subsidies being paid are up to 3 times the current cost of power and unsustainable in the long term. The main victims will be the aged and self funded retirees.

  • 12 Biker // Sep 19, 2010 at 7:25 pm

    Being both (nicely) aged and a soon-to-be SFR, I completely disagree, GoWest. You’d have a far stronger case arguing that the main victims will be the next generation, who pay for the present subsidies. πŸ˜‰

    But the panels we’re putting up now will be producing electricity after we’re gone. We’re in a position to take full advantage of these $ubsidie$… and we’ll do so. No objection whatsoever to you using coal to power your home. πŸ˜€

  • 13 Greg Atkinson // Sep 20, 2010 at 8:36 am

    Go West the carbon tax is just about the silliest thing I have heard especially when heavy polluters like the coal sector will be let off the hook. What is the tax suppose the achieve exactly apart from driving up the cost of energy and giving inflation a nudge upwards?

    The theory is, according to the likes of the BHP CEO, that the carbon tax will be applied across all major developed economies and because of that, Australia will not be economically disadvantaged.

    This is from a man who knows quite well that existing trade rules and international agreements are openly ignored already, so does he reckon that nations will put aside self interest and embrace a carbon tax?

    Or could it be the carbon tax, dare I say it, looks like a good option as far as BHP’s bottom-line is concerned?

    Another big supporter of the carbon tax is Malcolm “I’m still sulking” Turnbull. Wow, I wonder why an ex-merchant banker would be happy about something that created new financial products for his mates to trade?

    Enough said.

  • 14 Biker // Sep 20, 2010 at 8:43 am

    “…could it be the carbon tax, dare I say it, looks like a good option as far as BHP’s bottom-line is concerned?”

    No, no, I’m certain that money has nothing whatsoever to do with this decision!~ πŸ˜‰

  • 15 Ross T // Sep 20, 2010 at 4:30 pm

    BHP likes the carbon tax and the MMRT because existing (Coal) producers will be given carbon credits or protected by large book value write-offs in the case of the MMRT. BHP’s competition will be at a disadvantage when building new power required to service our rapidly growing population. BHP has a large oil/gas investment which will also do well as the number of diesel power stations increase to cover the peak power loads caused by solar and wind power drop-outs.
    Australia is devolving into “east vs west” with the easty’s using fed tax’s to rip off Woodside etc with a retrospective PPRT (Karratha has gone into a freeze)on gas. As for the MMRT, Twiggy’s curses show what FMG thinks of the cozy agreement. WA iron ore is expected to contribute $6bill+ in the first year of the MMRT. QLD / NSW Coal will contribute $2billion. After that it will get much bigger, no doubt Julia will spend the first part on the β€œlight rail” to Canberra being demanded by the Greens. Brazil is looking good!
    On another subject I note the Sri Lankin sharemarket is booming (up 100%) – maybe now there will be reverse migration as refugees head back to make their fortunes after a paid stopover?

  • 16 Biker // Sep 20, 2010 at 8:27 pm

    “…now there will be reverse migration as refugees head back to make their fortunes after a paid stopover…”

    Brilliant strategy. Once all these wealthy refugees realise how much better off they’d be back in Sri Lanka, they’ll swim home. Have a sinking feeling they’ll all airfreight their bullion back. πŸ˜‰

  • 17 Vince. L // Sep 21, 2010 at 12:48 pm

    Some interesting comments about nuclear power here: Nuclear option deserves our most objective gaze

  • 18 Ross T // Sep 21, 2010 at 3:01 pm

    Nuclear power is the only sensible long term power option – even the Greens support it (in Germany). Barry Brook has given many persuasive arguements why we should be building for a nuclear power future now. I particularely like the idea that it will take a golfball sized piece of nuclear fuel in gen4 reactors to provide all my power needs for 70 years. However the Aussie GreenALP wants euthanasia and thats what we will get during the next 3 years of Gillard’s boldly “going forward” green adventure.
    Wasn’t it great to hear that the Dubbo farmers are having a great year on the farm – Global warming is good for something other than solar panels!
    Over the weekend I also heard that the banks are back to their old bad ways – lifting loan to value ratios to entice aussie punters to take on more debt. Once again short term profit is being used to keep building the housing bubble until it really bursts.
    It was interesting that Glen Stevens came out rattling his “I will raise interest rates” saber not long afterward. He blamed the mining boom, but I reckon his real target was bank customers about to get a mortgage.

  • 19 Greg Atkinson // Sep 21, 2010 at 4:25 pm

    Ross when I am back in Oz I am bewildered by how little the average person know about nuclear power technology and yet plenty of people (and politicians) will stress nuclear power is unsafe.

    When people tell me that nuclear power is unsafe I ask:
    “which generation of nuclear power technology are you talking about” and the reply is usually “all”.

    I then ask: “can you tell me about some of the different types of nuclear power technology?” and at that point the person usually struggles to name any.

    So I wonder how people can have safety concerns about something they know nothing about? Do they also fear the bogeyman? πŸ˜‰

  • 20 Ned S // Sep 21, 2010 at 6:27 pm

    The one whinge re nuclear that always carried some potential weight with me, was that we haven’t quite figured out what to do with the radioactive waste fuel rods yet. What’s the state of play on that these days?

    Sorry if I’m just displaying excessive ignorance – I really haven’t kept up with it for decades. Although Yep, it seems like the way we need to go, even if the answer is wrap it in lots of rio and concrete and lead and have a bit more of a think about it.

  • 21 Greg Atkinson // Sep 21, 2010 at 7:39 pm

    Still a bit of an issue Ned. But I see no reason why the old fuel rods can’t be stored safely until we figure it out. I know some people say it will be around for 10,000 years but they have lost the plot, we will either solve the problem well before then or be wiped out by a big comet.

    I have faith in our ability to solve problems, that is why we are not still living in caves πŸ™‚

  • 22 Ned S // Sep 21, 2010 at 7:54 pm

    “Still a bit of an issue” – Thanks Greg.

    “I have faith in our ability to solve problems” – The thought crossed my mind recently that if all those clever climate change scientists were told to redirect their thoughts to the nuclear waste disposal issue, the likelihood of coming up with an answer sometime soon might be increased? πŸ™‚

  • 23 Biker // Sep 21, 2010 at 8:24 pm

    Lived right out in-the-middle for a coupla years. Bored spitless, I became interested in the history of possibly the most remote little community in Oz. Along the way, I found a handwritten journal which detailed the complete depopulation of the area back in the early seventies.

    Took them a while to figure out the problem.

    Turns out that the nightcarts emptied their sh*t into a gnamma hole west of town. They drew their water from a gnamma hole east of town. Cholera took out a whole Australian community… and in the 70s.

    Moral of the story: Find out what you’re going to do with the sh*t before you dump it.

    If we do go nuclear, let’s employ the very best technology and use thorium. Few of the horrors of uranium… less sh*t… and infinitesimally less radiation.

  • 24 Ned S // Sep 21, 2010 at 9:08 pm

    “Turns out that the nightcarts emptied their sh*t into a gnamma hole west of town” – Have you read Bryce Courtenay’s “Four Fires” Biker? – The sad circumstances of the demise of that town’s dunny cart man was one of the most seriously side splitting laughs I’d had in years.

    Just dug up “Power Without Glory” while looking for the Bryce Courtenay book, as I couldn’t recall it’s title – Bonus; That’ll keep me re-reading busily for two weeks! πŸ™‚

  • 25 Senator13 // Sep 21, 2010 at 9:14 pm

    We will just shoot it into the sun!

  • 26 Ned S // Sep 21, 2010 at 9:26 pm

    Another solar system’s sun please Senator just on the off chance our scientists get their sums wrong! πŸ˜‰

  • 27 Ross T // Sep 21, 2010 at 9:42 pm

    The ALP and Greens ignore technological developments that have solved the long-lived nuclear waste problem – it is burned as energy in fast spectrum reactors. Fear and ignorance is used to get votes as usual. I personally blame the ABC for their blatant bias against all things nuclear.

  • 28 Biker // Sep 22, 2010 at 1:01 pm

    I’ll look for it, Ned.

    I must write up a sad tale about a bloke who had stockpiled a mound of highly productive gold ore for detailed work, later returning to find the Shire had used it for roadmaking. His attempt to take his own life would be humorous, if it was not so tragic and his subsequent death not so long, painful and horrific… .

  • 29 Biker // Sep 22, 2010 at 1:47 pm

    I believe congratulations are in order, BTW, Ned.
    Apparently our mate Steven has got himself an apartment and is raising two kids. Must have accomplished this with all that really cheap gold he bought… . πŸ˜‰

  • 30 Futureproof // Sep 22, 2010 at 7:02 pm

    The Greens/ALP mantra: Massive fossil fuel processing plants are bad because they provide fuel to cars (modern cars getting 700KM to a tank), but electric cars are fine because they are powered, not by massive fossil fuel, coal-fired power stations (and only get a range of 150km), but by koalas running on tread mills in gum trees.

  • 31 Biker // Sep 22, 2010 at 7:31 pm

    Futurepoof Mantra: Stay with old technologies until the expense is unsustainable… then panic!~ πŸ˜‰

  • 32 Greg Atkinson // Sep 22, 2010 at 8:51 pm

    Futureproof: The focus on electric cars in Australia is a touch amusing since most of the power for them will come via coal fueled power stations…but apparently that is okay as long as you hide the CO2 underground somewhere.

    Of course true to form, the technology for electric/hybrid cars is developed overseas..another win for our shrinking hi-tech sector. Mind you we are giving the car makers in Oz some nice tax breaks, too bad they are all foreign owned.

  • 33 Biker Pete // Sep 23, 2010 at 8:47 am

    Perhaps we should pay our best engineers a little better and keep some of them in Oz, Greg. Can’t see our eldest staying…

  • 34 Greg Atkinson // Sep 24, 2010 at 9:16 am

    By the way new nuclear power technology is already coming into service in Japan: Tepco starts power output with MOX fuel

    Seems there is a use for that old spent uranium after all.

    P.S Biker, I am not sure the wages are such an issue, more the employment opportunities in some areas of engineering, although I suspect mining related engineers are doing well.

  • 35 Biker // Sep 24, 2010 at 2:27 pm

    Couldn’t build it in a more geologically-stable area in the world! Well, maybe Indonesia… .

    Sorry about my cynicism, Greg. If we could just fix that old tectonic plate issue for once and for all, maybe I’d have less reservations. Perhaps a good concrete pour, like the Deepwater Horizon fix!~

  • 36 Greg Atkinson // Sep 25, 2010 at 8:02 am

    The point is Biker that if reactors can operate safely in Japan then they are going to operate safely in Australia. There is also a high speed rail network crossing Japan and it also operates safely despite frequent earthquakes.

    By the way, the spent fuel from a MOX reactor needs to be isolated for only 200-300 years. Sounds like a long time? Well it is a lot shorter than the thousands of years figure the Greens scare people with. It is also more viable than pumping CO2 underground.

Leave a Comment



This site is not intended to act as any form of financial or investment advice.  © 2008–2017 Shareswatch Australia — DisclaimerCutline by Chris Pearson


The information contained in this website is for general information purposes only. Whilst we endeavour to keep the information up-to-date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk. Please seek professional advice before making any investments.