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.