Emails of the day (1-5)
Comment of the Day

September 11 2013

Commentary by David Fuller

Emails of the day (1-5)

On the election of Tony Abbott as Prime Minister of Australia, in response to my request for feedback yesterday
1) "Regarding the Bloomberg article on the recent election of Tony Abbott as Prime Minister. I also think it was unfair. Yes - Tony Abbott said little during the campaign…but why would he? Sometimes the hardest thing to do is just watch and say nothing as you watch the other side scratch each other's eyes out. That is what he did. I think he will exceed peoples (unfairly low) expectations of him as Prime Minister."

2) "Basically Bloomberg assessment is fair on basis of what is known:

"The Macro-economic picture suggests Australian economy will face headwinds as China growth slows. The publicly released economic policies are likely to produce a recessionary response in the National economy. The policy is light on detail but does include: A budget surplus to be delivered while simultaneously cutting two tax revenue sources and no tax replacement identified. The parental leave is to be funded by a tax targeted at the largest companies (not helpful) and is not well targeted to recipients economically.

"Bloomberg is therefore responding to what is published. The options are limited: 1. Break the election promises (always on the table, but unlikely given the PM's personality), 2. Massive spending cuts (moderate to severe recession), 3. Raise new taxes (Mild to moderate recession). The likely mix is option 2 cuts and some new taxes in option 3. Good policy on an uptick. Added to a slowdown, the scenario that produces the worst outcome for an economy.

"Time will tell if the PM's reputation for determination and discipline really means inflexibility. Challenging times ahead."

3) "I found your invitation for comment too hard to resist, although, of course, it simply reflects my opinions and prejudices. I will try to make it brief. Consistent polls showed that the Australian people, like me, wanted a change of government but, again like me, they did not want Abbott to lead it. They preferred Malcolm Turnbull, who is more moderate and who entered politics late from the business sector. Abbott is from the extreme religious right with views to match. For example, although he has a gay sister, he recently described the push for gay marriage as a current fashion. History has shown that extreme right-wing governments lack compassion and judge spending programmes only in money terms. Support for, for example, the arts, c lose to both of our hearts I know, tend to suffer and this has already been flagged.

"While the people voted Abbott into government in the lower house, they deliberately ensured , as they have done before, that he did not have a majority in the upper house so will not have automatic passage for his legislation. My take is that they do not trust him. I would also question the comment that he is smart. Cunning perhaps, but I have seen many interviews which suggested to me that, although a Rhodes Scholar, he does not have a particularly high IQ. He has been caught out lying a number of times where a smarter man would have handled it better. His use of suppository in the campaign when he meant repository was hilarious.

"I hope I am wrong. I have been before."

4) "In today's "Comment of the Day", David sought Oz comment on the recent election. The first three paragraphs of the following sub editorial from yesterday's only national newspaper probably sums up the story.

"I believe Abbott is a capitalist with a conscience. He recognizes that Australian politics still carries a very strong Irish, " 'gainst the government streak" that demands a slow and gentle approach rather than sudden sweeping reforms. He intends to entrench a more market oriented government and will find plenty in his team pushing him in that direction."

5) "Australia's Labor/Green/Independent coalition formed to attain government here three years ago was hamstrung by the necessity to placate it's minority components - hence, it's very unpopular Carbon Tax (Greens' price to support Labor) and its inability to 'stop the boat people' (illegal immigrants). Labor came to power with no debt and left with a 263B debt.

"Abbot had an assured victory so it was unnecessary for him to detail his agenda; for example, he divulged his budget only the day before the election. His announced 1 1/2% business tax reduction should boost the economy. Labor unions here are all powerful and actually a party to government - he will have to get their influence under control before the economy can be self-sustaining.

"About three years will be required to turn this situation around."

David Fuller's view Many thanks for these thoughtful and insightful replies, not least from people I have greatly enjoyed meeting in Australia. I hope Tony Abbott will exceed "people's (unfairly low) expectations" (1 above). I also think global GDP growth, including China's growth, will be somewhat better in a few years' time than some people currently expect. If so, what we now know of Abbott's programme could conform to the: "Good policy on an uptick" (2 above). I share the concern over any "extreme religious right" leaders (3 above), and doubt that Abbott would be where he is today in Australia if that was an accurate rather than overstated description. If the Prime Minister proves to be a "capitalist with a conscience" (4 above), that would presumably be regarded as appropriate by most Australians. The Australian newspaper's editorial (see link in 4 above) is also encouraging and informative. I also think Australia's economy would flourish under a fiscally conservative, entrepreneurial economy (5 above).

My guess is that Australia (weekly & daily) will be one of the better performing stock markets over the next several years

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