2019 Australian Federal Election opinion

Today is Wednesday 15 May 2019, three days left until the Federal Election. I have already completed my civic duty, much like a growing portion of citizens that chose to pre poll vote or use the postal vote.

Voting in Australia

Australia maintains compulsory voting, where the failure to vote is a fine of $20 if the citizen does not have a valid reason for not voting as set out in the Commonwealth Electoral Act 1918, under section 245(5)(c)(iii) (“CEA”). In Australia, voting is mandatory, as set out in the CEA, under section 245(1), which states: “It shall be the duty of every elector to vote at each election”. Voting in Australia is therefore NOT a Right, but a Duty. The right to vote in a Federal election is obtained once a voter has obtained the right in the State that they reside, as set out in the Australian Constitution, under section 41, unless you have been incarcerated for more than 3 years as set in the case of Roach (Roach v Electoral Commissioner [2007] HCA 43, (2007) CLR 162).

Australian representative government has:

• a hybrid system of the USA’s bicameral and the UK’s Westminster, where the “House of representatives” or “lower house” has members of parliament, of 151 seats. To form government, a party requires at least 76 seats. The 151 seats is altered every 7 years and is made up of 47 in NSW, 38 in Vic, 30 in Qld, 16 in WA, 10 in SA, 5 in Tas, 3 in ACT and 2 in NT.
• the “Senate” or “upper house”, has 76 seats and the government must have the support of 40. The 76 is made up of 12 seats from each state and 2 from each territory.
• to form government, the support of both houses is required.

The Parties:

The major parties are the Liberal National Party (“Coalition”), the Australian Labor Party (“ALP”), The Greens, and several other minor parties of varying ideology. In the Ideology spectrum, the three main parties are strongly Authoritarian, the Coalition traditionally represents the Conservative centralists, the ALP represent the Left centralists, the Greens the ecological Left. Only one party remains strong to a Libertarian ideology of smaller government, less restrictions and taxes, they are the Liberal Democratic Party (“LDP”). The LDP has only one senator in the upper house, who was elected in 2013, then re-elected in 2016. The other popular minor parties are One Nation (whose aims are popular nationalistic), Palmer United (which has no demonstrated no policies, only slogans, its leader appears to trying to capitalise on populism as seen in the USA). The last few decades have seen the LNP and ALP oscillate government after approximately two terms of 3 years. It is highly likely that this election will see swings in various regions; however, it is still too close to call.

The Coalition’s ideology is authoritarian with a minor right and libertarian slant; however, the only thing libertarian about their views are the general reduction of taxes, with no real tax reform in view. In other words, more of the same, fiscal restraint, maintain “necessary” regulations and promote stability in the nations economy. It is evident that the approach may be insufficient to thrust the economy into strong growth, but the fiscal discipline will bring a budget surplus in the near future.

The ALP as usual, are pushing for more spending (stronger fiscal stimulus), with Australia’s current debt levels being relatively low, this seems to be capable of being funded by increasing that debt, i.e. Commonwealth Government bond issues. The key policy of concern is the tweaking of the pension system called Superannuation and the removal of middle class tax concessions such as Negative Gearing. The ALP purports that their proposals are fairer for the have nots; however, it is punitive to the haves, which have benefited from a decade of economic growth.

Leadership issues have plagued Australia’s two main political parties since 2007, where the has been a revolving door of Prime Ministers, first with the ALP’s Kevin Rudd, then Julia Gillard, then back to Rudd. Then the LNP’s Tony Abbott, Malcolm Turnbull and now Scott Morrison.

What now?

It is the authors belief that the ALP will not win this election; however, their economic stimulus, or at least part thereof would be beneficial to Australia. A strong fiscal discipline is imperative in order to reduce government debt, as this affords the nation’s economy a budgetary buffer in the event of global shocks. The issuing of government debt in the Australian context, in relative terms, is not of major concern as 41.1% of GDP, with China at 55.4%, Germany at 56.9%, Norway at 36.8%, New Zealand at 28.1% (IMF Fiscal Monitor April 2019 — General Government Gross Debt), Taiwan at 33.9% (https://worldpopulationreview.com/countries/countries-by-national-debt/). Of greater concern is France’s 99.2%, USA 106.7%, Portugal 119.5%, Japan 237.5% and Italy 133.4%. In short, Australia can borrow minimally from the market without affecting their rating and serviceability. The best outcome for Australia’s future, ceteris paribus, is that the LNP wins the election and applies some of the ALP’s fiscal stimulus so that it is greater than the LNP’s proposed sum, but not as much as the ALP.

Tax reform has been at the forefront of the economic conversation in Australia, and unfortunately, the political parties have seen it fit to tinker at the fringes from time to time to appease the masses at election time. Our closest rival, New Zealand has a top marginal tax rate of 33%, whilst Australia is at 49%. The ALP supporters always hold Nordic countries as the ones to aspire to, where Sweden’s top rate is 60.1%, Denmark with 55.71%, and at the other end, Norway with 38.7% (https://theconversation.com/factcheck-qanda-does-australia-have-one-of-the-highest-progressive-tax-rates-in-the-developed-world-77785). Arguments against further tax reform are varied, but the strongest in relative terms was that Australia’s system is not as complex as others, rating 75th, where USA was 70th, New Zealand was 68th, France 11th, India 10th, China 7th, Italy 3rd, Brazil 2nd and Turkey the most complex jurisdiction with respect to tax (https://www.tmf-group.com/en/news-insights/press-releases/2017/june/financial-complexity-index-global/). Minor or major reform would be welcome, so long as it is done with the view to improving the middle class, as it is a well known fact that a strong middle class promotes stability, growth and society in general (https://www.americanprogress.org/issues/economy/reports/2012/05/17/11628/the-american-middle-class-income-inequality-and-the-strength-of-our-economy/).

Afterword: This was written prior to the 2019 election in Australia and intended to be published at the time as a blog piece.