With bookies indicating the Coalition was odds-on favourite to win the recent federal poll, much of the
Australian electorate had expected the incumbent Turnbull government would claim a decisive victory and
therefore assumed a high degree of certainty regarding various policy positions and proposed legislative
changes.
Although the prospect of a hung Parliament was averted and the government has a majority in the House of
Representatives, it is unlikely to control the Senate where the crossbench will represent a diverse range of
objectives with populist and single platform candidates wielding power.
Implementation of the Coalition’s stated policy agenda now appears precarious with the election outcome
throwing into doubt a wide range of issues, including key budget measures, such as the proposed changes
to superannuation and business tax cuts.
The Turnbull government faces the complex task of shepherding legislation through the Parliament’s upper
house where negotiations with independents and minor and micro parties may require offers of compromise
and incentives in exchange for support of their bills.
Adding to the political ambiguity, the Liberal Party is facing internal dissent over some of the government’s
budget initiatives, although the Prime Minister has committed to implementing the current budget agenda.
Furthermore, parliamentarian select from among the non-major parties and independents are exercising
their newfound influence and shaping the political agenda with gambling reform and the capital gains tax
concession rate now part of the post-election political discourse.
Here I outline several policy areas affecting business and investors where there is now uncertainty:
Senator Nick Xenophon is proposing a raft of changes to regulations governing online gambling, pokies and sports betting
advertising.
Superannuation reforms
A raft of changes to the super laws were outlined in the May budget, including a $1.6 million transfer cap on
pension phase assets, reducing the concessional contribution cap to $25,000 a year and a $500,000 lifetime
cap on nonconcessional contributions. As the budget has not yet been passed, these proposed changes
are now in the balance.
Despite assurances from Treasurer Scott Morrison and the PM that the package of reforms will be put to the
Parliament in their current form, this seem unlikely given division within the Liberal Party with parliamentary
members, as well as rankandfile members, reportedly blaming the mooted super reforms for a voter
backlash which contributed to the Coalition’s poor poll results. Weighing into the debate, industry groups are
now voicing their opposition to the proposed changes to further undermine the measures.
Gambling laws
Now one of the most influential MPs in the country, Senator Nick Xenophon, has predatory gambling high on
his agenda declaring it a “core focus” of his NXT Party platform. Citing statistics indicating Australia has the
highest gambling losses per person globally, Senator Xenophon proposes a raft of changes to regulations
governing online gambling, pokies and sports betting advertising aimed at minimising harm caused by
gambling, including $1 maximum bets on poker machines and banning sports betting advertising during Grated
television programming.
Senator Jacqui Lambie and independent lower house MP Andrew Wilkie have previously echoed similar
concerns about gambling and collectively they have the potential to create social and political pressure to
drive legislative changes to Australia’s gambling laws. Coupled with the proposed reforms to the wagering
laws recommended by the O’Farrell review and supported by the Coalition, the gaming, hotel and club
industries face potentially strong headwinds in the wake of the federal election.
Business tax cuts
To encourage investment and increase productivity, the Turnbull government set out plans in the 2016
budget to progressively reduce the company rate of tax paid by businesses with revenue of less than $10
million to 25 per cent over the next decade.
Treasurer Morrison argued the benefits of these tax cuts describing how small and medium enterprises are
“driving jobs growth in Australia and must continue to do so.” With the measure opposed by the Greens and
Senator Xenophon and Labor only prepared to support the cut for businesses with turnover of less than $2
million, the current proposal is now in doubt.
Capital gains tax concession rate
Throwing his weight behind an ALP initiative, Senator Xenophon is urging the government to consider capital
gains tax reform as a budget repair measure. As part of its election platform, Labor targeted tax subsidies –
specifically negative gearing and capital gains tax concessions – labelling them unsustainable and
unaffordable.
Labor’s policy paper claims the cost of the current capital gains tax discount subsidy is considerable and
growing rapidly. It forecasts forgone revenue due to the discount will increase from $4.2 billion in 201314 to
$8.6 billion in 201819. The Prime Minister may need to consider reducing the capital gains tax concessional
rate to offset potential revenue shortfalls from potential amendments to other budget measures.
Confidence undermined
Although the polls suggested the election would be close, given the majority of media and the betting market
inferred the Coalition would win comfortably, industry and investors were caught offguard by the federal
election outcome and have been largely unprepared for the ensuing political instability and policy
uncertainty. As a consequence, business and consumer confidence has been undermined, with the latest
Westpac Melbourne Institute Index of Consumer Sentiment falling 3 per cent in July.
This effect has been further compounded by Australia’s AAA credit rating now being at risk. The damage to
confidence has the potential to constrain personal and business investment and impact economic growth in
the short term. Ratings agencies, investors and industry alike will be watching intently how Australia’s 45th
parliament tackles the government’s policy and legislative agenda.