Tony Abbott’s election as the new Australian Prime Minister in September comes as the 13th biggest economy enters its 22nd consecutive year of growth. The defeated Labor Government, with the help of the Reserve Bank of Australia, diverted the economy from succumbing to the global financial crisis in their six years of power. This is with thanks largely due to the profitable mining industry fuelled by consumption in the emerging Chinese market.
The repeated lack of leader confidence indicated volatile relations within the Labor party ranks, despite visible national economic progression during their time in power. The conservative, Liberal-National Party leader has outlined post-Labor economic policies that will see drastic changes made in regards to spending
and taxation.
Their goal is to pay off the 27 percent of the GDP ‘’mountain of debt’’ left by the Labor Government in order to reach their target of a budget surplus by 2016/2017. Questioned by David Koch on the Australian TV show Sunrise before the election, as to how Abbott intends on reaching a budget surplus in four years without raising taxes, his answer was to implement ‘’sensible expenditure restraint.’’
He promised to protect Australia’s triple A credit rating by enforcing stringent government controls on spending. With his election speech declaration that “Australia is under new management and … once more open for business,” it is being made very clear that Australian economic growth is being pursued ahead of prior global humanitarian and environmental commitments.
Cutting aid for homeland improvement
According to Forbes, Australia is the 11th wealthiest country in the world with $39,764 per capita. Charity will definitely be starting at home for Australia though, with much of the proposed savings announced in the Coalition’s budget coming from federal funds allocated for humanitarian aid and asylum seeker support.
In Joe Hockey’s – an Australian MP – costings speech, he stated that it is necessary for growth in foreign aid to be reduced in order to pay for further infrastructure projects. He continued to outline savings of $4.5bn that will be made over the next four years by cutting aid to foreign nations, in order to fund infrastructural development.
As a member of the OECD’s Development Assistance Committee, Australia joined several other developed nations in promising to set aside 0.7 percent of its Gross National Income (GNI) for aid. This year, the country committed only 0.37 percent of its GNI to foreign aid.
Several developed countries have already surpassed or will be close to passing this 0.7 percent goal set out in the 1970 UN resolution, including Norway, Luxembourg, Denmark and the Netherlands.
Australia’s commitment to helping the world’s poor was also questioned this year when a third of the foreign aid budget was used to fund asylum seekers arriving on Australian shores ,despite having separate funds set out for this purpose. The decision to do this has received criticism from international aid organisations, as well as New Zealand Prime Minister John Key. The Liberal-National Party also expects further savings of $1bn over four years with its vow to ‘’stop the boats,’’ one of Abbotts many complex election promises reduced to a concise catchphrase. This $1bn is based on a supposition that the amount of asylum seekers arriving by boat will be reduced to 50 a month by the end of 2016.
A further saving of $1.2bn is proposed by cutting the current 20,000 refugee places to 13,750 and forcing asylum seekers whose boats are not stopped into programmes which will require them to work for welfare support from the Australian Government.
In an interview with Tony Eastley on ABC News, CEO of World Vision Australia, Tim Costello called foreign aid a “smart investment”, as it would help develop the education and health of the poorest members of the nations that Australia wishes to trade with, potentially strengthening ties between the nations.
If Australia’s GNI increases as the economy grows in the next four years as it has done the past 21 years, the percentage of aid in relation to GNI will also be decreasing, taking Australia further away from the aid spending goals it has agreed to repeatedly since 1970.
Keeping tabs on energy production
On the campaign trail, Kevin Rudd claimed that the mining boom was over; but Australia remains the world’s largest exporter of iron ore and coal. Iron ore production is also estimated to increase over the next few years.
Investors and analysts suggest that a slowdown in the growth of the Chinese market may result in lower demand for certain Australian commodities. The vast reserves of untouched and under-developed mineral resources other than coal and iron ore, such as shale gas, mean that the coalition government wants to ensure that the mining industry does not wind down any time soon.
BHP is the biggest mining company in the world and the president of its marketing and technology division Mike Henry expects energy to “play a growing part in China’s future commodity demand.” In a statement issued by Henry before a speech at the beginning of October he explained that ‘’although we expect growth rates to moderate, China will already be building off a very large base, which will translate favourably to commodities demand in the medium term.”
Apart from the supply and demand of natural resources, Australia will have to meet growing Chinese demands for freer business travel, work holiday permits and relaxed foreign investment limitations if it wishes to secure free trade with the Asian superpower.
Prospective foreign investment in Australian industry may also allow the reserve bank to keep interest rates under control, which are currently at a record low at 2.5 percent. This is stimulating prices in the property market, with some analysts warning of a housing bubble. Australia’s housing market is worth around $5trn, the country’s largest investment asset. Abbott has said that in years to come he wants to be known as the prime minister who focused on rebuilding the country.
New road layout ahead
The Liberal-National Party have focused their budget on internal development, firstly by allocating $11bn for roads, bridges and freight services. The development is due to the forecast growth in the size of the Australian population and the hopes of an increase in trade with Asia over the next four years.
$4.6bn is being cut from public transport to fund the road upgrades, perhaps an indication of complacency for the needs of those in urban areas who are reliant on methods of transport other than cars. The remainder of the $11bn will be paid for with already existing road construction and maintenance funds.
Abbott has said that in the years to come he wants to be known as the prime minister who focussed on rebuilding the country
Ian Macfarlane has now been appointed as the New Industry Minister and blames the Labor Government for slowing down the country’s potential growth in the energy sector with the tax on oil condensate, the mining tax and the carbon tax.
MacFarlane’s appointment has been well received within the energy sector, with The Australian Petroleum Production and Exploration Association calling it “a welcome appointment as he brings a wealth of experience, having previously held ministerial responsibility for the regulatory oversight of oil and gas industry operations from 2001 to 2007 in the Howard government.”
An upgrade to the transport infrastructure will probably be necessary with the renewed focus for investment in and development of mining projects currently being pursued by Macfarlane. In an interview with the Australian, he stressed “we’ve got to make sure that every molecule of gas that can come out of the ground does so. Provided we’ve got the environmental approvals right, we should develop everything we can.”
The desire to develop everything they can has been further emphasised in Macfarlane’s warning to current mine lease holders that ‘’if the deposits are able to be developed they’ve got to be developed,” saying that the licences to mine reserves will be revoked from current licence holders when they are due for renewal if the mining companies are not carrying out adequate development.
Fulfilling promised protocol
As promised, shortly after winning the election and being sworn in as Prime Minister, Abbott began implementing his overhaul of the energy industry, by pushing for the abolishment of the carbon tax, the dissolution of the Climate Change Authority and the Climate Commission.
The Climate Commission has already been disbanded and its Chief Commissioner Tim Flannery sacked, reportedly saving $580,000 per year. The Climate Change Authority will need legislative approval for its closure, which will be sought as soon as possible.
The Clean Energy Finance Corporation (CEFC), the legislated fund dedicated to investing in clean energy, or a green energy bank, has been instructed by Treasurer Joe Hockey and the Department of Finance to stop approving and providing loans immediately, and legislation is being prepared for all CEFC operations to cease on a permanent basis.
The only obstacle in repealing the infamous carbon tax would be a lack of adequate support from the Senate in order for the bill to be put through, but with Australian news agencies beginning to report that Abbott may have enough cross bench support, the scrapping of the carbon tax now seems imminent.
The intention of taxing CO2 emissions was to encourage less pollution in order to meet the government’s carbon reduction target of five percent less than pre-2000 levels by 2020. Less pollution is required for Australia to fulfil its commitment to lowering the emission of greenhouse gases under the Kyoto Protocol.
The carbon tax was introduced in July 2012 at a rate of $23 per tonne of carbon emissions, set to rise to $24.15 by 2014 and $25.40 by 2015. It was strongly opposed by a large portion of businesses and the public when it was under debate with the previous government.
The tax is directly paid by those responsible for the emission of 25,000 tonnes of taxed CO2 a year, which accounts for only 500 or so companies out of the 7.6 million registered. Inevitably the cost would trickle down to smaller businesses and consumers.
The Labor Government announced that the cost of living was estimated to rise by 0.7 percent by 2013 as a result of the introduction of the carbon tax, with gas prices estimated to rise by 10 percent and electricity prices estimated to increase by nine percent.
In spite of the previous government’s intentions of implementing the carbon tax apparently being primarily environmentally focused, one can surely empathise with voters queueing at polling stations on 7th September this year, enticed by Abbott’s promise of cheaper living.
Scientist and environmentalist David Suzuki disagrees with the economic gains to be made through the termination of the carbon tax, writing in the Sydney Morning Herald that Abbott’s “promise to scrap the carbon tax, a tax which had been a timid step in the right direction, to close down your green energy bank and to reduce the rebates for buying solar panels, all send a terrible signal to your entrepreneurs and to
the community.”
The Australian Government seeks to improve the transport infrastructure, promote subsequent trade with Asia, and reduce corporate tax and environmental red tape. However environmentally unaware the new economic focus may seem, the new coalition-led government is giving the country a competitive advantage which will set it apart from its developed counterparts in the next few years.
The problem with their strategy though is that it may set an example for developing nations who are making a considerable contribution to the global carbon footprint. The signs of a more self-serving Australia in the Pacific region and globally under Abbott are beginning to become clearer as the consequences of the coalition’s economic policies are analysed.
The renewed focus on the development of natural resources and the stronger economy expected to be gained from mining and exports may place Australia in a much better position to fulfil its humanitarian responsibilities as a wealthy, developed nation. The lack of adequate climate change and clean energy initiatives is somewhat short sighted, particularly at a time when more firms are attempting to achieve better carbon reduction targets.
