The 2013 election result will totally change the Australian nation. The Coalition plans one of the most dramatic transformations of the nation that we have seen for decades. And most of the changes will either not require legislation, or the minor parties will support the legislation.
Accordingly, Senate control is not vital in most areas, except for the ‘double dissolution’ issues of carbon tax and the end to the building industry cartel-style agreements. For what it is worth I can’t imagine that the ALP has an appetite for an election on the carbon tax and/or the building cartel-style agreements. Australians hate early elections and the ALP will almost certainly be even more savagely mauled than on September 7. But stranger things have happened.
I am going to list 12 fundamental changes that will take place in the wake of a Coalition victory – six will be covered today and six tomorrow. In many of the changes you will discover a surprising thrust: in the six years of opposition the Coalition has shifted from being a big business party to more of a small business party, because during those six years the large corporations turned their back on the Coalition and (unsuccessfully) wooed the ALP government. And so we are going to see a number of large organizations become critical of Tony Abbott and the new government.
But they are too late. They will need to adapt to this new style of government.
In Australia election campaigns are about politics; after the election comes the government. And so the 2013 election campaign was mainly confined to politics and few of the plans of the Coalition were debated.
Regular readers of my commentary will know that I have been describing some of the Coalition plans but I have been stunned that there has been so little coverage of them in the wider media.
Last week I was yarning to the chief executive of one of our largest corporations, who had no idea of how the Coalition’s plans would affect his business and particularly his industrial relations.
He turned out to be very pleased. If that CEO didn’t understand the Coalition’s plans then I am sure that the vast majority of the population is in the same boat.
And so I will start the 2013 agenda for the 44th parliament with six ways the Coalition plans to transform the nation. Tomorrow there will be another six.
This is a government that is about fostering small business, with the small business minister (and small business crusader) Bruce Billson in the inner cabinet. That’s where the proposed increased employment will be generated. And nothing illustrates that better than the fact that there will be a company tax reduction of 1.5 per cent to 28.5 cents in the dollar, but the largest 3200 tax payers will need to pay a levy equal to the tax cut. In other words they will receive no benefit at all from the tax reduction and indeed their shareholders will receive less franking credits than they did before. This sets the tone. There will be more actions like that.
(Very little legislation required): The Coalition plans the biggest de-regulation exercise ever attempted in Australia. Many will believe the public service will snow the Coalition and the de-regulation will not take place. That is possible, but I simply don’t believe it. The Coalition shadow cabinet ministers have built themselves into a frenzy of de-regulation preparation. It stuns me that the previous government didn’t press Tony Abbott much harder to explain what regulations are going to be abandoned, because with each regulation there is a whole series of vested interests that will be very upset when they discover that their pet regulation has been abolished. And with every regulation comes a group if of public servants who will need to find other work.
There has been the most enormous rise in the cost of doing business in Australia in the last decade and in many areas regulation has been a bigger contributor than industrial relations. The final years of the Howard government, plus the six years of ALP government, contributed to this rise in regulation that is now going to be wound back – and wound back dramatically. All businesses that are being affected by regulation should be contacting the government at whatever level they have access – from local member up. While the first and second year’s deregulation is in place there is always room for more, especially if it saves government money.
(The required legislation will be almost certainly supported by minor parties): A pivotal policy of the Abbott government is to extend the protection offered to consumers against unfair contracts to small business. Most large companies and organizations will need to completely rewrite the bulk of their contracts. Few have made preparation. Earlier this year I illustrated the sort deregulation and fair contract issues that will come up.
There will be an enormous lobby campaign to prevent the Coalition undertaking the ‘fair contract’ measure. Kevin Rudd had such action in his 2007 program but the lobbyists won and he abandoned it. The most vigorous opposition will come from shopping centres and franchise groups. Both are afraid that the way they contract with their tenants and franchisees simply won’t pass any fairness test. So expect a series of articles warning of the dangers of this action. Will the Coalition buckle? It has been a clear policy over the last six years – I don’t think so.
The fringe benefits tax will give a huge boost to the motor industry and help those who work for charities, hospitals and public service but will not necessarily save the motor making industry, and in particular General Motors. Most of the FBT demand comes to Ford (which is closing its plant) and Toyota. A really smart thing for the government to do would be to link the FBT concession to cars made in Australia, but I am not sure the Coalition is going to do that. There certainly has been no announcement.
Tony Abbott wants to be known as ‘Mr Infrastructure’, so you can expect infrastructure projects around the country. There are simply not enough spare taxpayer dollars to fund the level of infrastructure that the Coalition wants to push forward with. It is going to be necessary to tap the superannuation movement for capital and issue securities that do not carry very high risks.
The problem is that many of the users of infrastructure, like car owners, health beneficiaries and those using public transport, will not take kindly to the ‘user pays’ principle which underlines the infrastructure securities that are set to be issued to superannuation funds. People have come to expect these services to be funded out of tax revenue and not superannuation revenue, which involves a charge for capital. We will have major debate about this, but Australia needs massive infrastructure investment to improve its productivity to offset the decline in mining investment. The government will need to tap the self-managed funds, which collectively have now become the largest players in superannuation (about 31 per cent of the funds under management), eclipsing industry funds and other providers.
(Legislation required, which will be difficult): There will be a totally new approach to carbon management and companies will be invited to tender for government money to reduce their carbon. The plan is that the investment will be shared between the government and the corporations/organizations and those that offer the best tenders will be rewarded with a government aid package on the basis of their tender. They don’t get the money until they reduce the carbon, although once they have achieved their objective there is an ironclad guarantee.
If it can be done, abolishing the carbon tax will be an enormous boost to many businesses. For example, the tax has cost Qantas over $100 million dollars. All around the world employment has become more important than the carbon. This will not always be the case but it is the way it is now, and that fact is underlined by our election result. The carbon community says that the government has not allowed enough money to make the Direct Action plan to work. They may be right, but it is much too early to say. It will, however, create a new carbon consensus in the community that makes far more sense than a carbon tax introduced at a time when the price of electricity was already going up dramatically.
(No legislation required): This will be the biggest change of all and yet on the surface it seems just like public relations puff. Many parts of non-mining Australia are set to take off. And mining Australia will perform much better than the doomsayers are predicting.
In both areas a major force holding the country back has been the chaos in Canberra. When the opinion polls and the bookmakers declared that the Coalition was a certainty to win you could feel a surge of confidence going through the community.
And so our second or third largest eastern states display home builder suddenly saw inquiries surge to close to record levels. In the next couple of months that builder expects to sign up an enormous number of new houses. I met him in the week before the election and he could not contain his excitement.
A commercial architect tells me that when the opinion polls confirmed a Coalition win, people came through the door. A large number of companies are cashed up and have held back capital works because of Canberra.
There are still several multi-billion LNG projects on the drawing board. Those involved have been talking with the Coalition and they will be among the first beneficiaries of change number two (deregulation).
The approval process will be sped up greatly. And change number eight will also help LNG projects.
In my view we are going to see a complete change in the outlook for builders and their suppliers. And of course that is exactly what the Coalition plans. In time that will spread to retail.
If the ‘confidence’ injection works, then there still may be one more interest rate cut because it will take time for what is happening to be reflected in official figures. But once momentum builds the interest rate moves will be higher.
(A double dissolution issue): If the Abbott plan is to succeed the cost of building infrastructure and commercial projects must be cut. Three states (Victoria, Queensland and New South Wales) have already moved on the issue.
Abolishing the cartel-style agreements between large builders like Lend Lease and Leighton and the big building unions and reversing the increased union access to work places passed in the dying days if the 43rd Parliament is vital for the nation. Under the Coalition plan the cartel-style agreements will be stopped by the combination of a building commission with teeth and a strict code of conduct. The cartel-style agreements currently give unions a large degree of control over building sites and who can be subcontractors. As a result, because competition is restricted, productivity is low and profits are good. The cost of commercial building and infrastructure rises by between 15 and 30 per cent. Tony Abbott will be able to build so many more roads and hospitals once the cartel-style agreements are abolished. I must emphasize that Leighton, Lend Lease and other large builders have done nothing wrong and they simply maximized their profits under the rules of the day. But they will require totally different management styles and union agreements if they are to operate in the government sector and they may even be removed from big slabs of new private contracts. This legislation will cause vigorous industrial action by the building unions. The biggest problem for the government is that among the larger builders, Grocon is one of the few companies that operate outside these agreements. Tenders may need to be made smaller so smaller groups can tender. Overseas players are also looking at coming to Australia to fill the gaps created if Lend Lease, Leighton and other big builders don’t change their management style.
But, most importantly it means a whole host of new sub-contractors can enter the commercial space and there will be more productivity. This is another illustration where the big end of town will be on the back foot. And so will the building unions. Watch this space.
The base legislation for industrial relations will not be changed but what will take place is a return to the Howard rules on independent contracting.
We have excellent independent contracting legislation. Unfortunately the tax department and business administrators have not been obeying the law and they have been very tough on independent contractors. That can be reversed with public service pruning and some clear instructions from the relevant ministers that the law must be obeyed. We are going to see a huge boom in independent contracting that will overcome many of the industrial relations problems that have been thrown at the business community by the previous government.
I must emphasize that the Howard independent contracting rules do not allow open slather replacement of employment with independent contracting but they do allow an independent contractor to work for just one company. On the independent contracting association website there are the detailed rules covering behaviour, financial and relationship tests. Genuine independent contractors and people who organize their business to meet these tests can operate under this system. The productivity improvements can be huge. This is vital for the nation.
A new approach to the public service will see a rationalization with the states, which will enable the Commonwealth to slash expenditure on health, education and the environment without affecting services. Currently, there is massive duplication. This will transform the federal budget.
There is no better illustration of the help the government plans to give to small enterprises than its parent leave scheme. Small businesses simply can’t afford to pay the allowances that will be a part of the government’s program. On the other hand, many leading companies already pay similar amounts. The parental leave scheme is being funded by a levy on the profits of large corporations and affectively represents an income transfer from large companies to the staff of smaller enterprises to enable them to offer similar rewards.
The ALP’s national broadband scheme would have taken a long time and would have sapped the strength of the nation. The Coalition’s plan is much simpler and will be introduced more quickly. The problem is not receiving data but sending it out. To compete, many small enterprises must have the ability to send out their material and require bandwidth. Those in that situation will need to fund broadband from node to their enterprises. Users will pay if they need the full broadband service.
The government plans to look again at the joint strike fighter. The shadow Defence Minister David Johnston maybe a little bit close to the military establishment and I fear he will not do a proper review of the JSF. But if he does it he will quickly discover that it is simply no match for the Russian Indian aircraft, which has been purchased by Indonesia, who are currently destined to control our northern air space.
Many of those in the backroom of the Palmer United Party have done work on this issue and they can really do the nation a service if they make sure the government does a proper review and not just listen to defense chiefs trying to cover their mistakes. During the period of this government there will be the opportunity to encourage the US to bring together the JSF and the F22 projects and actually produce an aircraft to match that ordered by Indonesia. If it is not done during the next three years then we will have lost control of our air space for a generation. It is the greatest danger the nation faces.