Australian Weekly Report

Climate puts pressure on government

The fires are continuing to have a political impact, with the Coalition government facing a new challenge as environmental concerns, particularly climate change, become a major concern for not just voters, but business leaders as well.

Asked to pick the top three issues confronting the nation, 41 per cent of respondents in an Ipsos Australia poll put the “the environment” in their top three, up 10 percentage points from a month earlier.

Meanwhile, in a recent Deloitte survey, 83 per cent of Australian business leaders cited tackling climate change as their generation’s responsibility to solve. A similar survey by PwC found two-thirds of Australian chief executives see climate change as a major threat, with concerns increasing annually.

This presents a problem for the Coalition. From former Prime Minister Tony Abbott’s assertion that the climate change argument is “crap”, to current Prime Minister Scott Morrison fondling a piece of coal in parliament, the Coalition has a somewhat patchy record on climate change and the environment.

Sensing the change in mood, Mr Morrison has been working to find an argument that will cut through. The challenge will be in convincing voters and business leaders that the government is doing something, while simultaneously convincing climate change deniers within his own party that the government is not doing too much.

Sports scandal continues to take toll

The political scandal surrounding Agriculture Minister Bridgit McKenzie continues to occupy the government.

The former sports minister found herself in trouble after a scathing auditor-general’s report into her handling of grants to community organisations. The senator and her office were found to have directed funds to groups in electorates the Coalition was hoping to win or retain ahead of the May 2019 election.

Since then she has defended her actions, as has Prime Minister Scott Morrison. That support, however, appears to be dissipating, with Mr Morrison eventually referring the matter to the attorney-general, as well as the head of his own department, for advice.

In outsourcing the decision on Senator McKenzie’s ministerial future, the prime minister has sought political cover for any eventual action.

Senator McKenzie is deputy leader of the National Party, the junior partner in the Liberal-National Coalition, which is sensitive to any appearance that it is being dominated by the Liberal Party. The complex politics between the two parties partly explains Mr Morrison’s reticence to deal with the issue so far.

He will, however, be keen to have it squared away before parliament resumes on 4 February, where the opposition Labor Party can be expected to relentlessly pursue the government over the matter.  
The opposition ended last year attacking the government over the Minister for Energy and Emissions Reduction, Angus Taylor. Mr Taylor is under police investigation for his use of an apparently fabricated document to discredit the Lord Mayor of Sydney.

With that line of attack still available to the opposition, Mr Morrison will be reluctant to hand it another. However, there may be an opportunity for the prime minister. The removal of Senator McKenzie from the agriculture portfolio could be the pretext for a ministerial reshuffle in which Mr Taylor also finds himself relegated to the backbench, and out of the headlines.

The longer-term risk for [Scott Morrison] is that some, perhaps many, voters have re-thought the generally positive views they had of him before the election. This goes deeper than just immediate criticism.

— Political correspondent, Michelle Grattan

Economy likely to keep ‘treading water’

There are signs that record low interest rates and the government’s fiscal stimulus are starting to gain traction, with December’s unemployment rate unexpectedly falling to 5.1 per cent, from 5.2 per cent, as the economy created 28,900 new jobs.

The positive jobs data comes on the back of better-than-expected retail sales figures, which put in their strongest showing in two years in November, jumping 0.9 per cent in seasonally adjusted terms, well ahead of economists’ expectations of 0.4 per cent growth.

The positive data means the Reserve Bank of Australia will likely keep interest rates steady at its next meeting, rather than cut them to a new record low, as many analysts had been expecting. However, rates are unlikely to rise any time soon, with the economy still struggling to lift out of its low growth.

In his latest analysis, Chris Richardson from Deloitte Access Economics, says he does not expect economic growth to lift much from the current decade low, and will be “comfortably treading water rather than roaring into recovery”.

Meanwhile, ANZ chief economist David Plank estimates growth in gross domestic product over the 2020s will be between 2 per cent and 2.5 per cent a year, which is below the 3 per cent annual growth forecast by Treasury in the December economic update.

He says that is a strong argument for the government to consider further stimulus options, including infrastructure spending.

IMF sees an end to global downturn

Adding to the positive domestic economic news, the International Monetary Fund says the global economy’s slowdown may be ending.

The IMF says global growth will accelerate from 2.9 per cent in 2019 to 3.3 per cent in 2020 and 3.4 per cent next year. While positive, the outlook represents a reduction of 0.1 percentage point for 2019 and 2020, and a 0.2 per cent cut for 2021 from its predictions in October.

However, it says signs that last year’s downturn in manufacturing and global trade is bottoming out, helped by lower interest rates, less uncertainty around Brexit and the recent trade agreement between the US and China.

On the downside, the IMF singled out Australia over the long-running drought and unprecedented fire crisis. “Intensifying social unrest in several countries posed new challenges, as did weather-related disasters – from hurricanes in the Caribbean, to drought and bushfires in Australia, floods in eastern Africa, and drought in southern Africa,” it said.