Note from CMAX Advisory
Starting in the new year, the Australian Political Digest will be published on a Monday morning, allowing for analysis of developments over each weekend and providing insight for readers as they look to the week ahead. The next report will be published on Monday 14 January.

Please be advised that CMAX Advisory's Australian office will be closed from 21 December until 7 January. The CMAX Advisory team wishes you a safe and happy holiday season.

POTENTIAL NATIONALS LEADERSHIP CRISIS FOLLOWING MP SCANDAL

The junior party in the Coalition Government is eying an end to 2018 with another potential leadership change following a scandal that has prompted a member’s resignation and revived rumours in a challenge to Deputy Prime Minister Michael McCormack’s position. National Party Member of Parliament Andrew Broad has resigned from his position as Assistant Minister to the Deputy Prime Minister following allegations that he used a dating site to meet a woman while visiting Hong Kong. Mr Broad is married and has been a vocal proponent of high moral standards in Parliament, having condemned the former leader of the National Party Barnaby Joyce for an affair with a staff member. Mr Broad has also confirmed he will not re-contest his safe Victorian seat of Mallee at the next election, potentially putting it at risk of loss to the Nationals. Mr McCormack allegedly knew about Mr Broad’s actions as early as October, when he was suppressing an earlier challenge to his leadership, but did not alert the Liberal Party before media reports emerged this week. The Broad scandal emerged on the same day as the Government announced its expected return to budget surplus (see below) and reduced the impact of this positive story for the Liberal Party.

LABOR PARTY HOLDS ANNUAL CONFERENCE

The 2018 Australian Labor Party (ALP) Conference concluded on Tuesday, with the Opposition settling its position on some key issues, while avoiding any serious factional divisions. Leader of the Opposition Bill Shorten’s Right faction maintained control over conference votes by offering the Left faction concessions in potentially fractious areas. On immigration, the ALP agreed to maintain the Government’s boat turnback and offshore processing policies but will look to end indefinite detention and expand the refugee sponsorship program. On industrial relations, the ALP resisted demands for industry-wide bargaining between workers and employers, agreeing instead for unions to negotiate with multiple employers in certain low-paid industries. Foreign policy remains largely unchanged from the agenda outlined by Mr Shorten in October, although notable resolutions were passed on the status of Palestine and banning nuclear weapons. The final day included a speech from former Prime Minister Kevin Rudd, whose time as leader involved considerable internal divisions before he was replaced by Mr Shorten.

AUSTRALIA RECOGNISES WEST JERUSALEM AS ISRAELI CAPITAL

The Government has announced Australia will recognise West Jerusalem as Israel’s capital, but will not yet move its embassy from Tel Aviv. Despite previous suggestions of relocating the embassy, Prime Minister Morrison stated it will remain in place until a peace agreement decides the status of Jerusalem. The Government will instead open a defence and trade office in West Jerusalem. The Government’s decision dismisses the views of its expert panel (comprising former diplomatic, political and military leaders) who determined that deviating from the status quo would provide no benefit to Australian interests. The Opposition has criticised the Government for abandoning a previously bipartisan consensus on Middle East policy and promised to reverse the position if elected. Australia’s review of its embassy in Israel has attracted some international attention, mainly from Australia’s Muslim-majority neighbours, with Malaysia expressing strong disapproval. Indonesia’s reaction could have significant consequences, as it delayed ratification of a bilateral trade deal with Australia pending the position on the embassy.
 

OTHER POLITICAL NEWS

Analysis of latest poll results
This month’s Fairfax/Ipsos poll shows the Opposition extending its two-party preferred lead over the Government from 52 per cent in November to 54 per cent. This brings it in line with the consistent Newspoll result of 55 per cent since early November. Mr Morrison’s lead as preferred Prime Minister diminished slightly, but he remains 12 points ahead of Mr Shorten.

New Governor-General announced
Mr Morrison has chosen Governor of New South Wales (NSW) and former Chief of the Defence Force General David Hurley to be Australia’s next Governor-General. This will make General Hurley the Queen’s representative in Australia, fulfilling her symbolic role as head of state. While his duties will be largely ceremonial and directed by advice from the Prime Minister, the Governor-General is expected to intervene if a sitting government is incapable of governing. Mr Hurley will commence in the role in June 2019, with Mr Morrison extending the term of current Governor-General Sir Peter Cosgrove so General Hurley can preside over the NSW election in March. While most commentators have recognised General Hurley as an appropriate choice due to his distinguished career, the Opposition has criticised the announcement as rushed in advance of a federal election, with a new Government potentially coming into power before General Hurley takes office.

ICAC raids NSW Opposition offices

The Independent Commission Against Corruption (ICAC) has raided the NSW Opposition’s headquarters regarding a fundraising dinner for Chinese supporters. The NSW Labor Party leadership was attending the ALP Conference in Adelaide at the time of the raid, but the party has released a statement confirming it related to donations in 2015. The raid comes as NSW Leader of the Opposition Michael Daley — who was elevated to his position last month — prepares his party for a state election in March.

TREASURER ANOUNCES RETURN TO BUDGET SURPLUS IN 2019

Treasurer Josh Frydenberg has released the Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) statement which predicts a A$4.1 billion surplus in the 2019-20 financial year, significantly larger than the A$2.2 billion surplus forecast in the budget. The improved fiscal position is built on an A$8.3 billion increase in expected revenue, mainly through greater individual and company tax receipts. In addition to several new spending commitments, the statement placed A$9.2 billion in reserve for unannounced decisions from now until 2020. This included A$2.45 billion for the next financial year, to be unveiled closer to the election. If the MYEFO forecast transpires as planned, the Australian budget will reach surplus for the first time in over a decade.