For most European economies we are forecasting what we have termed a “partial V” type recovery with annual GDP grow… https://t.co/enZKk5R0Dn
Australian election results
Despite a consistent lead for the opposition Labor Party in pre-election polling, the Liberal-National coalition was returned to government in Australia's 18 May election with a slim majority. Australia's election commission expects the Liberal-National coalition to win 77 of the 150 seats in the House of Representatives, while Labor has won only 67 seats (two seats were undeclared at time of writing).
Prime Minister Scott Morrison is very unlikely to be challenged from within his party within the next year. Key members involved in the recent internal power struggles, which culminated in the resignation of former prime minister Malcolm Turnbull, retired before the May election. Morrison is now able to bring in a fresh cabinet, reducing the likelihood of a leadership challenge.
The main opposition Labor Party is weakened after losing seats in Queensland and Tasmania, as well as its leader. The minority parties One Nation and the United Australia Party directed their preferences towards the Liberal Party in Queensland, severely damaging Labor's performance in the crucial swing state. Labor leader Bill Shorten has resigned, and a new leader will be selected within the next month; leading contenders include the party's deputy leader Tanya Plibersek, Shadow Treasurer Chris Bowen, and Shadow Minister for Infrastructure Anthony Albanese. All of the main contenders are associated closely with Shorten's tenure, and none are likely to immediately improve Labor's popularity.
Minority parties again hold the balance of power in the Senate but are unlikely to block the passage of key legislation. With three seats in doubt, the Senate is largely unchanged: no majority party secured a majority, and minor parties will again hold the balance of power. The Liberal Party won two additional seats to secure 33 of 76 seats, while Labor kept 26 seats. The government's senators, particularly Finance Minister Mathias Cormann, are experienced in negotiating with minor parties and the government is likely to be able to pass legislation, albeit with small concessions and amendments.
The coalition will support the mining sector, implement tax cuts for SMEs, and tighten energy regulation. The coalition's re-election largely signals policy stability. Planned tax cuts for small- to medium-sized enterprises - defined as companies with less than AUD50 million (USD34.6 million) in annual turnover - will proceed. The rate will drop from 30% to 27.5% on 1 July 2018, and will fall again to 25% in 2021. The government is unlikely to obstruct mining developments, likely including the Adani coal mine in central Queensland, despite several (small and largely peaceful) protests. New legislation introducing stricter penalties for anti-competitive pricing in the energy markets are likely.
Indicators of changing risk environment
- A leadership challenge in the National Party, probably from former leader Barnaby Joyce, would destabilize the coalition and delay new business legislation.
- An improvement in Purchasing Manager's Indices, which are due on 23 May, would undergird improving political stability with stronger business confidence.
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