Nassim Khadem Reporter

Nassim covers the accounting and tax rounds for BRW, as well as general business news. She previously worked for The Age newspaper covering general news, state politics and economics.

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Bringing certainty back: how the next government can boost confidence in its first 100 days

Published 03 September 2013 10:50, Updated 26 November 2013 18:35

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Bringing certainty back: how the next government can boost confidence in its first 100 days

Council of Small Business CEO Peter Strong believes the first order of government business should be dismantling the supermarket duopoly. Photo: Alex Ellinghausen

Business leaders across the nation are looking forward to one outcome when the polls close on Saturday September 7: certainty.

Certainty about who is in government. Certainty about what legislation will or will not be passed. Certainty about new policies that will be implemented. And certainty about how to return the budget to surplus – even if it won’t be until after 2016-17.

Certainty creates confidence in the minds of business and consumers and makes for a better economy, says Woolworths chief executive Grant O’Brien. “A return to certainty is the most important thing for us, because ultimately it’s the most important thing for consumers,” he says.

“That’s what I’m looking forward to after the election – some certainty that allows consumers to have a high level of confidence when it comes to retail.”

Opinion polls point to a Coalition victory, but with a narrower margin than seemed likely under former prime minister Julia Gillard.

The possibility that the Coalition could win with an overwhelming Queensland-style majority – and gain control of the Senate – has also diminished since Prime Minister Kevin Rudd returned and started wooing back voters and pitching to business.

Whether it’s PM Rudd or PM Tony Abbott, Australian Chamber of Commerce and Industry (ACCI) chief executive Peter Anderson says the first 100 days of government needs to be about reviving confidence.

“We expect the next government to take steps that send a signal to business that will revive their confidence in the economy and in the system of government,” he says. “They will need to send a signal that the government is on their side and will support a stronger private sector.”

Small business needs love

Small business has been a key battleground this election. ACCI has set out five main priorities for the next government. “What we want to see in the government’s first 100 days is initial steps towards achieving five objectives: starting to build a stronger economy by reforming government finances, measures to support productivity and competitiveness, measures to access global markets, better institutions, and support for small business,” Anderson says.

“In each area there are things that can be done immediately, but the first task should be a root-and-branch review of government expenditure. That would send a strong message that the government's intention is to get its budget under control.”

Council of Small Business of Australia (COSBOA) chief executive Peter Strong says the first task should be tackling the power of supermarket duopoly Woolworths and Coles .

He thinks Australia is in for a change of government, and if the Coalition does win, it needs to make good its promise to review competition law.

While both parties have announced they will look into the power of the supermarkets, Tony Abbott promised a comprehensive review of competition laws in one of his first media interviews with shadow treasurer Joe Hockey on the Coalition's business plan.

“At the moment Coles and Woolworths and the big landlords can do whatever they want,” Strong says. “They are protected from competition.”

Enacting big changes

Historically speaking, when a change of government occurs there’s a spike in consumer sentiment and business confidence. How long such a revival lasts depends on how quickly the government can deliver on its promises.

Getting legislation through in the first 100 days will be tricky, especially for the Coalition, which has pledged to get rid of the carbon and mining tax.

One of Australia’s leading economists, Saul Eslake, says if there’s a change of government – not that he’s advocating for one – there will be a business confidence boost and that it would most likely result in further interest rate cuts.

“This disaffection that business people have with the current [Labor] government goes beyond the preference that business people normally have for Coalition governments,” he says.

“There’s not too many Labor voters [who are] the captains of industry.”

Eslake says whether that confidence lift is sustained will depend on the Coalition’s performance in its early months in office. For him the biggest risk to having sustained business and investor confidence is tension within the Coalition ranks.

He says on the one hand there’s the true economic liberals – like Malcolm Turnbull, Joe Hockey, Andrew Robb and Arthur Sinodinos. On the other, those who are “sceptical” of free markets and are “more inclined to favour universal welfare entitlements”, including Abbott himself as well some members of the National Party.

Confidence is also affected somewhat by how the opposition and minor parties behave. Minor party candidates campaigning on grassroots issues have a chance of gaining prominence through preference deals.

That would give them the balance of power in the Senate, and thereby the ability to sway legislative reform.

If the Labor Party is in opposition and decides to join with the Greens in the Senate to block Abbott from scrapping Labor’s carbon pricing mechanism, there’s a possibility that Australians will return to the ballot box.

“Abbott has reaffirmed his long-stated position that, in the event that the Senate did block a Coalition government’s legislation, he wouldn’t hesitate to call a ‘double dissolution’ election,” Eslake says.

“The process of getting to that point, and the resulting requirement for another election, would almost certainly lead to some erosion of whatever improvement in business confidence there had been after the initial election of a Coalition government.”

Consult to clear a backlog

Institute of Chartered Accountants chief executive Lee White also sees a renewal of confidence as the main issue. “The number one priority will be to inject confidence into the business sector and the wider community,” he says.

That means the first 100 days of the next government need to be dedicated to setting up processes that will see the next prime minister and his frontbench through their first term.

Part of this will be getting certainty around key issues such as tax reform, reducing carbon emissions, and how the big initiatives such as the school education reforms and the national disability insurance scheme are going to be funded.

Lee says that will involve “meaningful consultation” with business before policy development.

“Every possible consequence must be scrutinised, the long-term impacts must be fully considered and the implementation of policies must be straightforward and timely,” Lee says.

Apart from setting out the priority list and how it will be funded, there’s also a backlog of legislation waiting to be passed where clear decisions are yet to be made.

Hundreds of thousands of small businesses are waiting to hear about details surrounding reform of taxation of trusts, and a review of loans and payments from private companies (Division 7A anti-avoidance rules).

“Over 100 announced tax measures remain un-enacted, some for over a decade,” says Tax Institute tax counsel Deepti Paton. “This state of affairs is causing great uncertainty for business. We just want a status update that says: these measures are in or out; we will consult with you within these defined time frames.”

Getting back to surplus

The Coalition has refused to match Labor’s plan to get the budget back to surplus in 2016-17.

In the final days of the election campaign shadow treasurer Joe Hockey released $31.6 billion of proposed cuts by the Coalition, including scrapping instant asset writeoffs and the much-loved accelerated depreciation scheme for motor vehicles.

He made a speech to the National Press Club dismissing the notion that a Coalition government would eradicate deficits in its first, and perhaps even second, term.

“We will get to surplus when it is reasonable [and] responsible to do so,” he declared. “We are not going – I am not going – to make the mistake Labor did of making big heroic promises and never delivering.”

White says the long-term state of the economy is more important than a quick return to surplus. He also wants both parties to scrap “bad policies” in their first few months in office.

“Savings measures such as the $2000 cap on the tax deductibility of self-education expenses is an example of bad policy,” he says.

“It’s a myopic grab for cash that will damage the future productivity of our workforce in the long term.”

Anderson, however, sees the return to surplus as an immediate priority. Both parties have been promising big.

“No matter which party wins, they will have a tough job in repairing Commonwealth finances,” he says.

“The degree of difficulty of that task is accentuated by the level of spending promises, funded or unfunded, during this election campaign.

“We have already expressed concern regarding some of the Coalition’s policies, such as the paid parental leave scheme. And more recently Rudd’s announced $500 million to support the car industry, promised company tax cuts for northern Australia, which are undefined and projected beyond the budget cycle. Both sides of politics have been loose with holding themselves to account.”

Eslake says the budget is likely to slide back to deficit by 2023-24. That leaves the budget “much more vulnerable to shocks” and in a much worse state than the outcomes predicted by Treasury in the Pre-Election Fiscal and Economic Outlook.

Unfortunately, he says, neither of the major parties have proven virtues of prudent fiscal management. There is “no reason to be especially confident that either of the major political parties recognises this challenge, or is prepared to tackle it”.

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