February 8, 2016

Australian Tax Problems May Mean Early Election

Turnbull and his Coalition Government's popularity is dropping (above poll results in mid February 2016). Should he go to an early election while he is popular? (Polling from Fairfax-Ipsos via Sydney Morning Herald).

The Australian Liberal-National Coalition Government of Prime Minister Malcolm Turnbull is suffering from a low revenue problem. This makes it difficult to pay for important popular social programs. There may be a 50% chance of an early Election - probably in April 2016.

Reasons for low revenue include:

-  lower demand from China for Australian coal and iron ore means there has been a sharp reduction in Australian State and Federal tax revenue. The reduction being mainly in income tax, company tax and mining royalties.

-  this means that the Turnbull Government must find sources of revenue elsewhere. The Turnbull Government explored collecting revenue by increasing the Goods and Services Tax (GST) from the current 10% to 15%.

-  however a GST increase is unpopular with the public, opposition parties, and unpopular with Members of Parliament in Turnbull's own Liberal party.

-  so Turnbull is now exploring less generous superannuation tax concessions and reduced negative gearing on property. Predictably there is vocal opposition from many public who form Turnbull's wealthy heartland support base. Also many Members of Parliament in Turnbull's own Liberal party are nervous concerning a possible electoral backlash.

-  Over the last 2 days Turnbull has withdrawn the GST increase idea. But:

-  Turnbull still needs to increase tax revenue.

-  There may be a 50% likelihood Turnbull will hold an early election first (in March or April 2016) using a double-dissolution trigger. Then Turnbull would be in a safer position to impose politically unpopular tax measures which ordinarily are announced in the regular May 2016 Budget.

Factors important to Turnbull include:

1.  The appearance of unity in his Liberal-National Coalition government implying good governance. Recent political corruption and consequent resignations in the last two weeks have weakened Turnbull's lead. His political "honeymoon", since taking office in September 2015, is over.

2.  Turnbull still has strong support from moderates in his government but the conservative rightwing  (led by usurped ex Prime Minister Abbott) may cause increasing disunity problems within the Turnbull Government.

3. Turnbull's Government is ahead in the Opinion Polls. But Turnbull's lead/popularity is declining with Turbull being slightly ahead (at 52%) of the ALP opposition (about 48%). By an ordinary election period from August-October 2016 Turnbull's Coalition may be less popular than the ALP. So it is playing on Turnbull's mind whether he should go to election now.

4. Turnbull does not have a majority in the Senate. A early election Double Dissolution could give Turnbull that Senate Majority so he can pass the new Tax Laws and other financial Laws more easily. The collapse of the rightwing Palmer United Party in the Senate (with key resignations) means there is a power vacuum  that Turnbull's center-right Liberal Party can fill. Turnbull could win at least 3 Senate seats currently held by Senators formerly in the Palmer Unite Party.

So there is a chance (I would say 50%) that Turnbull will trigger in late February or March 2016, a double dissolution Election which would probably be held in April 2016, before the national annual Budget is announced (on second Tuesday in May 2016 = May 10, 2016).


1 comment:

Peter Coates said...

I have amended the Turnbull Government Early Election article, in view of corruption scandals, consequent resignations and lower Turnbull Government popularity. See bolded sentences on Submarine issues.