Instant View: Australian PM Gillard retains power

CANBERRA (BestGrowthStock) – Australian Prime Minister Julia Gillard clung onto power on Tuesday, securing support from independent lawmakers to form a minority government after her Labor Party lost its majority at elections last month.

Labor now has a one-seat majority in the 150-seat parliament after winning the support of three of the independents and one Greens MP.

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KEY POINTS & BACKGROUND

– August 21 election delivered a hung parliament, the first in 70 years, with neither the ruling Labor Party nor the opposition conservative coalition winning an outright majority.

– Four independent lawmakers and one Green MP emerged with the balance of power after an election campaign that focused on economic management, immigration and Labor proposals for a mining tax and for a $38 billion fiber-optic national broadband network.

– Prime Minister Julia Gillard called the election after she deposed her predecessor, Kevin Rudd, in a party-room coup in June to become the nation’s first female leader.

– Labor came to power in 2007 after 12 years of conservative rule. No Australian government had been voted out of office after just one term in office since 1931, during the Great Depression.

COMMENTARY

ECONOMY & MARKETS

BRIAN REDICAN, SENIOR ECONOMIST, MACQUARIE BANK

“It’s really anyone’s guess how long the government will last and how effective it will be and I don’t think you can really pre-judge the outcome.

With the independents giving their support to Labor, (the mining tax) has every chance that it will be passed. (The carbon tax) will require the support of the Greens. And I think what we are really talking is 12 months for that shift in policy.”

BEN JARMAN, ECONOMIST JPMORGAN

“There are still a huge amount of questions that are left unanswered. With the margin being 76-74, that is the smallest possible majority you can have. We expect with a very slim majority, it is still not a very compelling outcome. The policy implications of this are definitely uncertain.”

The resources tax presumably goes ahead but with the increased presence of the greens in the senate there could be more negotiations on that front too.”

MICHAEL WORKMAN, ECONOMIST. COMMONWEALTH BANK OF AUSTRALIA

“From the market’s point of view, this doesn’t mean anything. The market has operated very well without a government and history has shown that a minority government brings a stable government without any radical decision.

It was a fairly calm time for the market and I imagine this is in prospect. The senate changes next year where the Greens will hold the balance of power may stymie some tax reforms, but otherwise I think the market is fairly relaxed on a minority government. Both parties promise to be fiscally conservative and the budget will return to surplus in 2013 regardless of who is in power. The growth outlook is strong because China remains strong and that is what matters.”

JOHN WARHURST, PROFESSOR OF POLITICS, AUSTRALIAN NATIONAL UNIVERSITY

“I think (the government) will last a good while –it may not last three years, but it will last two, and may even last three. I think it’s reasonably stable.”

“My guess would be that it will be fairly much a status quo on the mining tax.”

MINING TAX AND TELECOMS ANGUS GLUSKIE, PORTFOLIO MANAGER, WHITE FUNDS MANAGEMENT

On the mining companies: “Pre-election, everyone had a good insight into the MRRT (minerals resource rent tax) and we had several months of trading while that was viewed as being the likely regime.

“Telstra now gets the certainty of the agreed compensatory payment. That certainty is viewed by Telstra as being a plus, and most fund managers will end up subscribing to that view.”

RICHARD SCHELLBACH, EQUITY STRATEGIST, CITIGROUP:

“One of the things we focused on was the whole NBN (national broadband network) situation. With respect to that we think this is good news for Telstra. We think the deal with NBNCo will provide a lot of cash and that supports the earnings of Telstra and supports the dividend long term.”

CLIMATE CHANGE

TIM JORDAN, ANALYST, ENVIRONMENTAL, SOCIAL AND GOVERNANCE, DEUTSCHE BANK, SYDNEY

“The returned Labor government has said that it will pursue a carbon price. But without a majority in either chamber of parliament, the government is likely to revise the emissions trading scheme it proposed under Prime Minister Rudd in order to win legislative support.

“In the absence of a major policy shift, the coalition is unlikely to support a carbon price, which means that the government would need the support of the Greens to pass climate legislation. Whether the Greens are open to negotiating is yet to be seen, but as a key force in the new parliament, they will face close scrutiny.”

LANE CROCKETT, GENERAL MANAGER, AUSTRALIA, PACIFIC HYDRO

“There are two main things that seem to have happened both at the election and since. The massive swing to the Greens represents a general view within Australia that people are sick of not doing something about climate change.

“Secondly, (independent MP) Tony Windsor highlighted the benefits of renewable energy for the bush and regional Australia. (Independent MP) Rob Oakeshott has also talked very strongly about climate change policy. So there’s a real opportunity here that we can expect a carbon price to be introduced in some form or another in Australia in this next term.”

“A carbon price is sorely needed just for pure certainty for business so we can get on planning the energy transformation that we need.”

NATHAN FABIAN, CEO OF THE INVESTOR GROUP ON CLIMATE CHANGE

“We’re happy that government has been formed as markets always take comfort from a degree of political stability so broadly that’s a positive.

“Secondly, and more importantly from our perspective, the independents have identified climate change as a priority issue and that would seem to align with the Greens on this issue and should get the ALP up to the mark.

“Investors have been looking for some clear political direction on climate change and it appears we may get it.”

PETER CHRISTOFF, SENIOR LECTURER ON CLIMATE POLICY, UNIVERSITY OF MELBOURNE.

“Australia is again on track to adopt a price on carbon. The two independents – Oakeshott and Windsor – who today agreed to support a minority Gillard Labor government have both expressed a clear desire to see climate policy move forward quickly.

After the election, in seeking Greens’ support in the lower house, Labor agreed to the formation of a Climate Change Committee of experts and parliamentarians, to consider the issue of a carbon price. Its composition, mandate and timing are yet to be determined, but the three independents and the Green supporting Labor will certainly hasten its work.

A price on carbon is now back on the agenda, especially once the Greens gain the casting vote in the Senate from the middle of next year.

(Reporting by Sydney, Melbourne newsrooms and David Fogarty in Singapore; Editing by Ed Davies)

Instant View: Australian PM Gillard retains power