Recently, a new prime minister – PM Scott Morrison – was ushered in to replace the out of favour Malcolm Turnbull. In this short piece, we will discuss what the implications of this change in leadership will be. In particular, we will focus on three main talking points of the current time: the Australian market, immigration and domestic policy.
It is early days, and PM Morrison hasn’t had the chance to make any substantial policy moves, but the very mention of him assuming leadership in Australia has had interesting impacts on the market economy.
Industry leaders have suggested that it is not the appointment of Scott Morrison himself that has shifted the Australian economy, but rather, the political instability around him is what poses the main issue. Perceived volatility in parliament house has amplified the downside risks for the Australian Dollar, which has, in turn, created a harmful knock-on effect with regards to the productivity of the Australian economy. However, while political instability has rattled the markets, because the markets were somewhat expectant of most of it, the charts have taken it relatively well. In previous instances of political instability, the economy has been fragile and vulnerable to shocks. But this time around, the change in leadership came during fairly robust economic conditions.
The ASX 200 market performance did not seem to be affected negatively after PM Morrison’s appointment. In fact, it experienced a share market bounce on the 24th of August, when PM Morrison himself was appointed. However, the Australian market has remained weak compared to its international counterparts. As a contrast, the S&P 500 experienced an all-time high on the 24th. Even so, the Australian market continues to look relatively healthy in spite of the current instability.
PM Morrison is seen as an experienced politician. Before taking up the Prime Ministership, Morrison was the cabinet Treasurer, where he generally had a good reputation due to his success in achieving positive investment and economic outcomes. One major factor behind his perceived success was his actions on tax policy reform. According to an analysis by ABC news, PM Morrison’s budgets as a treasurer give a strong indication of his neo-liberal agenda. Historically, Morrison has frequently lobbied for cuts to corporate and income taxes, and we can safely assume that more of the same push will come during his time as PM.
The impact of such tax reforms is unclear. While tax cuts may encourage individuals to work, save, and invest, if tax cuts are not financed by immediate spending cuts, they will likely also result in an increased federal budget deficit, which in the long-term will reduce national saving and raise interest rates.
Moving beyond the scope of the market, and into the situation of immigration, a very different side of Scott Morrison emerges. Immigration has been a contentious topic for decades in Australia, and there are few people firmer in their position on it than our new Prime Minister. But first, here are some indicative numbers:
Leading up to the year 2013, people arriving in Australia by unauthorised boat was on a rapid increase, reaching over 20,000 people. During this time, public sentiment against immigration had been increasing and culminated in a controversial policy move titled Operation Sovereign Borders (OSB). This policy was in fact implemented by PM Scott Morrison, and he has exclaimed proudly of how he stood by ex-PM Tony Abbott’s side during the process. The OSB had clear consequences for immigration in Australia: the numbers of people coming into Australia sharply declined, whilst the time immigrants spent in detention centres tripled – reaching around 450 days for the average immigrant. This latter fact is what has created the most controversy around the topic of immigration, because not only are people being vetted more rigorously before being let into Australia, they are also reportedly being subjected to harsh mistreatment and inhumane living conditions. Needless to say, not all Australians are happy with Morrison’s stance on the issue. However, that sentiment is not universal, and many Australians do believe capping the immigration was a necessary move, particularly for security reasons.
Scott Morrison is an all-Australian leader. Just a few days ago, his priorities were outlined clearly when he stated that the focus of his ministership is “keeping the economy strong, keeping Australians safe and keeping Australians together.” Indeed, his actions in these regards have been esteem-worthy. When the droughts hit Australian farmers in August last month, PM Morrison acted rapidly and advocated for donations to ensure farmers were adequately supported. Previously, Morrison also rejected ex-treasurer Joe Hockey’s plan of increasing the pension age from 67 to 70 – in spite of the economic repercussions. And as treasurer in 2018 before being elected PM, Morrison introduced the ‘Longer Life Package’, which aims to provide holistic health benefits for 45-65-year-olds – including regular health check-ups, broader retirement income options and other methods of boosting living standards for the elderly.
But, PM Morrison’s focus on the Australian way of life seems to neglect one major issue. Climate change policy is a struggle for many leaders in the world today, as tension always exists between lower energy costs and more environmental resources. Recently, Morrison was asked what was more important between international climate obligations and lowering power prices, he answered “power prices”. In spite of this, it is positive that Australia remains on track to accomplish its goal of reducing carbon emissions by 26% by 2030 – although Pacific Island leaders and environmental groups have warned that even this is not enough. The topic of climate change is particularly heated, especially because it has been rumoured that it was Malcolm Turnbull’s backing out of the National Energy Guarantee – an initiative aimed at further reducing carbon emissions – that incited the spillover in the first place.
In summary, the new PM Scott Morrison has caused slight ripples in the Australian market, mainly because of the broader political instability his election represents. Socially, Morrison continues to divide public opinion due to his firm stance on immigration policy. And domestically, PM Morrison has shown his active support for the wellbeing of Australians; particularly the older demographic, while his policy decisions on climate change remain questionable.
The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ, our Partners and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.
Stefano Gunawan is a 3rd year student pursuing an Honours degree in Economics. In the future he hopes to acquire a role in public policy and planning.