Morrison warns of widespread pain if US-China trade tensions are not contained


Michelle Grattan, University of Canberra

Scott Morrison will warn of the danger of any further escalation in US-China tensions and declare Australia won’t let its relations with China be dominated by inevitable differences, in a major speech ahead of this week’s G20 meeting.

Walking a line between Australia’s major ally and its largest trading partner in a Wednesday address on the economic dynamics of the Indo-Pacific region, Morrison will stress the need for these two great powers “to resist a narrow view of their interests”, noting that with great power comes great responsibility.

He will also emphasise the range of Australia’s regional involvement and promote its willingness to play its role as a middle power in a moveable scene. “We won’t be fazed, intimidated or fatalistic”.




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Morrison’s speech to Asialink, issued ahead of delivery, follows his outlining of the re-elected government’s immediate domestic economic priorities on Monday.

“The world’s most important bilateral relationship – the US-China relationship – is strained,” Morrison says, pointing to the spreading collateral damage of the rising trade tensions.
“The global trading system is under real pressure. Global growth projections are being wound back. The impact of any further deterioration of the relationship will not be limited to these two major powers,” he says.

“The balance between strategic engagement and strategic competition in the US-China relationship has shifted.”

Australia has and would continue to welcome China’s growth and development, Morrison says.

“However, the ground has now shifted. It is now evident that the US believes that the rule-based trading system – in its current form – is not capable of dealing with China’s economic structure and policy practices.”




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Morrison acknowledges the legitimacy of many of the concerns about China, such as its intellectual property theft and industrial subsidies.

“The rules-based system is in need of urgent repair if it is to adequately respond to these new challenges, including the rise of large emerging economies, changing patterns of trade and new technologies,” he says.

“Our prosperity, and that of our Indo-Pacific partners, depends strongly on the maintenance of an open global economy and a rules-based trading system in which the rights of all states are respected.

“It will also depend on a positive, productive and cooperative bilateral relationship between China and the US,” Morrison says.

“As a rising global power, China also now has additional responsibilities.

“It is therefore important that US-China trade tensions are resolved in the broader context of their special power responsibilities, in a way that is WTO-consistent and does not undermine the interests of other parties, including Australia.

“It is in no-one’s interest in the Indo-Pacific to see an inevitably more competitive US-China relationship become adversarial in character,” he says.

“There are risks of further deterioration in key relationships and consequent collateral impacts on the global economy and regional stability.

“There is also the challenge of adjusting to the potential for decoupling of the Chinese and American economic systems, whether this be in technology, payments systems, financial services or other areas.

“But these are not insurmountable obstacles,” Morrison says.




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Australia would not be a passive bystander but would play its part, based on principles including a commitment to open markets with trade relationships based on rules.

While continuing to work with other partners in the region, Australia would also “deal directly with our great and powerful friends”.

Its relationship with the US “has never been stronger,” Morrison says.

“Our alliance with the US is the bedrock of Australia’s security, providing us with irreplaceable hard power capabilities and intelligence. Australia is a stronger regional power because of the US alliance.

“We are committed to working with the US internationally because we agree it has borne too many burdens on its own. Australia will continue to pull its weight.

“And we will work with the US to reform international institutions, including the WTO, to ensure they’re fit for purpose and serve their members’ interests.”

The government is also “committed to further enhancing our relationship with China” – a relationship with “many strengths”.

“While we will be clear-eyed that our political differences will affect aspects of our engagement, we are determined that our relationship not be dominated by areas of disagreement.

“The decisions we make in relation to China are based solely on our national interests, just as theirs are towards Australia, and these are sometimes hard calls to make.

“But they are designed always to leave large scope for cooperation on common interests and recognise the importance of China’s economic success. This success is good for China, it is good for Australia.”The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Morrison wants to unleash economy’s ‘animal spirits’ and foreshadows new look at industrial relations


Prime Minister Scott Morrison will lay out economic policies “to get Australians off the economic sidelines and on the field again” on Monday.
Dean Lewins/AAP

Michelle Grattan, University of Canberra

Scott Morrison will commit to getting consumers, business and investors “off the economic sidelines and on the field again” in his first major domestic speech of the new term.

Addressing a business audience in Perth on Monday, Morrison will set out the government’s economic priorities for the next few months, including delivering its tax plan when the new parliament meets, and “provoking the ‘animal spirits’” in the economy by removing regulatory and bureaucratic barriers to investment.

He will also foreshadow a new look at industrial relations reform while stressing that it must benefit both employers and employees.

Acknowledging the challenges and headwinds affecting the Australian economy, which registered low growth in the latest national accounts, Morrison will say political uncertainty in the election run up weighed on the confidence of consumers, businesses and investors. This saw them “sitting on the sidelines” until it was over.

“Our job post election is now very clear – to get Australians off the economic sidelines and on the field again.”

With shadow cabinet on Monday discussing the opposition’s position on the Coalition’s three-stage decade-long tax package, Morrison will seek to increase pressure on Labor to pass all stages, saying the plan doesn’t just have a strong political mandate but also “a compelling policy rationale”.

The first stage will boost consumption and be equivalent to at least two 25 basis point interest rate cuts, he says in his speech, released ahead of delivery.




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Labor agrees with stage one but is yet to decide whether it will wave through the second and third stages, both due to start after the next election. It has been particularly critical of stage three, which delivers to the highest income earners. The government says it won’t split the bill, which will be introduced when the new parliament begins next week.

While some in Labor believe it should pass the whole package, others argue it is irresponsible to commit to tax cuts years out in uncertain times.

Shadow treasurer Jim Chalmers, interviewed on the ABC, reiterated on Sunday that Labor wanted to know how the third stage – worth $95 billion of the $158 billion package – was distributed through the various tax brackets. He said Labor’s highest priority was to get the first stage flowing through the economy, while the government’s highest priority seemed the third stage which didn’t come in for another five years.

But Morrison says in his speech: “It still baffles me why Labor can readily sign up to spending schemes that run for decades, yet cannot do the same to let Australians keep more of their own money.

“Under our changes, from 2024-25, 94% of Australians will pay a maximum marginal tax rate of no more than 30 cents in the dollar, compared to only 16% if stages two and three are not delivered.

“Or to put it another way, almost 80% of hard working Australians will keep more of what they earn following stages two and three of our tax plan.”




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Morrison says that to provoke the “animal spirits” in the economy, regulatory and bureaucratic barriers to business investment must be removed.

This requires “reducing regulatory barriers to growth and driving improvements in industrial relations that improve outcomes for both workers and businesses”.

“Congestion is not just on our roads and in our cities. We also need to bust regulatory congestion, removing obstacles to business investment,” he says, instancing the experience of the mining industry in Western Australia.

“In 1966, the late Sir Arvi Parbo took the Kambalda nickel mine near Kalgoorlie from discovery to operation in 18 months. By contrast, the Roy Hill iron ore mine took around 10 years to complete around 4,000 approvals. Delays to the project meant delays to over 5,000 construction jobs and 2,000 ongoing jobs.

“There is a clear need to improve approvals timeframes and reduce regulatory costs, but in many cases regulators are making things worse.

“Look at the WA Environment Protection Authority and the uncertainty it has created over new emissions requirements for the resources sector. Business will also make valid criticisms of many Commonwealth agencies and departments.”

Morrison is appointing his close confidant Ben Morton, from WA, who is Assistant Minister to the Prime Minister, to work with him, Treasurer Josh Frydenberg and other ministers “to tackle the full suite of barriers to investment in key industries and activities”.

The government will focus on regulatory reform “from the perspective of a business looking, say, to open a mine, commercialise a new biomedical innovation, or even start a home-based, family business.

“By focusing on regulation from the viewpoint of business, we will identify the regulations and bureaucratic processes that impose the largest costs on key sectors of the economy and the biggest hurdles to letting those investments flow.

“What are the barriers, blockages and bottlenecks? How do we get things moving?

“Step one is to get a picture of the regulatory anatomies that apply to key sectoral investments. Step two is to identify the blockages. Step three is to remove them, like cholesterol in the arteries.”




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Morrison will highlight the need “to protect investment from the impact of militant unions” and reaffirm that the government plans to try to get through the new parliament its Ensuring Integrity bill, that stalled in the last term. This would strengthen its hand against militant unions, notably the CFMMEU.

Beyond this, Morrison will say he has asked the new Minister for Industrial Relations, Christian Porter “to take a fresh look at how the system is operating and where there may be impediments to shared gains for employers and employees.

“Any changes in this area must be evidence-based, protect the rights and entitlements of workers and have clear gains for the economy and for working Australians.”The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Grattan on Friday: Those tax cuts test Albanese and provoke Hanson


The proposed 3 stage tax plan will cost $158 billion.
Shutterstock

Michelle Grattan, University of Canberra

As hissy fits go, it was a beauty. Pauline Hanson was very cross indeed. Senate leader Mathias Cormann hadn’t called her, even though he was reportedly negotiating on the government’s $158 billion package of income tax cuts.

Venting on Sky on Wednesday night, Hanson said: “I don’t think he’s got the guts to pick up the phone and actually talk to me. And to turn around and say that he’s negotiating with crossbenchers is not the truth, because he’s not negotiating with me”.

She went on to rail about the Liberals preferencing One Nation below Labor, doing “grubby deals” with Clive Palmer and trying to destroy her.

The three-stage 10-year package, which promises an extra tax offset for low and middle income earners, is the big game in town for the first days of the new parliament, which opens the week after next, and it’s causing some grief.




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Despite the government’s confident words during the election campaign, the Tax Office has declined to pay the offset of up to $540 until the legislation is passed. This means the July 1 deadline from when the offset was supposed to be available will be missed. (Although people will get from July 1 the tax cut in the pipeline from last year’s budget.)

If the tax legislation is passed quickly, a few weeks’ delay for the offset is no big deal, especially as many people won’t be putting in their tax returns for a while. But the pressure on the government to deliver the first stage of its plan ASAP – not least because the economy needs the stimulus – reduces its ability to hold out indefinitely on its insistence it won’t split the package to accommodate objections to the later cuts.

Labor is in even more of a bind. It is happy to tick off the first stage – worth $15 billion – but has yet to decide its position on stages two (costing $48 billion and starting 2022-23) and three (costing $95 billion and commencing 2024-25).

Its objections are particularly to the last stage, which delivers cuts for higher income earners. Both the later stages come after the next election, due early 2022.

Those urging Labor should try to block at least stage three argue, apart from the equity issue, that mounting economic uncertainty makes it irresponsible to lock in such big tax cuts out in the “never never”.

On the other hand, a strong case can be made on grounds of principle and practicality for Labor to wave the whole package through.

The question of when a party or politician has a “mandate” is vexed.

On one view an opposition can claim it possesses a mandate to stay faithful to positions it advanced before an election even after it has lost that election.

But when the Morrison government went to the polls with the tax package as its prime policy, it does seem to have a strong case to say the parliament should pass it.

The same point would have applied if Bill Shorten had won. He would have had a mandate for his proposed changes to franking credits and negative gearing – both opposed by the Coalition.




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It doesn’t help maintain faith in the political system, or in election promises, for parties to try to govern from opposition, despite the Senate’s voting system sometimes facilitating this. Voters should be able to expect that major election policies of the winning side are implemented (perhaps with some alterations at the edges by parliament).

It is another matter when, as happened with the Abbott government’s 2014 budget, big new controversial initiatives are brought in soon after the election campaign, during which they were not flagged.

The practical reason against Labor going to the barricades on the tax package is that as it regroups, there is little to be gained by taking on this particular battle, especially when it is trying to reposition itself as appealing better to “aspirational” voters and leaving behind language attacking the “top end of town”.

Labor might be right that the proposed long term tax cuts could look irresponsible later, but if so, that is a fight to be had at the next election, when the ALP could highlight doubts it had previously registered.

There are divisions in Labor about what to do. Victorian MP Peter Khalil this week said if the government won’t split the package, Labor should vote for it all. Anne Aly, a backbencher from Western Australia, expressed concern about the package’s implications against a darkening economic outlook. The ALP has asked the government for more information. Anthony Albanese is consulting within the party before shadow cabinet decides the position it takes to caucus.

While the government is focusing the rhetorical pressure on Labor, it has an eye to the alternative route – to get the package through via the crossbench.




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For Cormann, the new Senate is easier than the last, partly because the non-Green crossbench has been slashed at the election.

To pass legislation opposed by Labor and the Greens the government needs four of the six non-Green crossbenchers. These include two from Pauline Hanson’s One Nation, two from Centre Alliance, South Australia’s Cory Bernardi, and Tasmania’s Jacqui Lambie.

Bernardi will vote with the Coalition. He has said he wants to help the Morrison government as much as possible, and on Thursday he announced he is winding up his Australian Conservatives party. It’s not clear whether he’ll seek to rejoin the Liberals, from whom he defected in 2017, or even stay in the parliament.

Cormann has been in discussion with Centre Alliance about their push for lower gas prices, and an agreement on some action appears likely. While this deal is formally separate from the tax package, he and they both have that front of mind.

This would leave one vote to be collected.

Lambie refuses to comment on her position. Hanson said earlier this month she was “not sold” on the current package and “therefore not likely to support the measures” – and proposed some of the funds be used for a coal-fired power station and a water security scheme.

After Wednesday’s outburst, Cormann was (of course) on the phone to her at crack of dawn Thursday. On her account, he said: “I’m not negotiating with crossbenchers with this at all. We have our three stages. We’re going to pass that no matter what”.

The government aims to keep the heat on Albanese. By the same token, if the crossbench has to come into play, Cormann won’t want a repeat of last term, when he couldn’t muster the numbers to deliver tax relief to big companies.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

As Morrison heads to the Pacific, our nearest neighbours will be looking for more than kind words


Mark Kenny, Australian National University

Scott Morrison travels to Europe for D-Day commemorations next week. While there, he may also hold talks with leaders such as German Chancellor Angela Merkel ahead of the G20 meeting in Japan in June.

With the UK and US in the midst of internal and international repositioning –otherwise known as turmoil – and with China continuing to flex and grow, safeguarding Australia’s strategic and commercial interests has rarely been more complicated, nor more of a singular Australian responsibility.

Somewhat perversely, this may explain why Morrison’s first stop as a freshly re-elected prime minister will not be London or Washington, or even Berlin, but rather, the Solomon Islands capital of Honiara.

That is significant. Whoever won the May 18 election, the regional “backyard” was set to become a renewed priority for Australia.

Attention now turns to small and micro nations, who suffer in varying degrees from the effects of remoteness, narrow economies, endemic poverty, poor infrastructure, and, most existentially, rising sea levels. These countries are eager for assistance in securing their futures, whether sourced from old friends like the US and Australia, or new enthusiasts like China.




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China’s influence continues to grow

Labor’s new deputy, Richard Marles, has long championed improved development aid and other assistance to Australia’s nearest neighbours, arguing it is Australia’s moral responsibility. That’s a given, but so is the strategic case for a renewed presence. Namely, the expanding diplomatic and strategic reach of Beijing.

Morrison is alive to it too.

China’s influence across the region – particularly as an infrastructure and project financier – is growing. This is seen in Canberra as a serious threat, with both major parties looking for ways to strengthen ties with Pacific nations that had been allowed to fray.

Darwin-based Labor MP Luke Gosling told me he would make the Northern Territory capital the official base for Australia’s renewed regional extension.

“Whether it is responding to earthquake, cyclone, tsunami, or terrorist attack – it should be the hub for humanitarian, emergency and disaster assistance to the region, but more importantly involved in capacity building with our regional neighbours,” he said.

Valid though this is, success will turn not so much on a change of arrangements internally, as a whole new basis to Australia’s regional pitch.




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Australia needs to listen first

Experts say the key to closer relations is talking to smaller countries about their concerns, rather than the tendency we’ve had to date to talk about ours.

For Morrison, that is a political challenge with distinct domestic characteristics. It means acknowledging the contemporaneous real-world effects of global warming, including the direct contribution to carbon emissions from mining and burning coal.

For low-lying island countries including Kiribati, with a population of just 110,000, and Fiji, this is no abstract debate but rather one of life and death, here and now.

“It’s their top security priority,” Michael Wesley, Dean of the College of Asia and the Pacific at the Australian National University, told Sky News “whereas our top security priority in the Pacific is China”.

“Pacific leaders have made it very clear that they don’t see China in the Pacific as a threat, so we’ve got an immediate mismatch of what we perceive to be the problems between us and the Pacific Islanders.”

Wesley described global warming as an existential concern “happening to them right now”.

“We have to be extremely sensitive about how things like the Adani coal mine, [and] a new coal-fired power plant perhaps being opened, will play out in the Pacific, it goes down like a lead balloon.”

As with Mr Morrison’s visit to Honiara, the order of things matter when communicating internationally.




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Taking climate change concerns seriously

Fiji’s Prime Minister Frank Bainimarama was among the first to congratulate Morrison on his surprise election win. The pair had struck up a warm relationship when they met earlier this year. But now, as then, the Fijian used the opportunity to seek stronger climate leadership from the region’s wealthiest economy.

His longer post on Facebook provided the kicker:

In Australia, you have defied all expectations; let us take the same underdog attitude that inspired your parliamentary victory to the global fight against climate change. By working closely together, we can turn the tides in this battle – the most urgent crisis facing not only the Pacific, but the world. Together, we can ensure that we are earthly stewards of Fiji, Australia, and the ocean that unites us. Together, we can pass down a planet that our children are proud to inherit.

It was a similar message from Samoa, where Prime Minister Tuilaepa Sailele Malielegaoi welcomed the election result, but noted in an interview with The Guardian that “[Australia] has been lagging behind,” regarding the need for action on the climate emergency.

And it’s a fair bet the content will be the same in Honiara.

The finer points of diplomacy have not been a strength of Morrison, who, even after his recent electoral endorsement, is still less than a year in the top job.

A plainly cynical suggestion made during the Wentworth byelection of moving the Australian embassy in Tel Aviv to Jerusalem caused nothing but embarrassment. More recent comments depicting the US as our friend and China as merely our client raised eyebrows in Beijing.

But a desire to succeed, a personable nature, and an avowedly conservative disposition, suggest the Australian prime minister does not envisage significant direction changes in Australia’s stance on either regional or global affairs. That is a reality likely to prove disappointing to Pacific Island leaders looking for a lot more than kind words as their citizens face inundation.The Conversation

Mark Kenny, Senior Fellow, Australian Studies Institute, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Partner or customer? Why China is Scott Morrison’s biggest foreign policy test



Scott Morrison is relatively inexperienced on foreign policy, but he’s certain to be tested by China in his first full term in office.
Mick Tsikas/AAP

Euan Graham, La Trobe University

The 2019 federal election, unlike previous campaigns, did not feature a dedicated debate on foreign affairs or defence. The conventional cynicism – that there are no votes in foreign policy – does not adequately explain this. It seems Prime Minister Scott Morrison and Labor leader Bill Shorten reached a shabby consensus that foreign and security policy questions were uniformly too hot to handle.

Foreign affairs is in fact among the most important challenges facing the Morrison government. The simple reason: the status quo that has served Australia so well in the past couple of decades is fast coming to an end.

Australia has uniquely avoided recession among the developed economies because it has surfed a once-in-a-generation wave of Chinese demand for commodities. Australia’s security has also been assured through its longstanding alliance with the US, while its military commitments have been kept largely at arm’s length in the Middle East and Afghanistan.




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However, as Asia-Pacific scholar Nick Bisley has commented, Australia now finds itself caught between two different forms of revisionism: the strategic revisionism of Xi Jinping’s China and the economic revisionism of Donald Trump’s United States.

Trump’s trade wars and protectionist policies are likely to be a continuing point of friction with Australia, which remains heavily reliant on Asian markets (not only China) for trade.

But China is the most important external challenge Australia faces. It’s so all-encompassing that it transcends traditional foreign, trade and defence policy silos, and includes a significant domestic dimension in terms of political interference, as well.

Even though Morrison has already served the better part of a year in office, it’s hard to be sure of his convictions on China. With his mandate secured, he now has both the opportunity and obligation to show his true colours.

Caught between a rock and a hard place

In theory, the Coalition’s election victory should mean continuity in foreign policy, as signalled by Morrison’s decision to retain Marise Payne as foreign minister.

When China was – belatedly – raised during the campaign, Morrison repeated a well-worn mantra about not having to “pick sides” between the United States and China. The former he characterised as Australia’s “friend”, labelling China as a “customer”. While this description no doubt raised eyebrows in Beijing, Morrison was arguing Canberra could “stand by” both.

The Morrison administration has generally sought to position Australia somewhere in between its chief ally and its chief customer. His reticence thus far to make waves with the country’s number one customer may be borne of a desire to maintain Canberra’s room for manoeuvre as a middle power, though this is getting steadily harder.

Australia could find itself in an awkward position if the rift between China and the US deepens.
Roman Pilipey/EPA

If the prime minister truly believes Australia can play an intermediary role, few in Canberra’s foreign policy and defence circles would agree. To do so would only expose Australia to heightened risk, precipitating the kind of invidious strategic choices that Morrison wishes to avoid.

It also plays into the Chinese Communist Party’s objective of sowing discord between the US and its Pacific allies.




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If Morrison is privately more attuned to the strategic risks China poses – and after nine months of intelligence briefings he should be – then he has a duty to prepare the public for the likelihood of tougher times ahead. Should Australia-China relations take a darker turn, it may prove difficult for the government to persuade the public to back a significant adjustment in national security policy, including increased defence spending.

Moreover, there are risks to publicly framing US-China strategic competition as a destabilising factor for Australia’s security. Australians could judge the prospect of entrapment in a confrontational US policy towards China as potentially more threatening to Australia’s security than Beijing’s deliberate challenge to the “rules-based order” in the region.

This could undermine public support for Australia’s alliance with the US, which remains the bedrock of our security.

Stepping up in the Pacific

The Pacific is where the strategic interests of China and Australia clash most directly. Morrison’s most important security policy decision thus far, announced at last year’s APEC summit, was to establish a joint naval base with the US and Papua New Guinea at Lombrum on Manus Island. This was partly aimed at denying the location to China, as well as establishing a forward ADF presence in the Pacific.

It is also notable that Morrison will visit the Solomon Islands on his first post-election overseas trip. China is inevitably part of the subtext here, as Prime Minister Manasseh Sogavare is reported to be swaying towards switching allegiances from Taiwan to Beijing – yet another sign of China’s growing influence in the region.

Of course, there is more than geopolitics to the Pacific region and Morrison must be careful to demonstrate empathy and humility, given Australia’s patchy engagement with the region and the Coalition’s ambivalence on climate change – a major grievance for most Pacific nations.

Morrison’s appointment of Alex Hawke as both minister of international development and Pacific and assistant defence minister provides easy ammunition to critics, who will charge that the government’s Pacific “step up” is narrowly conceived through a geopolitical lens.

But Morrison appears to take the step up seriously, and a commitment to reversing the relative decline in Australia’s influence in its immediate neighbourhood (note: not “backyard”). A volatile political situation in PNG further demands a close watch on the Pacific.

Chinese President Xi Jinping has made Australia nervous by courting Pacific leaders like PNG’s Peter O’Neill.
Mick Tsikas/AAP

Other key alliances to shore up

Elsewhere in the neighbourhood, Morrison has fallen on his feet now that friendly incumbents in Indonesia and India – President Joko “Jokowi” Widodo and Prime Minister Narendra Modi – were also returned in recent elections, making it easier for continuity to be maintained.

Morrison was quick off the mark to congratulate Jokowi on Twitter, who promptly replied that Australia is one of Indonesia’s “greatest allies.”

By pulling off an unlikely election victory, Morrison is in the fortunate position of being the first prime minister for some time who is not looking immediately over his or her shoulder for political assassins within their party.

Morrison also has more bandwidth to devote to foreign issues than any leader since Kevin Rudd. He is disadvantaged, however, by his relative inexperience and the thinness of his front bench. That places a special burden on whoever will be advising Morrison on international security – a role sure to take on greater importance in his administration – to provide the counsel he needs and to wrangle the bureaucracy into line. For there will be no shortage of challenges ahead.The Conversation

Euan Graham, Executive Director, La Trobe Asia, La Trobe University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

View from The Hill: Morrison rewards friends, avoids making enemies and announces new ambassadors


Michelle Grattan, University of Canberra

Scott Morrison’s new ministry mixes stability with dashes of innovation, box ticking, and the rewarding of friends.

The Prime Minister has maintained his record number of women (seven) in cabinet, and created a new entry to the history books by appointing the first Indigenous cabinet minister, Ken Wyatt, who will become minister for Indigenous Australians.

Let’s hope this is not a poisoned chalice for Wyatt, who previously held aged care and Indigenous health in the outer ministry. It is one of the hardest jobs and the expectations and pressures on him from Indigenous people will be enormous.

Morrison has highlighted the priority he wants to give to improving program implementation, including and especially the National Disability Insurance Scheme.

Rewards for friends

Stuart Robert, one of the Morrison friends and supporters promoted in the reshuffle, becomes minister for government services and minister for the NDIS, and is elevated to cabinet.

Robert will oversee a new Services Australia agency to “drive greater efficiencies and integration” of service delivery.

Addressing senior public servants the other day, Morrison lectured them on the need for “congestion busting” in the bureaucracy. The NDIS has had serious teething problems. Time will show whether Robert, who moves from assistant treasurer, can deliver on improving delivery. He personally has been the centre of political controversies and last year had to pay back about $38,000 for excessive internet use at home.




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Ben Morton, a Morrison confidant who travelled with him in the campaign, becomes assistant minister to the prime minister and cabinet, one of those nice “in close” positions that are all about relationships.

Greg Hunt, much praised by Morrison during the election, adds to his health job the position of minister assisting the prime minister for the public service and cabinet, which gives him extra access to the PM’s ear.

Energy and emissions together

In a major move, Morrison has brought together energy and emissions reduction under Angus Taylor. This means Taylor, whose performance as energy minister has been underwhelming, has responsibility for the climate change area as well as continuing to try to achieve lower power prices.

The government skated through the election with climate change not having as much electoral bite as expected and high energy prices failing to extract the political toll they might have. But this is going to be a hard policy area in the coming term, as industry will be looking for more investment certainty, and consumers will want better results on prices. Taylor will need to lift his game.

As expected and despite Morrison’s commitment during the campaign, Melissa Price is out of environment and out of the cabinet. She’s now in the outer ministry, in defence industry, where she can continue to be neither seen nor heard. As Morrison put it with delicate understatement: “Melissa and I discussed her role and she asked to be given a new challenge and I was happy to give her one”.

Senators to New York, Washington

Two top level diplomatic jobs make space for appointments to the Senate. Mitch Fifield, who held communications, is off to be United Nations ambassador in New York, and Arthur Sinodinos, who seemed a monty for a cabinet post after his return from sick leave, will replace Joe Hockey in Washington. Morrison said Fifield’s exit was by choice – that he could have stayed in his portfolio.

Jim Molan, who unsuccessfully attempted to survive as a senator by appealing for people to vote for him “below the line”, will hope to get the NSW Senate spot; Sarah Henderson, who lost Corangamite, will seek preselection for the Victorian vacancy.

Paul Fletcher, with a background in Optus, takes over Fifield’s communications portfolio.

A minister for housing

The core economic team of Josh Frydenberg in treasury and Mathias Cormann in finance remains, with Michael Sukkar, from the hard right in Victoria, becoming assistant treasurer and housing minister. He will be in charge of implementing the Coalition’s election promise for a deposit guarantee for first home buyers.

Alan Tudge keeps population, cities and urban infrastructure while being promoted to cabinet.

Notably, responsibility for industrial relations (previously with the now-departed Kelly O’Dwyer), has been handed to Christian Porter, who stays attorney-general and becomes leader of the House. Porter immediately signalled his law-and-order priority in industrial relations: “my initial focus will be on the law enforcement aspects of the portfolio, ensuring adherence with Australia’s industrial relations laws, particularly on building sites across Australia”.

Promotions for women

Of the females in cabinet Marise Payne, who retains foreign affairs, is the new minister for women, while Michaelia Cash, who was in a heap of trouble last term, has employment, skills, small and family business, gaining employment.

As he promised, Morrison has elevated Linda Reynolds, whom he appointed to cabinet in March, to defence, formerly held by Christopher Pyne, who left parliament at the election. This is a huge job for Reynolds, regardless of her background in the military. Alex Hawke, who is close to Morrison, becomes assistant defence minister, and minister for international development and the Pacific.

Sussan Ley is back in cabinet after a break, taking the downsized environment portfolio. Anne Ruston is promoted to cabinet, as minister for families and social services. Karen Andrews remains in industry and in cabinet.

Victorian senator Jane Hume, with a background in the superannuation industry, becomes an assistant minister in that area; former whip Nola Marino also becomes an assistant minister.

Fewer Nationals

The Nationals have lost a cabinet position, going from five to four – this results automatically from the change in their ratio within the Coalition – despite the fact they did well at the election.

Morrison confirmed that McCormack chose who went into the portfolios the Nationals have. Nationals sources say McCormack pressed for a better deal on portfolios, Liberal sources deny this.

Nationals deputy leader Bridget McKenzie has got agriculture (first womanin that job), which means David Littleproud, who previously held agriculture and water resources, ends up with water resources, drought and other bits and pieces.




Read more:
VIDEO: Michelle Grattan on Morrison’s ‘miracle’ election win – and Labor’s leadership search


Among those not moving, Peter Dutton stays in home affairs, Dan Tehan in education and Simon Birmingham in trade.

Morrison has put his stamp on his team without being radical. Notably, no one was dumped to the backbench.

And the chance of an early return for parliament

Meanwhile Morrison also hinted he was hoping that, despite the current advice, there was a chance parliament could be brought back before July 1 to pass the tax cuts so the first tranche could be delivered from then.

He told his news conference:

We are awaiting advice from the [Australian Electoral Commission] as to when the return of writs will be provided.

At present they’re saying that’s June 28 and there’s a possibility of that occurring earlier. That presents different opportunities for when [we] might be able to recall parliament.

Delivering those tax cuts right on time is something Morrison would really like to do. It’s a fair bet the AEC is being urged strongly to “deliver” those writs early, if it’s humanely possible.

Meanwhile on the Labor side, Richard Marles is now assured of becoming deputy leader to Anthony Albanese, after Clare O’Neil – who like Marles is from the Victorian right – said on Sunday she would not contest the deputy leadership.


For the fridge door:The Conversation


pm.gov.au

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Why the 2019 election was more like 2004 than 1993 – and Labor has some reason to hope


Frank Bongiorno, Australian National University

I recently had cause to look at a large file of material I collected about Mark Latham during 2004. It is full of many of the same columnists who have just campaigned successfully for the return of the Morrison government. They were buzzing with excitement and hubris. News Corps’s Miranda Devine saw an omen in the news that arrived from Paris as the polls opened in Australia:

Jacques Derrida, the father of deconstructionism, died in Paris of pancreatic cancer, bringing to a symbolic end a destructive era of postmodern truth-twisting.

While no one else seemed to draw a bow quite so long, almost everyone could agree that John Howard’s victory was “historic” and that Labor was in “crisis”.




Read more:
View from The Hill: Should Labor jump to new generation leader – and Morrison steal some Shorten policies?


But The Australian’s Janet Albrechtsen’s response to that election brings us closest to the present. Howard’s very lack of a grand vision was precisely what had attracted voters to him, she claimed:

While the Left aches for a top-down vision imposed from above by some Whitlamite, Keatingesque leader, the rest of us prefer the bottom-up Howard version where we get to choose our own vision.

With Scott Morrison, we also have little choice but to choose our own vision if we want one. But Howard, it turned out, had plans if not a vision. He would use the Senate majority voters had sent his way to deal with Australia’s unions once and for all, through WorkChoices. At the 2007 election, Howard lost government as well as his own seat.

Labor supporters despairing of the result of Saturday’s election would do well to recall 2004. It is, to my mind, the closest parallel with what we have just seen. Labor took bold policies to the voters in 2004 and 2019. A Coalition leader managed to persuade enough voters that Labor couldn’t be trusted in economic matters.

Resources industries mattered for both elections, Tasmanian forests in 2004, and Queensland coal in 2019. Labor fumbled each, just as housing – interest rates in 2004, and property values and rents in 2019 – caused Labor grief on each occasion.

Shorten is no Latham, but there were question marks hanging over both leaders that told against their party. Shorten made his mistakes but ran a solid campaign in 2019, gradually hitting his stride.

Latham was no slouch in 2004, either; there has been a conflation of his behaviour after the campaign with that during its course. Writing straight after the election in The Australian, Paul Kelly had many criticisms of both Labor and Latham. But he also thought Latham had campaigned “very well” personally.

The more common comparison of 2019 has been with 1993, John Hewson’s “unlosable election”. There is, of course, something in that and, again, some hope for Labor.

There were reasons to imagine after the 1993 election that Labor was in for the long haul – that it would be the modern equivalent of the post-war Coalition with its 23-year run. The Liberals continued with a broken Hewson, had a brief and disastrous experiment with Alexander Downer, and then settled on a failed leader from the previous decade, Howard.

Few saw the Coalition’s future as bright after Keating’s win. But Labor fumbled its post-1993 election budget and, for all of Keating’s bravado in the house and all of his “big picture” hobnobbing with world leaders such as Clinton and Suharto outside it, the foundations of Labor rule were crumbling.

Is Labor’s “crisis”, if it is a crisis, worse than that faced by the Coalition in 1993 and Labor in 2004? If the ultimate test is electoral success, only the next election will allow us to answer that question.

But there are some alarming indicators. Labor seems to have lost votes to the far right in Queensland and preferences then flowed helpfully to the Coalition. Morrison was able to have his cake – getting the Liberals to put One Nation last south of the Tweed – while eating it north of the Tweed, where he had no sway over LNP preferencing and the Coalition reaped the rewards.

There is an emerging narrative that Adani mattered in key Queensland seats, not so much in its own right but for its wider symbolic significance for the future of coal mining in Queensland and Labor’s commitment to traditional blue-collar jobs.

If so, Labor has a lot of work to do to clarify its policy and messaging, in a state where coal has formed one of the foundations of the economy since the 1960s.

And it needs to do so without damaging its prospects elsewhere by equivocating on commitments to renewable energy and vigorous action on climate change. The old calculation that alienated Greens votes will come back to Labor might still be largely correct, but Labor has never won from opposition when the electorate votes for it only grudgingly.




Read more:
Labor’s election defeat reveals its continued inability to convince people it can make their lives better


It was ironic, in view of Labor’s problems in some regions and outer suburbs, that the two front-runners who initially emerged as Labor leadership contenders were members of the Left faction representing neighbouring seats in oh-so-hip inner Sydney. With Tanya Plibersek withdrawing – and another Sydneysider, Chris Bowen, also bowing out – the leadership is now likely to fall to the Left’s Anthony Albanese. Queenslander Jim Chalmers, from the Right, is considering whether to run.

The terms in which the post-election debate about Labor’s future has been carried on could have occurred after any election defeat in the last 50 years. But the foundational issue for Labor is not where it places itself on the political spectrum, or even whether it can win back voters in the regions, but whether it has any capacity to grapple with the inequalities and frailties that lax, opportunistic and unsustainable policy – much of it dating back to the Howard era – has embedded.

At the 2019 election, Labor proposed chasing revenue by winding back tax concessions to some categories of shareholder, property investor and superannuant. This approach was rejected at the polls. But economic growth and productivity seem unlikely to provide an alternative pathway for a future Labor government, unless there is a miraculous turn-around in the global economy.

No prospective Labor leader should be taken seriously unless he – and it seems it will indeed be a “he” – is at least able to articulate this dilemma.The Conversation

Frank Bongiorno, Professor of History, ANU College of Arts and Social Sciences, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Infographic: who’s who in the new Morrison ministry


Emil Jeyaratnam, The Conversation; Justin Bergman, The Conversation, and Shelley Hepworth, The Conversation

As Prime Minister Scott Morrison’s ministry is sworn in today, we’re taking a closer look at the members of the newly revamped cabinet.

Some of the faces are new – Stuart Robert, for example, takes over the new portfolio overseeing the National Disability Insurance Scheme. And some of the portfolios have shifted, notably Sussan Ley replacing Melissa Price as environment minister.

We’ve asked our experts to appraise the performances of the ministers and highlight what could be the key challenges in their new roles.

In some cases, ministers hold more than one portfolio. To simplify the policy analysis, we’ve chosen a key policy area for which they’re responsible and asked our experts to analyse those.

The Conversation

Emil Jeyaratnam, Data + Interactives Editor, The Conversation; Justin Bergman, Deputy Editor: Politics + Society, The Conversation, and Shelley Hepworth, Section Editor: Technology, The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Vital Signs: the ‘ball-tampering’ budget trick they don’t want you to know about



File 20190418 28103 iz9jvq.jpg?ixlib=rb 1.1
Just not cricket: Politicians make promises but obfuscate how those promises will be paid for.
Shutterstock

Richard Holden, UNSW

The first week of the federal election campaign has been dominated by heated disputes about the numbers behind both government and opposition policies.

Both sides are under pressure. Notably, the cost of Labor’s 45% emissions-reduction target has been rightly questioned.

Opposition leader Bill Shorten’s answer to reporters that “our 45% reduction, including international offsets, has the same economic impact as the Liberals’ 26%” didn’t exactly engender confidence.

But the folly of Labor’s environmental plans is another tale for another column.

Our focus here is on how the Coalition is going to cut personal income tax by A$158 billion and balance the budget.

Wild assumptions

Earlier this week the Grattan Institute pointed out the Coalition’s budget assumption that expenditure will fall from 24.9% of GDP in 2018-19 to 23.6% during the next decade amounts to cutting spending by more than A$40 billion a year in 2029-30.

This raised the natural question of exactly where those cuts will come from. According to the government, it’s from things such as lower welfare payments and lower interest payments on government debt.




Read more:
Your income tax questions answered in three easy charts: Labor and Coalition proposals side by side


The Grattan Institute’s Danielle Wood described these assumptions as “heroic”. Yup.

Now, you might wonder why the Coalition’s plan to cut personal income tax doesn’t fully kick in until 2025. Or, for that matter, why its “enterprise tax plan” on corporate tax is scheduled to be phased in over a decade.

Playing outside the rules

The short answer is that for the four years following a budget – the so-called “forward-estimates period” – there are rules about banking spending cuts.

During those four years, cuts need to be specified, or economic parameters need to be varied. And with good reason. That way the actual assumptions the government is making, however fanciful they may be, are plain for all to see.

But beyond the four-year period no such discipline applies. This allows governments of all stripes to make very specific claims about, for example, tax cuts they plan to deliver without having to be at all specific about how they are going to pay for them.

This is all just a conjuring trick. Politicians try to get us to focus on the tangible, specific thing we want – tax cuts, more money for hospital or schools, free cancer treatment – while obfuscating how they are going to pay for it.

It’s dirty pool. It’s not cricket. It’s the kind of thing a mob accountant does. Pick your favourite metaphor.

Bipartisan failure

Of course, treasurer Josh Frydenberg and finance minister Mathias Cormann didn’t invent this unscrupulous practice. Wayne Swan and Penny Wong, as treasurer and finance minister respectively, were guilty of these kind of shenanigans too.

The specifics of the current round can’t even be debated properly, because ten-year “guesses” don’t lay out specific assumptions that can be checked for internal consistency and plausibility.

Sadly, it seems futile to hope for cultural change among politicians and a shift to integrity.

To some extent, we need to be the change we want.

The fact both sides of politics so brazenly play us for suckers is as much our fault as it is theirs. If politicians thought there were real consequences at the ballot box for this sort of behaviour, they would think twice.

But there aren’t. When both sides are guilty it’s understandable that voters become so cynical that they just factor it in and look to other issues.

If more voters were willing to make “cooking the books” a decisive issue, that might change.

Need for incentives

Politicians respond to incentives. My favourite illustration of that is how United Nations officials used to be exempt from parking tickets in New York City. As economists Ray Fisman and Ted Miguel showed, when norms alone governed behaviour, officials from corrupt countries basically parked wherever they wanted. Once city authorities got the ability to confiscate diplomatic licence plates of violators, things improved radically.

So as long as the mainstream media refuses to issue our politicians with the moral equivalent of parking tickets for cooking the books of public debate, politicians are going to keep doing it.

Now, many commentators do exactly that – and some of them are brilliant and fearless. But other folks, on the right and on the left, seem to have the attitude that both sides play fast and loose with the facts so it’s fine for them to call out whichever side they personally like the least.

Actually, scratch “seem to have the attitude”. They’ll tell you that to your face.

When Australian cricket captain Steve Smith and vice-captain David Warner got caught in a ball-tampering racket, there were consequences.

When our elected representative do something similar, but with our nation’s finances –with consequences for growth, employment, welfare benefits, retirement incomes, and climate change – they get a pass.

That’s got to stop; and we’ve all got our part to play.The Conversation

Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Business-as-usual record on transport leaves next government plenty of room to improve


Marion Terrill, Grattan Institute

This article is part of a series examining the Coalition government’s record on key issues while in power and what Labor is promising if it wins the 2019 federal election.


Election season means transport season: just as the recent New South Wales and Victorian elections gave us massive new transport promises, so too is the federal government relying on the enduring popularity of new roads and rail. But look beyond the rhetoric and the past three years have been largely business as usual. That leaves plenty of room for the next government, of whatever colour, to take a fresh look at how transport promises are made – and plenty of room to improve.

Last week’s federal budget committed to transport expenditure of A$7.4 billion in 2019-20, and A$33 billion over the four-year forward estimates period.




Read more:
Budget transport spending is about par for the course, but the pattern is unusual


The government claims it’s spending a record A$100 billion over a decade. Yet the opposition claims: “Across the four years of this budget, Commonwealth investment in infrastructure actually falls, from A$8 billion to A$4.5 billion.” And Infrastructure Partnerships Australia says recent budgets are down on the long-term average by about A$11 billion over the forward estimates.

How much is the government actually spending?

With such polarised views, who are we to believe?

In reality, the expenditure for 2019-20 is absolutely normal. At 0.37% of GDP, it’s close to the midpoint of spending on transport under treasurers Scott Morrison, Joe Hockey and Wayne Swan. In each of the past ten budgets, annual transport spending in the year following the budget has been 0.26-0.53% of GDP.

What is different is the extent of promises that lie beyond the forward estimates period. The move to a ten-year pipeline of promises might be fine in theory, but an interested elector can rely only on what’s in the budget papers. And from that they would conclude there’s nothing unusual to see here.




Read more:
$500m for station car parks? Other transport solutions could do much more for the money


A new enthusiasm for equity investments

All these figures concern grants to state governments, which are responsible for transport networks. But, in addition to these grants, the federal government has developed an enthusiasm for funding projects “off-budget”. In the past two years, the Commonwealth made equity investments of A$9.3 billion in Inland Rail and A$5.3 billion in Western Sydney Airport.

The Charter of Budget Honesty states that an investment can be treated as an off-budget equity injection only if the government has a “reasonable expectation” of recovering the investment. In other words, the entity must be expected to make a positive return over time.

But this gives governments a lot of latitude. A positive rate of return is not the same as a commercial one. And there seems little likelihood of commercial returns in either case.

For Inland Rail, it’s no secret that the Australian Rail Track Corporation will never be asked to repay the A$9.3 billion, even when project revenues start to flow in 2025. Let’s hope the finance minister is right to insist there’s no prospect the project will need even more taxpayer support, despite the risks identified in the budget papers themselves and by the Commonwealth Auditor-General. With no expectation of repayment, there is no practical difference between this “equity investment” and a grant.

For Western Sydney Airport, the government decided to build the airport itself after Sydney Airport Corporation declined its right to build it. The airport operator said the offer as it stood was “deeply uneconomic”. It cited operational, traffic, financial and political risks.

So it’s hard to share the confidence of the then treasurer (and now prime minister), Scott Morrison, when he said the new airport will “generate an income stream that’s going to pay for itself”.

In both cases, if a future government ends up writing down the fair value of these assets, this will appear on the balance sheet as a change to “other economic flows”. It won’t be separately identified. Nor will the write-down show up in the underlying cash balance figure that the media spotlight highlights on budget night.

The unavoidable conclusion is that pushing transport spending off-budget seriously diminishes not only the discipline that comes from competing for funds through the budget process, but also transparency in how public money is being spent.




Read more:
A closer look at business cases raises questions about ‘priority’ national infrastructure projects


A foray into road pricing is stillborn

In November 2016 the government took an unusually bold step: it committed to holding an inquiry into road-user charging. The then minister for urban infrastructure, Paul Fletcher, was in good company. His commitment to commission a review led by an eminent Australian was in response to a 2016 recommendation from Infrastructure Australia, which invoked a similar recommendation in the 2015 Harper Review of competition policy, which in turn referred to a 2014 Productivity Commission recommendation. And the backdrop to all these reports was a recommendation of the 2010 Henry Tax Review.

But time passed and no eminent person was appointed. More time passed, ministers moved portfolio, and no eminent person was appointed. Finally, in October 2018, current minister Michael McCormack declined to commit to the inquiry.

An inquiry is no more than an inquiry, but a non-inquiry is a commitment to the status quo. Roads funding and roads investment are serious topics, and many commentators have argued that they are the laggards of regulatory reform.

A change to how road use is funded could significantly alter which roads are funded, what maintenance is done, and how networks are managed. It appears to have been all too much for this government. This task awaits a future government.




Read more:
Delay in changing direction on how we tax drivers will cost us all


The alternative government’s most important promises aren’t the sexy ones about electric vehicles. They are Labor’s promises that Infrastructure Australia should assess projects before the decision to invest, and to release assessed business cases. These promises may sound worthy and a little dull, but in reality they are big and welcome commitments.

Less obvious is how to square them with federal Labor’s promise to advance high-speed rail, or the promise to work with the Victorian premier “to deliver the visionary Melbourne Suburban Rail Loop”. Both of these are massively expensive projects with nothing approaching an assessed and publicly available business case.

It would be a significant improvement if whichever party wins government next month were to commit to, and follow through on, careful assessment of transport gaps and problems, consideration of the various feasible solutions, and rigorous evaluation of the preferred approach. And it’s not enough just to do this; it should be done in public.

Let’s hope.




Read more:
Missing evidence base for big calls on infrastructure costs us all


The Conversation


Marion Terrill, Transport and Cities Program Director, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.