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Beware dependence on independents

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by Peter Switzer

With market news out of the US sparse on the ground, it’s timely to evaluate Independents’ Day in Canberra yesterday. In fact, what happens to resource stocks today should be interesting.

On the decisions of Tony Windsor and Rob Oakeshott to desert their apparent roots — conservative politics — to jump into bed with Julia and her Labor team, it looks to be a big gamble.

On why we have a minority Government, dependent on independents and one Green, can be explained by a leadership vacuum.

The Rudd era, while filled with so much promise, proved to be a “Government that lost its way” as Julia regularly reminded us over the election campaign. Meanwhile, the Opposition ran with a loose cannon in Tony Abbott, who surprised many on how well he campaigned but he never once won a poll as preferred prime minister. That worked against him but he has impressed even some of his staunchest critics.

Not quite ready

The Coalition also have a “not quite ready” look about them. Barnaby Joyce has to learn to say the second thing that comes into his head. Warren Truss, the National Party leader and potential Deputy Prime Minister has to become known and politically smarter.

Truss was bagging the independents after the election when he should have been building bridges.

Joe Hockey has to become a Treasury expert. This will build his credibility. He is the most likeable politician I have met and he’s academically smart but he needs to add gravitas to his charm as a good bloke.

Credibility issue

The closeness of this election showed that while Australian voters were disappointed in Labor after three years of batts stuff ups, Julia Gillard Memorial school halls and back-downs on key policy initiatives such as an ETS, the Opposition was not quite ready to get a landslide victory.

On Labor, it has a credibility problem with the role of the “faceless men” who assassinated Kevin Rudd. Rudd was making lots of mistakes and was not including the party, instead taking counsel from his inner team of young advisers.

These people had helped him win power tapping into the likes of TV programs such as Sunrise and Kevin 07 websites. But these guys were good at getting him into power but not competent at keeping him there.

Growth ahead

This was always going to be a nice election to win as China and India will keep our economic growth show on the road, though we will have an interest rate challenge over the next three years. The global economy should slowly recover and the stock market will go to higher levels, which should mean our budget deficits will turn into surpluses again.

The challenges

Our biggest challenge will be the unholy alliance of Labor with the two bush independents, the Tasmanian whistleblower and the Green MP from Melbourne. This challenge will intensify when the Greens stack the Senate next year and their minority interests are imposed on the rest of us.

This is when the new, unstable parliament is tested as Bob Brown starts calling in his favours on his new buddy, Gillard.

Dumb spending aside, Labor did navigate us through the GFC well and that was a big effort given Wayne Swan’s lack of economic knowledge. At least he was smart enough to listen to Treasury boss, Ken Henry, who is a solid performer despite his second-rate showing over the resource tax.

However, they were helped by:

The surpluses and no debt left by the Howard Government.
China’s strong growth and our mining sector.
The strength and stability of our banks.
The quick interest rate cuts of the Reserve Bank.
The devaluation of the Aussie dollar.
And their own decision to back deposits 100 per cent.

Businesses want certainty

My biggest concern about the new parliament will be how long it takes to get laws passed with so many politicians with big egos and big mouths, when it comes to the likes of Oakeshott, all wanting to put their penny’s worth in.

At the moment, financial planners don’t know what changes will happen to their industry and while Labor has inferred what they want to do, there is no certainty about the intended reforms. What will the Greens want? What will the bushies want? And how long will it take to get the changes passed? Meanwhile financial planners wanting to sell or buy businesses don’t know how to value the business with new laws coming in one day.

It might sound great that every madman and woman in the parliament will have their say, creating an “exciting parliament”, to quote Brown, when most of us in business, who invest and create jobs, want certainty. Brown would not know much about that, though he has created some Greens jobs lately, to be fair.

Tony Windsor’s belief in the need for a better telco solution for the bush is understandable but the jury is out on the National Broadband Network. I have experts who both support it and bag it. My greatest concern is that it was conceived by politicians for an election and it worked! Great politics but is it good economics and telecommunications?

Keep it short, Oakeshott

Finally, someone has to shut Oakeshott up. That marathon speech yesterday was too long and he turned this political stand off into a soap opera or a reality show with Abbott and Gillard on the sidelines waiting to see if they were voted on or voted off the show.

If this guy really knew the Australian people he would have given his decision, a short reason why and he would have got out of our way. Instead he grandstanded too long and made me think: “I could listen to Oakeshott all day, and for one moment there I thought I was going to have to!”

He has to lose his VD — verbal diarrhoea — and please let’s hope he’s not made speaker!

Switching sides

My final point comes from Malcolm Mackerras, who said on my Sky News Business Channel program that if this unstable parliament doesn’t work, the two independents could switch allegiances and then we could have a Prime Minister Tony Abbott. Bob Menzies lost out to John Curtin in 1942 when we had our last hung parliament but it was when we faced a pretty trying time called World War II.

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

*Error fifth and sixth paragraph amended.

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Published on: Wednesday, September 08, 2010