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Who will be our Prime Minister?

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On Tuesday of this week, I wrote about the looming battle for the Lodge:

Another chapter in what has become a classic political farce is set to be closed, with the chance that Malcolm Turnbull will lose his job as PM very likely. His right-wing enemies in his own party, in the media and within Parliament itself have not only made it impossible to get his National Energy Guarantee off the ground and passed, they’ve shown him to be out of control of his own party and has become a flip flop man!

By next week, I reckon there’ll be a spill (some say it could even be as early as today!) and his party will have to decide between him and Peter Dutton, who’ll be hard to sell to non-Queensland voters, because while he looks competent, he doesn’t look like the sharpest tool in the shed.

Julie Bishop and Scott Morrison don’t have enough supporters and would experience the same problems that Malcolm has — they aren’t ‘right’ enough to tell the world that our energy bills are more important to voters than concerns about climate change.

I believe around 50% of the population are climate change believers and are prepared to pay to save the planet for future generations. The other 50% are in the ‘don’t know, don’t care’ or ‘I hate high power bills group’. They’ll end up voting for the Coalition or those splinter groups led by people like Pauline Hanson, Bob Katter and so on.

And while my numbers aren’t precise, they explain why we’ve had close elections since Kevin Rudd’s victory in 2007 and why we’ve had a succession of Prime Ministers ever since. Recall even John Howard changed his view on climate change before he got kicked out, and even lost his seat.

Before his knifing, Rudd backed down on his carbon tax, despite addressing climate change as “the greatest moral challenge” of all time.

Malcolm Turnbull lost his job as Opposition leader to Tony Abbott because Malcolm was prepared to do a climate deal with Rudd. Abbott’s big policy was to oppose Labor’s Carbon Pollution Reduction Scheme, which was simply called the carbon tax.

Julia Gillard told us that there’d be “no carbon tax under a Government I lead”. She lied and eventually it came back to haunt her and she lost the gig as PM.

Prior to her axing, Tony Abbott lost out to Gillard in the 2010 election, only because of the three independents — Katter, Oakeshott and Windsor. In 2012, a carbon tax was introduced and the backlash in the polls saw Kevin Rudd make a PM comeback.

One of his first measures was to terminate the carbon tax, ahead of losing the election to Tony Abbott.

It was now 2013 and Abbott won power on a platform summed up by this: “We'll build a stronger economy so everyone can get ahead. We'll scrap the carbon tax so your family will be $550 a year better off. We’ll get the budget back under control by ending Labor's waste. We'll stop the boats.”

As PM, Abbott opted for an Emissions Reduction Fund, which was a small backdown from his anti-climate change policy stance. But his popularity problem, as shown by 30 Newspolls that said he stunk as PM, saw Malcolm Turnbull take his job.

And now Malcolm looks set to be roasted alive because of this damn earth that apparently keeps hotting up!

All this seems crazy with big businesses, such as steelmaker BlueScope, resources giant BHP and the minerals, farming and business lobbies all calling on MPs to support the NEG. However households and small businesses have been rocked by their power bills and Malcolm has made the fatal mistake of ignoring the masses.

And it’s come back to bite him. Of course, Malcolm has never been a masses man but that’s what the next successful PM will have to be.

Until someone is so charismatic that he/she can get us as a solid majority to buy into coal-fired power stations, dams to reduce droughts, a commitment to lowering greenhouse gases and not be pilloried by international climate cops for pandering to a majority who want lower power bills, we will have a revolving door of unimpressive PMs.

The interesting challenge for Bill Shorten is going to be how he keeps power bills down, with a great reliance on renewables as a prime source of energy. A cynic might say if he can pull this off, someone else is going to have to pay to make it work, or it might prove to be an empty promise.

The more you think about this climate conundrum, the more you realise that this isn’t a problem that a second-rate politician can solve.

I wonder if Tony or Peter, or whoever beats Malcolm for the top job, is currently working on a new election pitch of “lower power bills, dams to beat the drought and less immigration.”

I know it sounds so un-modern but after years of revolving door PMs, do you think a majority of Aussies actually wants this? The next election could answer my question.

As a business and money commentator, why do I care? Well, Malcolm and Scott Morrison have done a good job delivering on the Abbott promise that: “We'll build a stronger economy so everyone can get ahead. We'll get the budget back under control by ending Labor's waste.”

Climate change has redefined what’s really important in politics nowadays and only a great leader will survive and cope. Unfortunately, Malcolm doesn’t fit the bill.

The PM surprised us by bringing on a showdown with Peter Dutton, and this what I wrote on Wednesday…

If you think I’m biased towards Malcolm Turnbull as PM because I was his patrol captain when we were both 21 years of age, or because I’m a dyed in the wool Liberal supporter, then you haven’t been paying attention. I’ve always loved that one liner — anything worth doing, is worth doing for money — and with Malcolm I calculated that the economy and the stock market would perform better. And that’s really important for my readers here, for those who subscribe to my investment newsletter called the Switzer Report, and those who watch me on TV or follow me on Twitter and Linkedin.

I know I get ripped into whenever I get political in this column but I don’t do it because I have the passion of an Andrew Bolt or Alan Jones groupie. And I gave up believing the Labor Party was for the little guy when I was much younger and saw real profits actually rose faster under Bob Hawke and Paul Keating than did real wages!

But those two guys showed me a Labor Government can be good for the economy, as they won over support for the union movement via the Accord and actually created good growth. Sure, it ended in a stock market crash in 1987 and then a 1990 recession but a lot of their repair/reform work made it easy for John Howard and Peter Costello to keep the positive changes going with the GST, overall tax reform and the conversion of chronic budget deficits into surpluses!

And over that time I learnt (because I did this stuff every day for newspapers, radio stations such as Triple M, then Mix 106.5, the ABC and later 2UE then 2GB) that gutsy governments can create the conditions that partly explain why we have grown since 1991 without a recession!

The payoff was that unemployment went as low as 4% under John Howard as the chart below shows:

 

Good government can help unemployment fall, and Labor governments of the 1980s achieved that too, but they weren’t in the business of punishing business and investors, as Bill Shorten is currently planning with some of his policies. They might look OK, socially, but they worry me economically-speaking and market-wise.

I’m sorry if you don’t like it but I’m not here to keep you politically happy. I’m here to explain the economic and money consequences of who runs Australia, Donald Trump, the team ruling China and anything else that might hit your hip pocket.

My fear of a PM Peter Dutton, the bad look for the Government, and then the likelihood that Bill becomes PM, was played out yesterday when Wall Street gave us a nice lead in, all Asian stock markets were up on good, potential trade talk news between the USA and China, but our S&P/ASX 200 index was down 60 points (or 0.96%)!

Worse still, my listed Switzer Dividend Growth Fund fell 4 cents to $2.61 and that’s another reason why I prefer Malcolm over Bill and Pete! However, that’s me being self-interested, but as Paul Keating once observed, if you go to the races and “you see a horse called ‘Self Interest’, back it because you know it’s trying!”

But back to the bigger picture, under Malcolm, the NAB business conditions reading went to a record high, which says businesses had never felt so good about their businesses! By the way, that has recently gone off the boil and I suspect a lot of the political paralysis and internal fighting over tax cuts, energy policy and the fact that banks are being forced to play hardball with borrowers (following the Royal Commission and APRA’s heavy-handedness) have made business life not as good as it was in April, when the reading was the best ever.

And while the Royal Commission has been good for bringing bad banking practices to book, this was a Labor-encouraged development, which has been good socially but negative economically-speaking.

I’ve argued before that if past governments had really cared about financial abuse of ordinary Aussies and small business, they would’ve created a financial consumer claims tribunal that would have blasted banks and other financial bodies for behaving badly.

And now we come to Pete Dutton. If Peter is a hand puppet for the hard right-wingers, we could see him try to win an election on lower energy prices and less immigration. This would appeal to a lot of voters, who hate the rise in energy prices and who believe immigration is excessive.

The first would be good for the economy — lower prices to consumers and lower costs for energy would be pluses — but we’d have to see what kind of international reaction follows, if we give the world committed to fighting climate change the big finger.

There could be trade sanctions from some trading partners but the biggest effect would be brand damage, but I guess a lot of us could live with that.

However, cutting back on immigration would have significant economic effects.

Economists say our 27 years of growth without recession was helped by our big immigration programme. So new immigrants create more jobs than they take and it would reduce demand for housing as well, and that has economic implications as well.

Meanwhile, political experts argue the idea of Malcolm being replaced by Pete would probably help Labor win the next election. This is how Paul Dales from Capital Economics would see an Oz economy under Bill: “If Labor does get in, then that would change the economic outlook. The tax system would be less favourable and the housing market would certainly be in the firing line."

Housing and immigration create economic growth, jobs and income, which in turn helps spending and businesses make better profits, stock prices go higher and our super funds keep doing well like they have since Malcolm’s arrival.

Since September 2015, when Malcolm became PM, the stock market has added around 26% including capital gain and dividends, and have a look at how our best super funds have returned around 9% per annum.

All the above are good reasons why I’m not jumping up and down for joy at the prospects of a new Prime Minister. The current one has his shortcomings and is hopeless at marketing his stronger points but the economy and the stock market (my beats) are looking pretty damn good.

And remember, I’m not some academic economist or sociologist. I have about 50 staff, a big energy bill and pay rent in the CBD of Sydney. But according to my calculations, the pros outweigh the cons with Malcolm T.

Today’s update

The next chapter in this three-part drama will be written tomorrow, with a Libs party room meeting likely. If it does proceed, Prime Minister, Malcolm Turnbull says he won’t stand for the leadership. It’s possible that Scott Morrison could end up as PM and as he was my old Economics student from the University of New South Wales (UNSW), I have to say I am conflicted!

Watch this space for the rest of this political story that has trumped reporting season!

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Published: Thursday, August 23, 2018


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