10 uncertainties for business from a hung Parliament

It’s the word on the lips of every business leader in the country right now – uncertainty.

While political pundits are warning it may take as long as two weeks to sort out who can form government, business lobby groups, including the Australian Industry Group and the Business Council of Australia, want a speedy resolution to ensure political instability doesn’t infect the business community.

“The prospect of a hung Parliament and a Senate where a minor party holds the balance of power in its own right is a worrying outcome for business,” AIG chief Heather Ridout said yesterday.

“It will potentially lead to instability, uncertainty and short-termism in policy development, all of which poses risks and challenges for the economy.”

Graham Bradley, president of the Business Council of Australia, expressed concern that the new government would struggle to focus on tax reform, health and education.

“With the incoming government being a minority government requiring independent and minor party agreement to implement its agenda, there is the danger that the bold reforms Australia needs might take a back seat.”

While predictions of sharp election-related falls on the sharemarket have been overdone, there are a number of big-picture business issues now very much up in the air.

Here are 10 of the big ones:

Broadband

Labor and the Coalition went to the election with very different broadband plans: Labor has the NBN, and the Coalition doesn’t. The three independent parliamentarians all support the idea of improved broadband for rural and regional areas, but whether this is in the form of an NBN or just better bush infrastructure is unclear. At first glance, it appears the NBN is pretty safe, but it is possible we could see the rollout schedule change to favour rural areas.

Mining tax

Labor’s mining tax has been extremely controversial and appeared to cost them votes in Queensland. While independents Tony Windsor and Rob Oakeshott have supported the mining tax, Queensland independent Bob Katter is less supportive.

Company tax cuts

What happens to the mining tax will have some bearing on what happens to the company tax cuts promised by both sides, as the mining tax funded Labor’s promise to reduce the company tax rate from 30% to 29% starting July 2012, and its promise to introduce immediate tax write-offs for businesses with under $2 million in annual turnover who purchase assets worth $5,000 and less.

The Liberals promised to cut company tax to 28.5% from July 2013, although the timing and even the size of these cuts could be impacted by any horse-trading.

It should be noted that the independents are likely to be broadly supportive of company tax cuts.

The Greens

The Greens now hold the balance of power in the Senate, so will have the ability to rubber stamp and reject new legislation. Entrepreneurs should note just how differently they see the world when it comes to business issues. Some of their key business policies include:

• Increase taxes for high income earners.
• Limit the use of independent contractor arrangements.
• Increase casual loadings to a minimum of 30% and introduce the ability for casual employees to convert to permanent part-time work after three months of continuous employment, where employment is on a continuous ongoing basis.
• Legislate for a mandatory minimum of five weeks paid annual leave for all employees.

While the Greens are unlikely to be in a position to make any of these policies law, entrepreneurs should realise this is the prism through which they view business issues.

Further tax reform

The independents are keen to see further tax reform, which might be something the Coalition can play too, as they also promised to set a tax reform agenda by the end of their first year in office. However, the devil would be very much in the detail and getting reforms through both houses of Parliament is unlikely to be simple.

Parental leave

Labor’s policy – 18 weeks funded by the government, at the minimum wage – is in place and will start from January next year. However, the fate of the Coalition’s promise to introduce 26 week’s leave at full pay (up to $150,000), funded by a levy on big business is now unknown. For businesses hoping to use generous parental leave provisions to lure workers, clarity on this is essential.

Population

All three independents support the idea of population planning, with a focus on attracting people back to live in rural areas and taking the pressure off cities. Given both major parties support immigration reduction and a “sustainable” approach to population, this area all looks reasonably settled. However, business will still have many questions about how skills shortages are to be met if immigration falls.

Climate change

The independents want action on climate change, but they don’t want an emissions trading scheme, which is the centrepiece of Labor policy. Instead, the focus is likely to be on encouraging renewable energy use and falls in household energy usage – more like the “direct action” idea proposed by Tony Abbott. The uncertainty over climate change continues for business – it seems everyone wants something done, there are still big debates to be had over what.

Infrastructure

The Business Council of Australia is particularly worried about how the hung Parliament could slow down the decision-making process for vital infrastructure projects, which already have extremely long lead times. If the minority-government horse-trading involves promises to fund the pet projects of the independents, infrastructure investment could become even more compromised.

Regional development

The fact that the three independents are from rural and regional areas should lead to a much bigger focus on regional development. That is likely to create opportunities for some entrepreneurs, although until we know when, where and how any new money is to be spent, it will be hard to size these opportunities up.