New Government Insights

Tomorrow, the first Abbott Cabinet will be sworn in by the Governor-General. While there are a few new faces, it is largely the same Shadow Cabinet which has been in place for the past three years, bringing to an end what has seemed like the longest election campaign in our nation’s history.

Though the September 7 election result delivered a solid victory for the Coalition, it was not the predicted bloodbath that would have seen Tony Abbott secure a majority in the Senate. The Coalition recorded a national swing of 3.5 per cent against Labor and is currently forecast to win 90 seats in the House of Representatives to Labor’s 55 seats. The Coalition made significant gains in Tasmania and Victoria, but the predicted sweep of seats in Western Sydney and Queensland failed to materialise.

Regardless, the election of a majority government delivers greater political certainty. The incoming Government is made up of many former members of the Howard Government. Yet unlike that period of Coalition rule, there are a series of fiscal challenges which now confront the nation, such as declining revenue, partly due to some of the heat coming out of the mining boom.

Former Prime Minister Paul Keating rightly once said that when you change the government, you change the country. As much as governments may carry characteristics of those which have gone before them, each has its unique style, challenges and agenda.

On election night Tony Abbott told a television audience that Australia was once again ‘open for business’ and smaller government and economic growth would be at the forefront of the first term policy agenda.

MAGNUS has summarised the key information for you and your business, to ensure you are on a positive footing to start building a relationship with the new administration.

THE ABBOTT APPROACH – Key Policy Initiatives

Commission of Audit

Top of the Abbott agenda will be the appointment of a ‘once-in-a-generation’ Commission of Audit to focus on public sector efficiencies. The audit will examine all aspects of the Commonwealth Government and whether they can be done better and more cost-effectively. While this process may bring considerable angst in some quarters, it follows similar processes which the private sector has undertaken in recent times, sending a strong message to the entrenched bureaucracy.

Repeal of Two Key Taxes

In the coming weeks, the Government will also instruct the public service to prepare legislation to repeal the carbon tax. Within the first 100 days, this legislation will be presented to Parliament, along with legislation to abolish the mining tax. Whether they pass the upper house is another matter.

The Coalition has mounted a case that the carbon tax is a $9 billion a year impost on industry, detrimental to productivity and international competitiveness and has contributed to increases in gas and electricity prices across the country. Income tax cuts and fortnightly pension and benefit increases linked to the carbon tax will be retained and re-badged as ‘cost of living relief’.

The new Government remains committed to a 5 per cent reduction in emissions by 2020 and will establish a $3 billion Emissions Reduction Fund for projects associated with achieving this goal.

Repealing the mining tax aims to boost investor confidence and Australia’s sovereign risk profile, as well as reducing administrative and compliance costs for affected miners. The Minerals Resource Rent Tax on iron ore and coal profits has raised a fraction of what was forecast when first proposed.

Exploration Development Incentive Scheme

The Government will introduce the Exploration Development Incentive Scheme (EDI), allowing investors to deduct expenses associated with mining exploration against their taxable income. The EDI will commence in July 2014 and be capped at $100 million over the forward estimates. A tax credit will be provided to Australian resident shareholders for ‘green fields’ exploration expenditure in Australia.

Company Tax Cut

The company tax rate will be cut by 1.5 per cent, which will see Australian companies paying a new tax rate of 28.5 per cent from July 2015. This term the government will also release a white paper on further tax reform.

Infrastructure

Tony Abbott has declared he wants his legacy to be that of the ‘infrastructure Prime Minister’.

Key initial priorities identified include the West Connex project in NSW, upgrading the Bruce Highway and the Gateway Motorway extension in Queensland, the East West Link in Victoria and the Swan Bypass upgrade in Western Australia.

The Coalition has also promised to strengthen the role of Infrastructure Australia, including the appointment of a Chief Executive Officer and a requirement that all Commonwealth Infrastructure exceeding $100 million be subject to analysis by Infrastructure Australia, to test cost-effectiveness and financial viability.

Other first-term priorities:

  • Introduction of a Paid Parental Leave Scheme granting working mothers six months’ leave on full pay, capped at a salary of $150,000. The net cost of the scheme will be $6.1 billion, of which half will come from the 1.5 per cent levy on about 3000 Australian companies earning more than $5 million in taxable income. This will be offset by a cut in company tax, from 30¢ in the dollar to 28.5¢.
  • Reversing Labor’s recent tightening of fringe benefits tax rules related to novated car leases.
  • Commencing a ‘root and branch’ review of Australia’s competition laws and frameworks within two months.
  • Introducing government-wide processes to reduce the cost of red and green tape, along with the establishment of a ‘one-stop shop’ for environmental approvals for major projects.
  • Reinstatement of the Australian Building and Construction Commission within three months.
  • Commencing a Productivity Commission review into the operation of Fair Work Laws within six months.
  • Reviewing current commercial progress for NBN Co and options to meet the Coalition’s broadband policy objectives, within six months.

EARLY CHALLENGES

  • With the Coalition falling short of a majority in the Senate, many of its flagship policies now face a potentially rough passage through the ‘House of Review’. Despite a convincing win, Labor and the Greens appear to have rejected Tony Abbott’s claim of a mandate and have the ability to form a bloc, thwarting moves to repeal the carbon and mining taxes.
  • When the new Senate takes effect from July next year, the Coalition is likely to be forced to negotiate its legislative agenda with a collection of little-understood independents and minor parties, including the Palmer United Party. Building positive relations with these members as soon as possible will be a top priority for the new Government.

BUILDING A RELATIONSHIP WITH THE NEW GOVERNMENT

Building a solid relationship with the new Government is vital for all businesses to ensure your issues are understood by the Government as it seeks to implement its policy agenda.

Traditionally a new government brings with it changes to the bureaucracy both in Canberra and at a local level.

MAGNUS can assist you in ensuring you get off to a strong start with the Government, advising on the best way to navigate your way through the new landscape.

Key members of the MAGNUS team, John Rochester and Rob Newton, have unique insights and knowledge having worked in Ministerial advisor positions in both the Federal and State spheres. They are adept at knowing what information government requires from your business and how best to build a positive partnership with a new government from day one.

GOVERNMENT ENGAGEMENT TRAINING

MAGNUS has developed a ‘Navigating the New Government’ training workshop which is a useful starting point for you and your team as you begin to understand and interact with the new Government. Topics include:

  • key players and drivers
  • understanding how decisions are made
  • the process of policy development
  • effective government engagement
  • presenting your case
  • effective business to government communication.

To find out more about the training workshop or how we can assist your business in communicating with government, contact the MAGNUS team.

CLICK HERE to read the MAGNUS New Government Insights newsletter which includes profiles of some of the key Ministers in the new Cabinet.