Minority government a threat to economy

NOTHING destroys business certainty like political uncertainty.

That is why all the talk about letting the sun shine in on the new parliamentary paradigm - Labor's minority government - counts for little in the eyes of the real drivers behind Australia's economic prosperity: the business community.

Mining companies, financiers, small business and pretty well any other sector in the Australian economy can't know for sure what the political landscape will look like for the next 2 1/2 years.

Let's not forget, for all the beating that comes from individuals about the amount of tax we each pay, government revenue streams are most significantly supported by the various company taxes.

Income taxation has long been a declining quotient of the budget bottom line.

Businesses can't be sure that the government will run its full term. Even if it goes close, they can't be certain Labor's policy agenda will be passed by the parliament. And even if the government lasts and the parliament is willing to pass its policies, the weakness of Labor's first term suggests there is no certainty that convictions will be strong enough inside the caucus to proceed with policy settings during the second term if they prove unpopular.

In such an environment it is very difficult for the business community to plan for the future, yet planning is what sets up the prosperity of tomorrow.

Modern politics is inherently less stable than it used to be. That's the dual price we pay for greater influence over politicians courtesy of published polls that reflect our thinking and as a consequence of the Senate being opened up to greater diversity courtesy of the introduction of the proportional representation voting system, which precipitated the rise of minor parties and independents.

Evolutionary instability in the Westminster system is something the country and businesses can handle. Partly because it is democracy in action. Partly because the evolution to date went hand in hand with a federal political scene dominated by major party leaders with strong convictions.

But that time appears to have passed. The double whammy of less conviction and the weakness of minority government are threats to the strength of Australia's economy.

Bob Hawke, Paul Keating and John Howard all led this nation during an era of more political research being conducted. Yet they also managed to institute reforms - micro and macro - that ensured prosperity.

That's because all three were leaders of conviction.

Voters and commentators alike aren't sure what convictions Julia Gillard has. Bland statements about believing in a strong economy don't burrow very deep when it comes to understanding what will be the driving influences of Labor's second-term agenda.

And that's before even starting to worry about her ability to achieve change, even if she works out what she wants to do.

In the 1980s, Labor used the double-dissolution trigger, but more frequently it was the preparedness of the opposition to support good policy that led to reforms.

Howard never needed to use the DD trigger to secure his beloved industrial relations reforms, or the passage of the goods and services tax during his time in government, despite Labor's oppositionist tendencies.

Initially he managed to broker a deal with the Democrats on IR (nearly 200 amendments were forced on his 1997 legislation, but eventually Cheryl Kernot agreed to pass it into law). The GST also passed with the support of the Democrats. Later Howard gained control of the Senate and forced through Work Choices.

Kevin Rudd's government had a strong mandate after nearly 12 years of Coalition rule, but he proved not to be in the league of his predecessors. By the time Rudd found some courage (at his press conference the night before he was rolled as leader) it was too late. Labor was divided, his colleagues were spooked by the polls and his time was up. Labor limped to victory under Gillard's leadership.

But that political success came at a policy price: minority governance. Forming government was a face-saving exercise for Gillard: a second chance to prevent the history books recording her time at the top as a six-week joke.

When you step back from the political fascination of the hung parliament, the uncertainty attached to it is diabolical for businesses planning. What shape will the mining tax ultimately take? Will it even pass through parliament? Will Labor last long enough to finish rolling out the NBN? If the mining tax doesn't happen, does that stymie other initiatives such as the increased compulsory superannuation contribution of 12 per cent, or the small business tax concessions already promised?

And these policy settings aren't even Gillard's own: they are the remains of Rudd's first-term agenda. She has added debate about a carbon tax into the mix, but she was the one who pushed Rudd to dump the ETS in the first place. Gillard is scratching around for an agenda, and that's putting it kindly.

Now we have the spectre of banking reforms being put into the political lexicon without the certainty of knowing how the government will approach the issue, or even if it will follow through to adjust policy settings rather than simply blow hot air on the topic.

Ministers can't give the business community answers to these important questions because they don't know themselves how the parliament will react when they put legislation before it.

Political scientists say that this is the Westminster system functioning properly. But it also leaves the executive impotent.

The current parliament would be uncertain enough given the fallout of the past three years and Gillard's lack of direction. But it is even less certain now that the likes of Adam Bandt, Andrew Wilkie, Tony Windsor and Rob Oakeshott control the balance of power in the lower house. And that's before you consider the motley crew of independents and Greens who carry sway in the Senate.

If the collection of names mentioned were competing on the Nine Network's Survivor Nicaragua, you get the impression they wouldn't make it to the final week without an all-out brawl.

The business community likes certainty. However until the federal polity returns to majority government it won't get much certainty in decision making from the political classes.