Federal election 2016: Business should prepare for a Shorten win

Businesses need to know what strategic changes will be required in the advent of a Shorten government.

After less than a week of campaigning the business community needs to prepare itself for the real possibility that Bill Shorten will be the next Prime Minister of Australia. I emphasise that I don’t claim to be predicting the election result, but, apart from the opinion polls, there are dangerous signs for the Coalition camp.

More importantly, the business and investment communities need to divorce themselves from what they think should happen and prepare for the clear possibility of a Shorten win.

Businesses need to know what strategic changes will be required in the advent of a Shorten government. So, without making predictions, let’s first look at what is happening in the election that increases the possibility of Bill Shorten becoming the next prime minister. Below are 10 areas where Shorten is either winning or the Coalition is not exploiting weakness, remembering that in a long campaign many of the points below can be turned to the Coalition’s advantage.

1. The Coalition’s retrospective taxation on tax paid on non-concessional contributions to superannuation shattered the retirement community’s confidence in the government. Even though the numbers of people affected are not large the punitive measures dating back to 2007 made everyone afraid that they could be vulnerable to the next set of changes.

In particular, the Turnbull/Morrison changes hit many small enterprises that had sold their business property into their superannuation fund in anticipation of paying for it over time via non-concessional contributions. Obviously the numbers of people involved are not large but almost every small business owner knows someone affected by the hated retrospectivity and it mutes the government’s pitch to the small business community.

In addition, Scott Morrison flagged changes to the public servant bonanza schemes for those employed before 2007. (The superannuation review must include the public service, November 16.) It was excellent government but bad politics just prior to an election.

2. While there is not a great deal of difference between Labor’s 15 per cent tax on superannuation pension incomes of more than $75,000 and the Liberal’s $1.6 million cap on tax-free retirement balances — both are retrospective — the asset cap looks a lot more severe and unfair. Moreover it is very complex to administer in a time of great market volatility. And those saving through superannuation had no warning.

Combined, the two superannuation changes are a clear breach of a Coalition promise. They have shattered confidence in Malcolm Turnbull and for retirees and those approaching retirement, on an entitlement basis, Bill Shorten looks the best option.

3. The Coalition laid out a wonderful set of small business growth policies (funded by superannuation cuts) but then added a crazy set of tax reductions over 10 years covering the entire corporate sphere.

This enabled Shorten to declare the government was simply reducing tax on the greedy multinationals. Shorten’s claim does not stand up to close examination but in a world of one liners it shattered the government’s linchpin policy and gave Shorten the chance to announce huge savings. It was just stupid politics by the Coalition.

4. The government is having great difficulty mustering a proper scare campaign on negative gearing, and has not been helped by the Reserve Bank. There is plenty of potential ammunition for the Prime Minister but Turnbull is much better at talking about aspiration than he is at pulling the opposition apart on things like negative gearing.

5. The election is supposed to be about the establishment of the Australian Building and Construction Commission but that carries little weight in the electorate. I strongly believe in the policy but the government has not made the case in the community.

6. Labor’s attack on banks by calling a Royal Commission has a much more positive impact on the electorate than the ABCC legislation.

The government’s proposal of an ASIC investigation into banks doesn’t have the same electoral punch but ‘confirms’ that something is wrong.

I am actually worried about the impact of a Royal Commission on bank lending but it is good opposition politics given the anti-bank feeling in the community and their management mistakes.

7. Shorten is planning on introducing a carbon tax but it is a much more complex proposal than the draconian Gillard carbon disaster. And again Malcolm Turnbull is no Tony Abbott when it comes to pulling such policies apart.

8. Shorten has many members who disagree with the party’s refugee policy. Yesterday we saw this weakness but we also saw how ruthless Shorten will be on anyone who steps out of line. It will be hard for Malcolm Turnbull to win in this area because ALP official policy is close to endorsing the government policy.

9. Shorten wants to re-establish the Road Safety Remuneration Tribunal, which earlier this year devastated owner-drivers in the transport industry but there is no sign of Malcolm Turnbull landing any blows in this area. (Beware the great union comeback, May 10.)

10. Although Shorten says he will not form a government with the Greens, he does not need an absolute majority in the lower house because the Greens will support him.

I repeat, it is important for the business community to put aside what it wants to happen and look at strategies for what might clearly happen.

It’s not all bad. It is highly likely Bill Shorten will be able to run the cabinet better than most recent Prime Ministers, so decision making will be easier, and Chris Bowen is shaping up as a good treasurer — although on both fronts it’s not until people get into power that you discover whether they can do the job or not.

If Shorten happens to win there will not be a Building and Construction Commission and if the election is close but Turnbull wins it probably wouldn’t pass a joint sitting of parliament.

Banks must prepare themselves for a Royal Commission, which will investigate vast areas of their activities. They have never been exposed to this level of exposure before and it comes at a time when they are flagging an increase in bad debts, which is really where they should be putting their efforts.

Those who need a significant bank overdraft should get their documentation approved before the banks are distracted.

And, of course, the sharemarket won’t take kindly to a Shorten win. But the impact will go much further and every business needs to look carefully at what it would mean to them. Keep in mind that this is not a forecast, merely an alert. It is always possible that Turnbull will still come out on top.