Australia

   
 

Executive Summary

Short-lived political popularity
Despite its comfortable victory in the September 2013 federal election, the center-right government of Prime Minister Tony Abbott soon found itself deeply unpopular with the electorate, particularly after the May 2014 budget was defeated in parliament. Discontent with Prime Minister Tony Abbott’s leadership within the Liberal Party led to his replacement by Malcolm Turnbull in September 2015. However, Turnbull’s popularity quickly evaporated and he secured only a narrow victory in the July 2016 federal election. Indeed, Turnbull’s gamble on a “double-dissolution” election (whereby all 76 senate seats were contested, rather than 40) backfired and the senate has proven more intransigent since the election.
Boom’s end demands
hard decisions
Since the end of the mining boom in 2012, Australia’s economic circumstances have fundamentally altered and living standards have remained stagnant. Difficult fiscal-policy decisions will be necessary over the coming years, but there appears to be little hope of the government securing the passage of major reforms through the senate, as the balance of power in the senate is held by several minor parties and independents. That said, after an initial period of policy paralysis, in the current review period, the Turnbull government has begun to have some success in passing legislation to achieve reform. To a significant extent, this reflects the government adopting a more moderate or balanced agenda, which has been more acceptable to independents and minor parties.
New sources of
growth needed
Under Turnbull’s leadership, the government has recognized the need to develop new growth industries. The prime minister has particularly emphasized the need for Australia to be “innovative and agile,” although he has not laid out a plan for fostering innovation and agility. One factor supporting the economy is the relative weakness of the Australian dollar, which improves the competitive position for tourism and education services in particular.
Performance strong
but stagnant
Policy performance has improved very slightly over the review period. Slight progress has been made in balancing the government budget, and policies to improve the funding and quality of health and education were implemented as part of the 2017 budget. Economic and social outcomes continue to be relatively good in absolute terms, and sustainable policy performance compares reasonably favorably with many other developed countries. In particular, the fiscal position continues to be considerably stronger than in many other OECD countries. That said, GDP growth has remained tepid, the labor market has remained relatively weak, and real wages and household incomes remain stagnant.
Much room for governance gains
There is considerable scope for improvement in governance. The coalition government has cut public-sector employment, reduced funding for several government agencies, and partially reneged on the health and education funding agreements reached with the state and territorial governments prior to the 2013 election. This situation improved only slightly during the review period. Persistent problems therefore remain, such as vertical fiscal imbalances between the federal, state and territory governments; the absence of legally protected human rights; the politicization of the public sector; and the degree of concentration in media ownership.
 
Prime Minister Turnbull has demonstrated an appreciation of the problems currently faced by the country, along with a willingness to negotiate and compromise with other parties to achieve policy reforms. Unfortunately, he has so far been unable to translate this into substantive change.
Back to Top