Political instability continues to undermine sound policy development and implementation underpinned by a long-term vision. There have now been seven changes of prime minister in 12 years, with only two of these the result of a federal election. While the intransigence of the Senate – which no government has had control of since 2007 – has been a factor in frustrating policy action and creating instability, a much more important factor has been disunity within the major political parties. That said, the May 2019 federal election saw a surprise victory for the incumbent government led by Scott Morrison, and since then there has been less evidence of disunity within the coalition government.
Difficult fiscal decisions being delayed
Since the end of the mining boom in 2012, Australia’s economic circumstances have fundamentally altered, with living standards stagnating. The government’s fiscal position has also deteriorated precipitously, although it improved somewhat in the review period thanks to the strength of commodity prices. Difficult fiscal policy decisions will be necessary over the coming years, yet there does not appear to be much appetite for these among the political leadership. That said, after an initial period of policy paralysis, the Turnbull government experienced some success in passing reform legislation over its final two years. To a significant extent, this reflected the government’s adoption of a more moderate or balanced agenda that proved more acceptable to independents and minor parties. This has broadly continued under new Prime Minister Scott Morrison, although the government’s policy agenda following its electoral victory in May 2019 has been almost nonexistent.
Economy boosted by currency’s weakness
One factor supporting the economy is the continued relative weakness of the Australian dollar, which improves the country’s competitive position particularly with regard to tourism and education services. Many observers feared that the end of the housing boom would result in declining domestic demand and an end to Australia’s 29-year-long phase of economic growth, but to date this has been avoided, and indeed the housing market appeared to be recovering as of the end of the review period.
Strong fiscal position,
but stagnant incomes
but stagnant incomes
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. However, real wages and household incomes remain stagnant.
Ample scope for
Overall, policy performance remained relatively unchanged in the current review period compared with the previous one. There is consequently considerable scope for improvement in governance. In its early years, the coalition government cut public sector employment, reduced funding for several government agencies, and partially reneged on the health and education funding agreements reached between the state and territorial governments prior to the 2013 election. More recent government actions have only slightly improved the situation. In particular, many persistent problems remain, including the vertical fiscal imbalances between the federal, state and territory governments; the lack of a coherent, effective and sustainable energy policy; the absence of legally protected human rights; the politicization of the public sector; and the degree of concentration in media ownership.
Continued minority status for government
The Labor Party proved unable to win the elections to the Australian Parliament on 18 May 2019. The Liberal/National Party coalition, which had lacked a majority since October 2018, won 77 seats in the 151-seat House of Representatives. Although the coalition still lacks a majority in the Senate, where it holds 35 out of 76 seats, it now needs the support of only four instead of nine independent senators. The coalition achieved its first notable success on 4 July 2019, when its complete package of income-tax cuts, the heart of its election program, passed the Senate with the votes of four independent senators.