Deloitte Access Economics’ latest Business Outlook noted that the recent federal election saw all major parties effectively state they “wouldn’t recognise the mandate of the winner”.
“That guaranteed more gridlock even before the cliff-hanger of an election. Governments will continue to struggle to achieve much-needed reforms, as those reforms will almost always be unpopular,” the report said.
“In turn, that says reform proposals won’t make it through the Senate, or [will] be shelved before even getting to the Senate. Or, to put that differently, both better living standards and budget repair require bipartisanship, and we can’t say we expect to see too much of that.”
Overall, the report found that Australia’s growth prospects are currently well positioned, in spite of the spectacular end of the mining boom.
“Australia’s growth is great – or, to be more exact, it’s at trend, but that’s a pretty great position to be in at the tail end of the resources boom. Low interest rates have kept retail healthy and sent the building of new housing to record highs, while the lower [Australian dollar] has fired up tourism and protected the markets of our miners, farmers and manufacturers,” the report said.
“Even better, that good news on growth means good news on jobs too. So there’s a lot to like. And a lot to be proud of too.”
However, the report noted there are some sizeable challenges looming, particularly given Australia’s economic reliance on major players in the Asia region.
“Our dependence on China – and its tricky transition – remains huge, and our living standards continue to fall from the highs reached when China was booming and coal and iron ore prices were at record highs,” the report said.
“You can see the continuing income squeeze evident in falling profits, weak wages and a federal budget still deeply in the red. Hopefully the worst of that weakness in national income has now passed, although much remains dependent on China.
“Unhappily, much also remains dependent on Australia’s dysfunctional politics.”