NZ Herald business editor at large

Liam Dann: Abbott's win good for NZ


Lucky Country's health - from banking sector down - remains entwined with ours.

Australian Prime Minister Tony Abbott. Photo / Getty Images
Australian Prime Minister Tony Abbott. Photo / Getty Images

Australia is "open for business" says the freshly elected leader of the lucky country. Prime Minister Tony Abbott wasn't randomly reaching for cliches in his victory speech, he was sending a clear message that his Government will be more business friendly than its predecessors.

Expect to hear that message again. Across the Tasman expectations are high that political certainty will be the circuit breaker to restore confidence in an economy which has been drifting sideways and suffocating itself with fear that the resource boom has ended. That can only be good news for New Zealand. Despite the rise of China as our biggest export market, Australia's economic health remains vital to ours. The slowdown there remains one of the darkest clouds hovering over our recovery.

Our economies remain intimately entwined - from the banking system down. We've already felt a direct impact of low consumer confidence with several of our major listed retailers downgrading earnings outlooks on falling Australian sales.

Abbott's job in the next few weeks will be to maximise the value of any post-election sentiment boost.

Australian markets are likely to be positive this morning, although exhaustive polling should have already priced in the election result.

There will be special interest in mining stocks which ought to be buoyed by Coalition promises to dump both the carbon tax and the special mining tax. There is a strong feeling from the top of Australian business that the country has talked itself into its malaise. But sentiment and a post-election honeymoon might not be enough to fully resuscitate Australian GDP growth to levels consumers are used to.

And it is not obvious that Abbott's election promises contained a magic bullet for bigger structural problems.

New Treasurer Joe Hockey has already said he plans an independent audit of the Crown accounts and, as you'd expect from a centre-right government, there is likely to be a short, sharp dose of austerity treatment for the public sector.

Since the global financial crisis the Australian economy has been stimulated with tens of billions of dollars of public spending. Abbott has been highly critical of the spending path that has taken Australia from a surplus of A$44.8 billion ($51.4 billion) to net debt of A$147.3 billion in just five years.

Yet - as AAP economist Garry Shilson-Josling noted - the final difference in spending promised by Abbott versus that promised by Labor was not significant.

Abbott won't be making Australians go cold turkey. There will be cuts to corporate tax rates but these will be offset by a levy on business to help Government fund a generous paid parental leave scheme.

There is also the spectre of a financial services inquiry hanging over the banking sector.

None of that will stop Australia's market leaders talking up the change. Sentiment is a powerful economic force and this is too good an opportunity to miss. If it works for them then the timing for New Zealand's fragile economic recovery couldn't be better.

- NZ Herald

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NZ Herald business editor at large

Liam Dann is business editor at large at the New Zealand Herald. He has been a journalist for 20 years, covering business for the last 14 of them. He has also worked in the banking sector in London and travelled extensively. His passion is for Markets and Economics, because they are the engine of the New Zealand economy. He hosts The Economy Hub video show every Thursday.

Read more by Liam Dann

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