Christopher Niesche: Senate's power may rest with Hanson

Prime Minister Malcolm Turnbull and Pauline Hanson. Photos / Getty Images
Prime Minister Malcolm Turnbull and Pauline Hanson. Photos / Getty Images

Malcolm Turnbull and Pauline Hanson could not be more different.

Turnbull is an eloquent, university-educated former barrister and investment banker from Sydney's Eastern Suburbs. He is worth hundreds of millions of dollars and lives in a harbourside mansion estimated to be worth A$50 million ($51.8m).

Hanson left school at 15 and after two failed marriages opened a fish and chip shop. Without the benefit of a university education, she can appear muddled and tongue-tied when trying to explain her ideas, but this belies the strength of her convictions, which are immutable.

Yet the fate of Australia's economy could well rest on these two forming a good working relationship.

Turnbull was re-elected as Prime Minister in the last election, but only just. His Liberal-National Coalition scraped over the line with a probable 76 or 77 seats in the lower house, just enough to form a government in its own right without having to rely on independents.

But with the headache of a potential hung parliament behind him, Turnbull will now have to focus on another problem - repairing the budget in the face of a hostile Senate.

This is where Hanson comes in.

Hanson - who rose to prominence in the 1990s for her anti-immigration stance - and two other members of her party look as if they will win three seats in the 76 member Senate and could share the balance of power with a couple of other minor parties.

In Australia, legislation has to be passed by the lower house and then by the Senate before it can become law and without a majority in the Senate, Turnbull might find he will have to rely on Hanson to get his legislation through.

Already ratings agency Standard & Poor's has put Australia's prized AAA credit rating on "negative" watch - suggesting that the next move will be a ratings cut.

S&P is worried about Australia's very high level of offshore debt and ongoing budget deficits.

The net amount of money Australian governments and businesses owe offshore lenders is about 60 per cent of GDP.

"There is a one-in-three chance that we could lower the rating within the next two years if we believe that Parliament is unlikely to legislate savings or revenue measures sufficient for the general government sector budget deficit to narrow materially and to be in a balanced position by the early 2020s," S&P warned.

A country's credit rating is an assessment of how likely it is to repay its debts. If Australia's credit rating falls, then foreign investors will demand a higher interest rate for lending to Australian banks.

These higher rates will be passed on to homeowners, who will then have less money to spend, and passed on to businesses who will likely curb their investment plans.

The effect on the economy could be chilling.

If we assume that Turnbull is politically brave enough to shrug off the drubbing he just received from voters and cut spending and raise taxes (and that's already a big assumption) he will then have to deal with Hanson and other cross-bench Senate parties.

Hanson and Nick Xenephon, whose party looks likely to win three or four Senate seats, are old-style protectionists. They'll want industry assistance for their own regions and pet sectors - in fact Xenephon is already demanding assistance for a South Australian steel mill.

These policies costs money and make for a less efficient economy.

Hanson and Nick Xenephon won't want to hear about policies that might cause pain to sections of the economy even if they are for the greater good.

Even before she was elected, Hanson was signalling that she will be tough to deal with. "I'm going to be a thorn in their bloody side," she said.

Turnbull has a tough job ahead of him.

Electronic mess

The Dick Smith electronics chain, which collapsed soon after Christmas, is but a distant memory.

Private equity firm Anchorage Capital pocketed an estimated A$500m from buying Dick Smith in 2012 and floating it on the sharemarket less than a year later.

Shareholders who bought into the float were left with nothing.

So it is heartening that the administrators of the collapsed company, who are trying to salvage what's left for the creditors, have called two of the Anchorage partners who were involved with Dick Smith to give public evidence in court this week.

As part of its investigation into why Dick Smith collapsed, administrator Ferrier Hodgson will be using powers they have under the Corporations Act to examine Phil Cave and Bill Wavish, who were Anchorage Capital's representatives on the Dick Smith board.

Anchorage has denied it was responsible for the chain's collapse, but it will be interesting to hear what the firm knew about the state of Dick Smith when it was floated and when it subsequently sold down its remaining shares, ahead of a share price plunge and the chain's eventual collapse.

It might make for some awkward questions for Cave and Wavish. Still, their share of the half billion profit from the float should provide adequate balm for any discomfort or embarrassment they might suffer.

- NZ Herald

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