Climate policy wars cloud Aussie business confidence

SYDNEY: Australia’s revolving door of political leadership has hit confidence in sectors particularly prone to policy uncertainty, such as energy, which could hurt business investment and push back the time frame for a central bank interest rate increase.

The resource-rich economy has seen five changes of prime minister over the past decade with Malcolm Turnbull last week becoming the latest to lose the top job amid political upheaval.

Growth has mostly remained unscathed – Australia has posted 27 years of uninterrupted expansion – but 10 years of political deadlock over climate and clean energy policies, among others, have created headaches for pockets of the economy.

Climate and energy politics have long been problematic for Australia’s leaders.

Turnbull, whose views on climate change put him at odds with sceptics in his own Liberal Party, last week was forced to water down a long-awaited energy policy in a failed bid to stave off a challenge to his leadership.

Several Liberal Party members, including former Treasurer Joe Hockey and ex-prime minister Tony Abbott have in the past publicly bemoaned wind farm aesthetics.

Neither of them have supported other forms of renewable energy either. Turnbull cited such “bitterly entrenched views” in his farewell speech last week as a reason for the political deadlock.

Research group BIS Oxford estimates electricity engineering works to slump more than 27 percent to A$8 billion over the next five years with fewer projects in the pipeline and as the “current energy policy failures deter new investment”.

Also weighing on confidence is the prospect of a federal election, which needs to be held by May next year and could effect yet another change of prime minister with the opposition Labor party currently ahead in the polls.

Amid the policy limbo and risks already hitting the housing market, some economists expect the central bank to keep rates at a record low 1.50% beyond 2020 to help support the A$1.8 trillion (RM5.4 trillion) economy.

Westpac chief economist Bill Evans last week cited the political environment as one of the reasons for the Reserve Bank of Australia to stay pat until the end of 2020, as it revised its forecasts.

Evans expects the uncertainty to weigh on business confidence, spending and employment plans which in turn would hurt an already cautious consumer. – Reuters