The federal election was held over the weekend resulting in a shock swing away from the sitting Liberal party led by Malcom Turnbull. So close is the election result that it will not be known for a few days. The likely outcomes are either a narrow Turnbull victory or a hung parliament.
A hung parliament is one where neither of the major parties hold a majority and must rely on the smaller parties or independent members to form government. This was the situation most recently with the Labor government of Julia Gillard.
Should the Turnbull-led Liberal Party be able to form a government it is unlikely to be able to pass legislation on the majority of its platform including reforming industrial relations, increase taxes on retirement savings and cutting taxes for small business. A previously legislated ‘short term’ tax on higher earners due to be removed on 1 July 2017 is also likely not to be passed by the parliament.
In short, it’s a mess and likely to lead to lower growth, higher taxes, greater spending and pressure on Australia’s AAA rating. Australia’s budget, last in surplus in 2007 when the Liberal government was ousted by Labor’s Kevin Rudd, looks likely to see spending at record levels of GDP. This will increase pressure on Australia’s credit rating as both gross and net debt continue to grow.