Businesses must be bold in a climate of instability
A lot can happen in one week in Australian politics – make that a couple of days.
One week ago, a defiant Prime Minister Malcolm Turnbull announced the leadership of the Liberal Party vacant and called for a ballot, narrowly beating Home Affairs Minister Peter Dutton 48 votes to 35 votes.
Today, the new Prime Minister Scott Morrison returns from visiting a drought-stricken Quilpie farm in rural Queensland, having just announced his new “next-generation” Liberal Cabinet and wider Ministry.
Many of us are still shaking our heads in disbelief. Is Canberra now what BCC New York Correspondent Nick Byrant dubs “the coup capital of the democratic world”? Is this political volatility intractable? Are we facing an enduring crisis in this country?
In this political climate of prevailing instability, one thing for certain is that Australian businesses cannot afford to wait for direction from the Federal Government. It’s time to be bold, take risks and invest in growth, without expecting the vision and the plan to come from Canberra.
The impact on financial markets and business community
The Australian sharemarket appears to have recovered after last week’s leadership turmoil, with the Australian dollar bouncing back after the former Treasurer Scott Morrison’s elevation to Prime Minister.
But the narrowness of Mr Morrison’s win (45 to 40 votes) and a looming Federal Election has raised further concerns in the financial markets. Combined with the possibility of a minority Government, with Mr Turnbull announcing his resignation from Parliament, the revolving door of leaders may affect consumer and business confidence, dampen spending and delay investment decisions.
It’s vitally important for Mr Morrison and Deputy Prime Minister Mr Frydenberg to set the economic direction, given the dumping of the big business tax cuts, and articulate policies clearly to businesses – both small and large.
The slice and dice of the “innovation agenda”
The new Prime Minister Scott Morrison has excised “Innovation” as part of the Cabinet reshuffle, with the industry portfolio not included as part of his Ministerial line-up.
For our clients in the technology sectors, there are concerns that Law Enforcement and Cybersecurity has been removed as a ministry, while the Home Affairs and Digital Transformation portfolio has been demoted to an outer ministry role. The sector may view this as demoting the importance of digital transformation and cybersecurity, at a time when the country needs it most.
On the other hand, the promotion of Former Assistant Minister for Vocational Education and Skills, Karen Andrews, to Minister for Industry, Science and Technology, brings promise for a more “STEM-literate” Cabinet.
Technology companies may need to be more courageous when making investment decisions, without high-expectation for Federal Government support.
Uncertainty will prevail
A week of madness will not disappear with the wave of a wand and the question remains on how Mr Morrison will resolve the ever present tension between the Liberal Party’s conservative and moderate forces, and a looming federal election in the first half of 2019.
Research indicates a drastically declining level of public trust in politicians, as well as corporations, media and other institutions.
In this climate of political instability and low consumer confidence, Australian businesses must forge ahead in developing its strategy and relationships by 1) accepting that instability is a fact of life 2) by understanding that a federal election is coming with the likelihood of a change in policy direction and 3) building ‘uncertainty’ factors into decision-making when taking risks.