>
Saw an excellent article in the WSJ looking at the upcoming federal elections and how the background/views of the 2 main parties leaders – John Howard and Kevin Rudd – will shape Australia’s future. I have commented on some excerpts from the article here, with a link to the full column below. This is a good read to broadly understand some of the macro-economic issues which could influence Australia’s economic future and hence subsequent investment decisions going forward.
Polls suggest that Mr. Howard — Australia’s second-longest-serving premier — and his conservative Liberal Party-led government are likely to lose power in a parliamentary election Nov. 24. If that happens, it would topple one of Mr. Bush’s key supporters on global issues such as the U.S.-led fight against terrorism and on climate change.
The election could also signal a broader policy shift in Australia, as the resource-rich nation forges closer ties with China. Australia supplies the coal, iron ore and other raw materials China needs to fuel its economic boom, and ties between the two countries would probably strengthen under a new Australian government. [Look for growth in the big mining companies as well as Uranium stocks]
Mr. Howard’s opponent, 50-year-old Labor Party leader Kevin Rudd, is a former diplomat who speaks fluent Mandarin Chinese and has long made a priority of increasing Australian links to Asia. At a recent economic summit in Sydney, he upstaged Mr. Howard by chatting in Mandarin with visiting Chinese President Hu Jintao.
Mr. Rudd has also suggested he may push for greater independence from the U.S. in setting foreign policy. He intends to pull many of Australia’s troops from Iraq, for example, and has advocated more aggressive action to curb emissions linked to global warming. [This means you should look to invest in environmentally friendly companies like BBW and reduce exposure to smaller commodity plays]
Some political analysts say it’s too early to count out Mr. Howard, 68 years old, who has already served four terms as prime minister. Although he currently trails in polls by several percentage points, Mr. Howard has fought back from the brink before, including in Australia’s last national election in 2004. He is known for his common touch, connecting with voters on his regular jogs and in other informal public appearances.
Mr. Howard could benefit from a widely held perception that his conservative Liberal Party deserves much of the credit for Australia’s recent economic success. On his watch, Australia has emerged as one of the world’s most dynamic economies, with unemployment at its lowest level in decades and growth expected to hit 4% this year. A mandatory retirement savings program has helped Australians accumulate wealth that they’re now investing aggressively across the globe.
The country of 20 million people [gods-own country I believe] sits on vast reserves of natural gas, coal and other raw materials, increasing Australia’s importance as many commodities are enjoying record prices.
Still, many Australians have grown tired of Mr. Howard, a polarizing figure who is closely identified with Mr. Bush and the U.S.-led war in Iraq. Several years ago, Mr. Howard was quoted referring to himself as Mr. Bush’s "deputy sheriff" in Asia. Like the Bush administration, his government has refused to ratify the Kyoto Protocol, the 1997 international accord aimed at reducing greenhouse-gas emissions. Many younger Australians view Mr. Howard as hostile to environmental causes and committed to a harsh brand of free-market capitalism, highlighted by his government’s moves in recent years to give employers more leverage over workers in setting wages and other benefits.
Mr. Rudd’s career appears to symbolize Australia’s shift toward closer relations with Asian nations. After growing up in a dairy-farming family in Queensland state, he took an early interest in Asian affairs and studied Chinese history in college. He later joined the country’s diplomatic corps, and rose rapidly through the ranks, serving in the Australian embassy in Beijing in the 1980s. He also worked as a consultant and later emerged as a Labor Party star in part because of his foreign-policy experience.
About 14% of Australia’s exports now are sold to China, compared with less than 3% in the early 1990s. Fewer than 6% of Australia’s exports are shipped to the U.S., compared with about 11% in the early 1990s, despite a free-trade agreement reached with the U.S. in 2004. [China will continue to be a big focus and will become an even more important trading partner for us than the USA]
Part of what makes Mr. Rudd a serious threat to Mr. Howard, analysts say, is that he has nudged his traditionally left-leaning Labor Party closer to the political center on a number of issues. He has suggested he will promote many of the free-market economic ideas put in place by Mr. Howard, and his party has promised to deliver large tax cuts — much as Mr. Howard has done.
The Labor Party has also appeared to moderate its stance on some environmental issues, indicating it now supports efforts to require developing nations such as India and China to participate in global emissions-reductions targets — a position that also mirrors Mr. Howard’s views.
Australia’s Liberals and Labor supporters "are almost the same party" these days, says Saul Eslake, an economist at ANZ Bank in Australia. But that may play to Mr. Rudd’s advantage, economists say, by making voters more comfortable with the Labor Party.
In a speech yesterday officially starting his party’s campaign, Mr. Rudd pledged to boost government investment in education and skills training, as well as Asian language studies "to equip the next generation of Australians with the languages of the major economies of the future."
He also repeated that he wants Australia to have its own voice in global affairs. "I want Australia to lead and not just follow," he said.
Mr. Howard has fought back by recalibrating some of his positions to appeal to voters who otherwise might lean toward Mr. Rudd. He has appeared to soften his stance on climate change by indicating he now believes Australia needs to take some steps to reduce emissions in case global warming becomes a big problem. He has also announced billions of dollars of government spending and tax benefits, including tax-free savings accounts for first-time home buyers and tax rebates for education and child care.
But some of those moves could backfire. Mr. Howard’s reputation as an economic mastermind has already taken a beating in recent months amid signs that inflation is heading above the central bank’s preferred target of about 3% — a problem that could be exacerbated by both parties’ aggressive spending plans.
In 2004, Mr. Howard told voters his party could be trusted to keep interest rates low — a critical issue in Australia, where many homeowners hold mortgages with adjustable interest rates. Since then, the Reserve Bank of Australia has raised interest rates six times to combat inflation, including a quarter
-point hike in early November. Australia’s benchmark rate is 6.75%, 1.5% higher than in 2004.
The full article by Patrick Barta at can be found at – http://online.wsj.com/article/SB119509313912493742.html?mod=todays_asia_economy_and_politics.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
