GRACosway Weekly Wrap Up: Economic headwinds forecast

18 October 2019

Highlights

Federal Parliament resumed this week following a three-week break
The International Monetary Fund (IMF) has predicted a slowdown in global growth, however the Morrison Government has rebuffed calls for additional stimulus
Treasurer Josh Frydenberg announced an ACCC inquiry into the pricing of residential mortgage products
The fate of the Regional Comprehensive Economic Partnership (RCEP) is uncertain following concerns raised by India over China’s proposed access to its economy, however Trade Minister Simon Birmingham is confident the partnership will be concluded alongside the ASEAN Summit in early November
Opposition Leader Anthony Albanese and NSW Labor Leader Jodi McKay announced a review into NSW Labor to be conducted by former Attorney-General Michael Lavarch
Labor MPs have called on Scott Morrison to increase the foreign aid budget, following a speech by former prime minister Julia Gillard which called on Australia to adopt a political truce on the aid budget
The national unemployment rate has dropped to 5.2 per cent, down from 5.3 per cent in August
Unions including the ACTU and the CFMEU have criticised Labor for backing the Coalition’s Free Trade Agreements with Indonesia, Hong Kong and Peru

Prime Minister Scott Morrison returned to Canberra this week for the next sitting fortnight, having recently spent time visiting families affected by bushfires in NSW. It’s been a successful week for the Morrison Government, which looks set to secure crossbench support in the Senate for the passage of its union-busting laws, while Labor’s Shadow Cabinet gave in-principle support for the Government’s contentious ‘big stick’ energy legislation. Labor has faced criticism for its ‘backflip’ in supporting the laws, given it had opposed a similar bill prior to the Federal Election. However, Opposition Leader Anthony Albanese defended Labor’s decision to back the legislation, stating it had changed substantially from the previous parliament and reasoning the Government had made concessions which made the bill more “palatable”. Climate change policy has continued to divide Labor, with MPs from both factions taking aim at frontbencher Joel Fitzgibbon over his call for a settlement with the Coalition on climate action. Meanwhile, the House of Representatives voted down a motion for Parliament to declare a Climate Emergency.

Australia’s relationship with China is back in the headlines this week, following comments made by Home Affairs Minister Peter Dutton. Mr Dutton stated China’s conduct is typically at odds with Australian values, and warned to be wary of the Chinese Communist Party’s behaviour. Chinese state media has accused the Government of “pandering” to the United States, and has urged the PM to build a stronger consensus on Australia-China relations within his ranks. Australia’s relationship with China was also criticised by Shadow Foreign Affairs Minister Penny Wong, who accused the PM of being reckless in his handling of the relationship while in the US. The renewed tensions came the same week as the US and China reached a truce in the trade war, which was welcomed by Trade Minister Simon Birmingham who said progress will help boost global economic confidence.

In unwelcome news for the economy, the IMF has predicted a slowdown in global growth, forecasting just 1.7 per cent growth for Australia. This is well below the RBA and Government forecasts, which had tipped Australia to be at 2.25 per cent growth. This has spurred commentators and critics to call for further stimulus from the Government. The Treasurer and the PM have acknowledged that Australia faces strong “economic headwinds”, however insist the Government’s tax cuts and economic plan is sufficient to stimulate the economy. The Government has been buoyed by an improved unemployment rate, which has defied market expectations to drop to 5.2 per cent.

Australia’s drought response has come under scrutiny this week, following a heated interview between the PM and shock-jock Alan Jones, who was critical of the Government’s actions. This was echoed by Labor MPs, who used Question Time this week to grill the government on their “ad-hoc” drought policies. Under pressure from critics, the Coalition announced an additional policy to Parliament, which is set to give farmers lump sums of up to $13,000 upon reaching their four-year limit on government repayments. This measure has been welcomed by the National Farmers Federation (NFF). Labor has indicated it will support the measure, but will continue to demand the government lift the four-year cap in times of drought.

Looking ahead

Looking ahead, the Federal House of Representatives will sit next week, while the Senate will hold Supplementary Budget Estimates. Parliament will also be sitting in NSW, QLD, WA and ACT.