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Normally around this time of the year, we write an article that discusses some of the themes and issues that we looked at through the year that has nearly finished. In 2017, we’re going to do something different.

You may remember in March this year, we announced with great sorrow of the passing of our fellow conspirator, good friend and (there is no other way to say it) really nice bloke, Ken Wolff, who was a regular writer on this blog. Ken’s last article was entitled ‘Watch this Space in 2017’, first published on 15 January 2017.To demonstrate his acute awareness of the political system in Australia and globally, as well as how well he wrote about it, we’ve decided to revisit the article and see how accurate his predictions were. Ken’s words are in italics throughout this article and it has been edited for length. After a preamble, Ken got straight into the subject.

Will the Australian economy improve or continue to stagnate?

In December [2016] we had the news that the Australian economy had contracted by 0.5% in the September quarter. Most of the pundits do not expect that to be repeated in the December quarter, which means we would avoid a recession (which requires two consecutive quarters of contraction).

Australia formally didn’t enter a recession in 2017, however the economy is still not strong due to flat wages growth and low inflation.

The end of car manufacturing will lead to increased unemployment, not only in the car industry but in the companies that previously relied on providing parts to that industry. Couple that with the lack of wages growth (the lowest since records have been kept) and the government will be losing more in income tax revenue, and paying more in unemployment benefit, making it that much more difficult to achieve its stated aim of bringing the budget back to surplus.

Holden and Toyota have now finished manufacturing vehicles in Australia, (the last Australian Ford rolled down the production line in 2016) and while all three companies did and continue to support their ex-employees with employment assistance, the large number of people involved and the necessity to discover new skills has caused significant dislocation.

The economy did not go well in 2016 and the prospect for 2017 isn’t all that good. Even in his MYEFO in December, Morrison lowered the estimated rate of economic growth for both financial year 2016?17 and 2017?18. The new forecast rate of growth isn’t even enough to absorb new entrants into the workforce (usually accepted as about 3%) and that is without considering that the economic growth forecasts for the past few years have proven optimistic. Certainly don’t expect a boom year but how bad it may be, we will have to wait and see.

Well – that’s pretty accurate.

Will Scott Morrison ever understand the budget?

Ever since the Abbott/Turnbull government was elected, and returned last year, the government’s budget deficit has continued to grow. Low commodity prices, over which the government has no control, and slow wages growth, which government policies have actually promoted, have not helped.

Morrison, however, continues to focus on government spending rather than revenue raising. Although he has backed away somewhat from his earlier statement that the government had a spending problem not a revenue problem, his actions have remained focused on reducing spending. (I won’t get into the MMT argument here.)

The government has ignored the opportunity to borrow money at historically low interest rates to fund infrastructure. Although it is now talking more about infrastructure,

To his credit, Morrison did change track to an extent in the 2017 budget with an increased spend on infrastructure such as the Western Sydney Airport. Shane Oliver from AMP Capital reviewed the budget, delivered in May, here. Although Oliver concludes with

The 2017-18 Budget has a sensible focus on housing affordability and infrastructure. The main risks remain around the revenue assumptions and when we will get back to surplus.

It appears it may be at a time when interest rates could be on the rise again — US interest rates are certainly likely to rise during 2017 which may force some other countries to raise theirs in order to maintain their currency.

The US interest rate went up to 1% during March 2017, with further upward movement predicted. However,

The Federal Reserve left the target range for its federal funds rate unchanged at 1 percent to 1.25 percent during its November 2017 meeting as widely expected.

Our Reserve Bank still has capacity to reduce interest rates (although such reductions have done nothing to stimulate the economy so far). If it does reduce interest rates, and the US increases rates, the Australian dollar is likely to drop in value. The government will claim that helps exporters but it will increase the price of imports which may not help our ‘terms of trade’ and will also potentially lower our living standards by making imported consumer goods more expensive at a time when wages are barely growing — not something that would enhance the government’s electoral appeal.

Australia’s interest rate remained steady all year – here’s part of the RBA’s February announcement

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent

and the November announcement

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Will Morrison and Turnbull finally concede that they also need to raise revenue in the next budget? That will be one to watch although I expect that, if so, they will do their best to obscure the fact.

Did Morrison and Turnbull concede – according to Greg Jericho the answer is a qualified ‘yes’

Will there be a new conservative party?

Cory Bernardi is creating a nation-wide conservative movement but not yet formally a new conservative party. It will be interesting to watch where that goes in 2017 and whether it turns into a fully-fledged political party.

The Liberal party will no doubt do its best to stop it happening as it would further split the conservative vote, although that may not be an issue until the next federal election. If such a party comes into being during 2017, it could have serious implications for the government because it has only a one seat majority in the House of Representatives. Even if only one or two Liberal or National members in the House were attracted to the new party, that would create a situation where not only does the government have to negotiate with crossbenchers in the Senate but also in the House to have legislation passed. Although the conservatives already seem to wield considerable influence in the Liberal party room, if they held the balance of power in the House, that could actually increase their influence. That may even be a consideration in the formation of such a party: if they wish to create Australia in their conservative image, having a couple of members in the current House could help them achieve that, or force Turnbull to another election earlier than he would wish.

The electoral implications are that the conservative vote could be split between the Liberals, One Nation, the Nationals and the new party, leaving open the possibility that Labor would lead on first preference votes in more House of Representative seats and have an improved chance of winning them. And it is likely that a proportion of the preferences for a new conservative party would flow to One Nation (and vice versa) before they flowed to the Liberals, so it would be very interesting.

Queensland went to the polls last weekend. While Bernardi’s Australian Conservatives movement has become a Political Party, it did not run in the Queensland election. One Nation ran in over 60 of the 93 seats in the Queensland Parliament at the election and at the time of writing, they have been successful in one seat while the LNP self-immolates over giving them preferences but accepting One Nation preferencing most sitting members (ALP or LNP) last .

In a major organisational blunder, Hanson’s One Nation ‘forgot’ to register for the March 2018 South Australian state election in time. Xenophon’s SA Best and Bernardi’s Australian Conservatives are expected to have candidates.

Will Turnbull remain prime minister?

Personally I think he will in 2017 but 2018 may be a different story — unless he voluntarily decides to toss in the towel, deciding it is just too difficult to govern his fractious coalition and cope with the constant negotiation with the Senate crossbenchers (and potentially House cross benchers) to have legislation passed.

As indicated above the earliest an election can be called is August 2018. I doubt he would dare have another double dissolution before then as that would not go down well with the electorate (but if he loses members in the House to a new conservative party he may be forced to).

Unfortunately Ken didn’t live to see the brouhaha over Section 44 of the Constitution. There are two by-elections already scheduled for December in the seat of New England (‘held’ by Nationals’ Leader Barnaby Joyce who was duly re-elected as he has apparently renounced his New Zealand citizenship and increased his already healthy margin) and Bennelong (‘held’ by the Liberals’ John Alexander on a much slimmer margin, with a high profile ALP candidate and in Sydney, which makes him much less certain to be returned after renouncing his inherited UK citizenship). There are also a number of other MPs and Senators under a citizenship ‘cloud’ although all MPs and Senators have a 1 December cut off to demonstrate their citizenship. This saga still has a long way to go.

With Turnbull’s federal Coalition no longer having a majority of members in the House of Representatives thanks to the ‘dual citizenships’ of Barnaby Joyce and John Alexander in late November, he prolonged the House of Representatives for a week in fear of losing the vote on establishing a banking enquiry on Monday. Turnbull announced a banking industry enquiry on Thursday after a number of National Party members threatened to cross the floor to ensure one was established regardless.

The various claims and counter claims of dual citizenship would have been great fodder for another one of Ken’s specialities, his humorous take on the completely absurd. Ken was the writer behind the backyard bigot, ‘Tiny Napoleon O’penmouth’ and ‘Mal C’od-turn-a-bull who all made appearances (to paraphrase an old commercial) ‘when only comedy would do’

Abbott has spoken against the rise of a new party and will some in the Liberal party see Tony Abbott as the one who can provide a bulwark against defections to a new conservative party or even its creation? Although perhaps not intended, the pressure created by threats of a new conservative party may well enhance the chance of an Abbott return to counter it.

Abbott is still ‘not being destructive’ by outlining his visions to his conservative rump using every media opportunity he can muster. Despite pitiful polling numbers by Turnbull, there seems to be no real appetite in the Coalition to return to the days of a Prime Minister who was ‘relaxed and comfortable’ in brief red swimming trunks (thankfully; due to the fashion statement if no other reason).

Will Trump really threaten the world as we know it?

While Trump may cause problems for the US with his apparently contradictory promises to halve the company tax rate, spend billions on infrastructure and improve the US budget bottom line, their impact on Australia will play out indirectly through the international financial system. Of more direct consequence to Australia could be his trade and foreign policies, particularly relating to China.

Trump may wish to be more friendly with Putin and Russia but he will have to remember that China and Russia are still close, if not as close as once they were. He also sees North Korea as a threat but will have little scope to do anything about it without Chinese support although he thinks that using trade as a lever may also force China to act. He may think he is a good negotiator but he and his appointees will run up against expert negotiators and some, like the Chinese, are certainly willing to play the ‘long game’, something which Trump and his ilk seem unable to do.

The US and North Korean leaders have had an interesting relationship this year. From Trump claiming the threat of North Korea using nuclear weapons ‘won’t happen’ early in the year, through Trump attempting with some success to pressure China to reduce trade with North Korea, to Trump calling Kim Jong-Un ‘rocket man’ with Jong-Un responding with a spray that included the phrase ‘mentally deranged U.S. dotard’. That all happened before the North Korean media sentenced Trump to death in November for the crime of posting a tweet saying ‘Why would Kim Jong-Un insult me by calling me ‘old,’ when I would NEVER call him ‘short and fat’? Who would have though this might have apparently insulted Jong-Un?

Australia may continue sitting on the fence and use ‘diplomatic speak’ to suggest that differences should be resolved diplomatically but that may become more difficult under a Trump presidency. Will Australia be forced to side with either the US or China on some key issue? That will be a difficult position for Australia given that they are our two biggest trading partners.

North Korea certainly had an opinion on Australia’s claimed support for the U.S., suggesting the actions were suicidal, however on the surface Australia seems to be able to discuss issues with both the US and China.

On trade, Trump is keen to scrap US involvement in the TPP which will effectively be its demise. Turnbull has consistently insisted that the TPP is essential to Australia’s future, so what will its demise mean for that future? It will be another piece of Turnbull’s economic plan that fails to materialise — which in the case of the TPP may not be a bad thing.

Correct again but Canada not signing as well was a bit of a surprise (especially to the leaders of the other APEC Countries that had turned up to the signing ceremony in Vietnam!)

The main concern is a potential trade war between China and the US. If the US becomes more protectionist and imposes tariffs on Chinese imports, that may reduce Chinese production which in turn will reduce demand for Australian resources, with all the economic consequences that implies. It could also mean that China sends more cheap goods to Australia that formerly went to the US and that could further undermine what manufacturing we have left unless we also declare that they are ‘dumping’ goods in Australia and impose punitive tariffs which will essentially be biting the hand that feeds us. If this scenario unfolds, Australia will be in a difficult place economically and in how to respond to the challenges it throws up.

In turn, it may also mean that China pays more attention than it already does to developing nations in Africa and the Pacific and that will have foreign policy implications for Australia. We have been cutting our foreign aid budget but if China redirects its effort, we may be forced to do more in that area or accept further growth of Chinese influence in the region — which way will we go?

China announced its ‘One Belt, One Road’ (OBOR) program during 2017, the subject of a briefing note issued by the Parliament of Australia which concludes

Regardless of the credence which one assigns to the various interpretations of the OBOR initiative, progress thus far makes it clear that as Australia becomes increasingly tied economically with China, there is a need to maintain a close watch on the progress of the OBOR initiative globally. It also suggests that Australia needs to adopt a more economically and strategically prudent attitude in determining how the Australia-China economic relationship is to further develop.

Conclusion

The above are just a few of the questions that could arise during 2017. It may prove to be an interesting year both here in Australia and internationally.

All in all, Ken was pretty accurate with his predictions. The related posts for this article are chosen to demonstrate the expanse of knowledge and understanding Ken demonstrated in his writing (and the private emails that help run this site). We said last March we’d miss Ken – and we do.

For Ken’s 90th and last time –

What do you think?

Related posts:

Another failure in Aboriginal and Torres Strait Islander affairs
The rise of political staffers: how people disappeared from policy advice
Are governments ready for the coming economic and social changes?

• ← We need to understand entrenched belief
• A tale of two regions →

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