One decision made, many still to come

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This was published 13 years ago

One decision made, many still to come

By Malcolm Maiden

IT IS trite but true to say that the markets dislike uncertainty, and the market's minimalist move after Tony Windsor and Rob Oakeshott sided with Labor yesterday suggests that some see more certainty now that the poll is ''decided''.

But it has been decided in a way that is inherently unstable.

Labor is trying to bring Oakeshott into the tent by offering him an executive role. But with the third independent, Bob Katter, siding with the Coalition it has the thinnest of governing majorities, and Windsor and Oakeshott are committing only to supporting supply bills and voting against no-confidence motions. They will cast other votes as independents, and how, or whether, this works in practice remains to be seen.

As Peter Costello pointed out recently in this newspaper, the deadlock that has empowered the independents potentially empowers any member of the lower house. In a house where a single vote is crucial, everyone is a potential independent, and everyone knows that independence generates patronage.

Labor's task in government is therefore to keep its own soldiers as well as the independents on side, and it must do so as it moves into an unexplored alliance with the Greens.

It begins when Parliament sits again - October 27 at the latest - and is completed in July, when the balance of power in the upper house swings to the Greens, bolstering their single lower house seat.

Greens leader Bob Brown has nominated ''getting a price on carbon'', fairer treatment of refugees and asylum seekers, and an end to same-sex discrimination as his priorities, but the Greens have a wide-ranging agenda.

They want more prescriptive ''triple bottom line'' reporting and behavioural rules for businesses, for example, and higher penalties if those rules are ignored. They want a 50 per cent top income tax rate, an increase in the corporate tax rate from 30 per cent to 33 per cent, abolition of capital gains tax concessions, and an end to fringe tax benefits on vehicles.

They say they want stronger regulation of the banks - how that fits with the global shift towards re-regulation that the Australian Prudential Regulation Authority is already introducing here is unclear - and say ''natural monopolies'' and essential services should be publicly owned.

The Greens will therefore support the national broadband scheme, which recreates public ownership of the nation's communications backbone by superseding Telstra's copper network.

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And the independents will support it in return for a ''prioritised'' rollout in the bush.

Returns over the life of the broadband network will not change, but this ''inside-out'' development of the network will depress early financial returns and cash flows, as lower-density areas that cost more to cover move to the front of the queue.

Given the Greens' position of the public ownership of natural monopolies, Labor's plan to eventually sell the national broadband network to the private sector is presumably now up for discussion within the new ''alliance''.

So too, presumably, is the Greens' retro-tax agenda as the re-elected Labor government turns its mind again to the contents of the Henry tax review - another part of its deal with the two independents.

Labor has already moved ground on tax to win Oakeshott and Windsor's support, by substantially upping regional infrastructure spending, and partly covering the bill with a $700 million saving on the deferral of the 50 per cent tax discount on up to $1000 of fixed-interest income announced in this year's budget.

The start-up date has been pushed out from July 2011 to July 2012, and the maximum qualifying interest income will be halved initially to $500, rising to the previously announced $1000 in 2013-14.

The possibility that the Greens will support a toughening of the mining tax is also worth considering. After Julia Gillard negotiated a smaller mining tax when she took over as Prime Minister, Treasury predicted the tax would raise $10.5 billion in the two years to 2013-4. However, broker estimates continue to suggest the prediction is optimistic.

We can't yet conclusively calculate how much the tax will raise. It depends on commodity prices, and on details that have not yet been negotiated, notably the market value of mining assets injected into the new regime.

But the revised tax was billed was meant to be a compromise between the government and the big three miners - BHP Billiton, Rio Tinto and Xstrata.

If it attracts significantly less revenue than expected, Labor could test the support of the two independents - Oakeshott in particular - by moving to tighten it again, backed by the Greens.

Standard & Poor's noted yesterday that Australia's AAA credit rating was not dependent on the election result. Both sides pledged to rein in a debt load that was small by global standards, and the economy's economic pulse was independently strong.

The question, though, is whether the choice the independents have made is decisive, or a recipe for instability. The agenda that emerges from the untested Labor-Greens alliance and the independents' reaction to it will provide the answer.

mmaiden@theage.com.au

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