IHS Global Insight Perspective | |
Significance | Australia's Prime Minister Julia Gillard has won the support of two key independent lawmakers, giving her centre-left Labor Party enough seats to form a new government and ultimately ending weeks of uncertainty in Australian politics. Labor now holds 76 seats in the 150-seat lower house, compared to the opposition Liberal National Coalition's 74 seats. |
Implications | The independents' decision gives the Labor government a second term in office, which means that Gillard can continue to push for the introduction of a controversial 30% tax on iron ore and coal industries, meaning the country's biggest carbon gas emitters will pay billions more in tax. |
Outlook | As Gillard moves to form her first cabinet, the stability of the minority government will be a key issue in coming weeks and months. Although a Labor government is seen as more stable than a Liberal National coalition alternative, a return to the polling booths remains a possibility. |
Australia's Prime Minister Julia Gillard has been given the backing to form a new government today after two independent Members of Parliament (MPs)—Tony Windsor and Rob Oakeshott—announced their intention to back her Labor party. Their decision boosts Labor's control to 76 of the 150-seat House of Representatives, where a minimum of 76 seats is required to form a government. Opposition leader Tony Abbott's conservative National Liberal coalition now controls 75 seats, after a third independent MP, Bob Katter, announced his decision to back the Liberal-led coalition hours before Windsor and Oakeshott.
The three "king makers" from rural constituencies have finally spoken. In the end, their decision has decided the future of Australian politics for the next three years. The decision follows two weeks of soap-opera style political horse-trading after an indecisive federal election, held on 21 August, produced the first hung parliament at the federal level for 70 years (see Australia: 23 August 2010: Election 2010: Australia Analyses Poll Outcome amid Uncertainty). The results of the election were particularly close, with neither of the main parties winning the 76 seats necessary for an outright majority.
Labor Forms a Government
Despite a roller-coaster ride in Labor's fortunes since the beginning of this year—with a controversial leadership transition, fluctuating support ratings, and a neck-and-neck competition in the polls with the coalition—Julia Gillard's party is finally set to form Australia's next government (see Australia: 20 August 2010: Election 2010: Australian Rivals Head to the Polls Neck and Neck). Apparently, the final outcome has not been secured without concessions.
Since the election it has been clear that the key independents were placing the electorate's interests first in coming to a decision, with health, education, and constituent access to broadband internet key priorities. Moreover, in a seven-point letter released on 25 August, the group also highlighted the issues of government stability, reform of the manner in which parliament conducts business, and openness regarding the two main parties' economic plans. Speaking to the media in the Australian capital of Canberra today, Windsor revealed that the National Broadband Network (NBN), energy policy, and regional infrastructure were the key reasons for his support for Labor. Oakeshott, meanwhile, said his decision was focused on providing Parliamentary stability, Labor's plans for NBN, and its positions on climate change and regional education. The deal with the two MPs was reportedly reached after Gillard pledged A$10 billion (US$9.16 billion) in new investment for rural schools and hospitals. Last week, Gillard secured the support of Green Party MP, Adam Bandt, and a fourth independent MP, Andrew Wilkie, to form the next government, giving her 74 seats, one seat more than the opposition National Liberal coalition held at the time. Gillard and Bandt signed a deal after the Prime Minister agreed to Green demands to hold a referendum on recognising indigenous people in the constitution, and a full parliamentary debate on Australia's military involvement in Afghanistan.
Outlook and Implications
Gillard's government will be the first minority government in Australia in 67 years. With no party having control over the executive or parliament, the coalition's cohesiveness and stability are set to be key issues to watch. Following the widely expected pact between Gillard and Bandt—the Green Party's second ever and only current MP—Labor should now be able to rely on Green Party support in the Senate, where the two parties hold a majority of 40 seats in the 76-seat legislature. This should make it easier for the Labor-led administration to gain Senate approval to push through legislation. Gillard is expected to present a proposed mining law to parliament by mid-2011, and will push for its passage (see Australia: 16 August 2010: Iron Clad? Australia’s Mining Boom Reconsideration). Further strengthening of tax cannot be disregarded, with the Green party leader Bob Brown having suggested he would like to extract an extra A$2 billion from the mining industry.
Overall, while a Gillard-led government appears a more stable option than the Abbott-led alternative, it is still possible that Australia could return to the polls if the government proves unstable. Crucially, the last time there was a hung parliament at the federal level, in 1940, it collapsed after a year. This would, however, only further damage investor confidence in the Australian economy.