The sharp jump in Australian consumer confidence by 8.7% last week, as measured by the weekly ANZ-Roy Morgan survey, is a clear vote of confidence in the new Prime Minister, Malcolm Turnbull. No doubt, business confidence will see a similar rebound as expectations around the new leadership increase. For the bounce to be sustained, however, the new Prime Minister will need to deliver a clear and defined narrative around reform and the economic direction of the country.
The foremost issue is to buttress the tax base. The contribution of both the personal and corporate income tax bases have eroded over time under the pressures of inefficiency and globalisation. Akin to our New Zealand cousins, the obvious solution is to broaden and raise the goods and services tax. At the same time, reducing corporate and personal income tax would improve both incentives and productivity.
A further issue is infrastructure investment and the use of public borrowing to fund vital long-term infrastructure projects. What would be great to see is a focus not just on road building but also public transport and other nation critical projects.
Another key focus will be the rapidly emerging Asian middle class, and its importance to Australia’s future. According to Ernst & Young, the number of middle-class consumers in the Asia Pacific region is expected to grow from half a billion in 2009 to 3.2 billion by 2030. It is estimated that by 2030 just under two-thirds of spending by the world’s middle class will come from the Asia Pacific region, compared to around one quarter today. This is tremendously positive for both Australia and New Zealand. In this context, Government efforts in promoting and building industries such as food, energy, financial services, tourism and education will be crucial.
Disclaimer: This is intended to provide general information only. It does not take into account your investment needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.