The Distillery: Down to business

Business leaders let out a collective sigh of relief when Tony Abbott cruised to a comfortable victory and declared Australia was under new management – but the commentariat is not wholly convinced. Amid reams of pages full of advice on all sorts of crucial first tasks, jotters debate whether Australia under Abbott will indeed be open for business, or if it'll simply be business as usual.

At Fairfax, Ross Gittins argues "the change in government will change surprisingly little", despite popular expectations of a "marked improvement in business confidence now the socialist hordes have been vanquished".

"This is the one delusion that remains from the rubble of an election campaign by the Liberals' most populist and least rationalist leader in a generation. Fortunately, its delusory nature shouldn't stop it giving the economy a genuine boost as business ends its three-year-long dummy spit. Today's return to real life will end one more illusion that accompanies every campaign: that it's governments who do most to manage the economy, not the unchanging econocrats of the Reserve Bank."

Alan Mitchell, economics editor at The Australian Financial Review, seems to think Abbott has more control over the economy than Gittins gives him credit for – although he says the new leader's core promises are "ill-suited to the new global economic environment".

"Those promises include the protection of manufacturers (Abbott’s five-pillar economy) and the preservation of Labor’s core industrial relations reforms. It is a manifesto developed to outflank his protectionist and pro-union Labor opponents, but it is incompatible with a world of hard-won and volatile growth and with the Coalition’s need to fill the fiscal black hole inherited from Labor."

The Australian Financial Review's Chanticleer columnist Tony Boyd is much kinder to the Coaltion following a win he thinks may "signal the dawn of a new era in Australian commerce and politics".

He says Abbott has a "once-in-a-generation" opportunity to deal with the three biggest hurdles blocking Australia’s transition from a mining-driven economy to one founded on innovation and competitiveness.

"The new government’s most pressing tasks are to reform the country’s dysfunctional federal/state system of government; kickstart $US11 billion ($11.97 billion) in 'ready-to-proceed' infrastructure investments backed by public and private sector funding; and formulate an innovation policy that involves greater collaboration between industry, universities and government. If Abbott can get these three things right he will confront the negative legacy of the past six years under Kevin Rudd and Julia Gillard – declining productivity growth."

At The Australian, however, John Durie warns business groups not to get their hopes up about a new government under Abbott.

"The director lobby – the Business Council of Australia and Australian Bankers Association – have quickly claimed Abbott as one of them, but they may soon learn that unlike John Howard, who was comfortable in the company of big business, Abbott is more his own person … The big hope is that Abbott delivers by getting government out of the way of business. The big test starts now."

And while the newspaper's resources guru Barry Fitzgerald says miners will be celebrating the promised axing of the mining and carbon taxes, he adds that productivity is now the industry's main concern.

"It's an agenda that reflects the new order in the lower commodity price environment, one where there is a need to 'sweat' assets harder to ensure decent returns. And from the industry's perspective, that means the need for what BHP Billiton chief executive Andrew Mackenzie calls a 'modern industrial relations framework that draws employees and employers on to the same page'. Again, easier said than done. But at least there is alignment on the issue this time around."

More broadly, The Australian Financial Review's Jennifer Hewett backs – to some extent – Joe Hockey's claim that the return of confidence under a new government means consumers and business can now “unleash their balance sheets”.

"That boost should happen – but only to a limited extent. The whole country – including surviving Labor MPs – can at least be united in relief that this bloody election is over at last. Even so, continued consumer and business caution is likely to remain the dominant sentiment affecting the economy and investment. That includes a wait-and-see judgment on the new government as well as on the chances of improving business conditions."

When it comes to the Coalition's promised 'Son of Willis' enquiry into Australia's financial system, The Australian's Richard Gluyas says it must answer one fundamental question: "how to best fund the economy's growth when the nation's major banks still have an excessive reliance on offshore wholesale funding".

"With the super pool destined to overshadow the banking system (including loans) within a decade, the key will be to establish the right structures so that surplus funds are available for infrastructure investment and funding the banking industry … with the right incentives, it would be possible to fund productivity-enhancing infrastructure; for example, the commonwealth could take on the risk before on-selling the completed project and its attractive, annuity-style flow of income to the super sector."

The incoming government may also confront a Reserve Bank more inclined to lift politically-sensitive interest rates than to cut them, as financial markets bet an economic recovery will take root in Australia over the next 12 months, according to The Australian's David Uren. 

"Over the course of last week, markets went from pricing in a further 17 bps of rate cuts over the next year to pricing in nine bps of rate hikes. It is the first time since mid-2011 – when the Reserve Bank's cash rate was a full 2 percentage points higher than it is now – that markets have taken a 12-month view that rates will rise."