The Australian election has been run, but as yet remains un-won.
Mirroring the stinging rebuke delivered to the political establishment in other major democracies in recent years, the Australian populous has put the status quo on notice.
With 78.2% of the vote counted, the primary vote for independents, at 23.2%, is at another record high, bringing the very real prospect that a hung parliament may prevail.
As my colleague Paul Colgan wrote on Sunday, the Senate is looking like a disorderly nightmare for whoever ends up managing to forge a working majority in the House of Representatives.
It’s a shambles, mirroring the performance of the Australian parliament since 2010.
Perhaps that’s a tad rough on my behalf, but broadly, it’s clear that’s what many Australians thought when they lined up to vote on Saturday.
They’re fed up, and are looking for alternatives. On this occasion it appears that they’ve put their faith in Nick Xenophon and Pauline Hansen, along with their respective parties.
To Paul Bloxham, HSBC Australia and New Zealand’s chief economist, the election result, as it currently stands, is not a good for the economy.
“In the short run, it increases political uncertainty,” says Bloxham. “As neither major party have radically different economic plans, the immediate market reaction is likely to be limited, albeit more likely to be negative than positive.”
Over the longer-term, Bloxham believes that trend will continue.
“The close result, and potential hung parliament, are likely to make it more difficult to pass budget reform, which we see as needed to remedy Australia’s structural budget deficit and help to protect its triple-A sovereign rating,” he says.
The last point, in particular, has been the focus of many since election night.
We heard plenty of three-word slogans during the election — “debt and deficit”, among others — but few expect any meaningful budget repair to be undertaken over the current parliamentary term, however long it lasts. Be it months, a year or the full three-year term.
Political survival, rather than budget repair, is likely to be the prevailing theme. An unfortunate outcome, again, given no side has been provided a clear mandate from the Australian people.
As Bloxham pointed out prior to the election, “neither party (was) proposing discretionary policy changes that would significantly reduce Australia’s structural budget deficit.”
If that was the case prior to the election, what are the chance of that occurring now? Buckley’s to none, one would imagine.
Although few expect a near-term move on Australia’s AAA credit rating, another three years of potential policy gridlock will test the sustainability of this view from ratings agencies, says Bloxham.
“Given Australia’s comparatively low level of government debt (net debt is 18% of GDP) and its triple-A sovereign rating from all of the rating agencies, Australia’s near-term budget deficits are sustainable,” he says.
“However, if government debts were to continue to rise and the structural budget deficit remains, this could test the sustainability of the ratings.”
Although there are questions over the financial impact that a credit rating downgrade would bring, Bloxham suggests that protecting the rating “ought to be a priority given Australia’s persistent large foreign borrowing requirement.”
Australia’s outstanding gross debt level has risen from $55 billion in 2008/09 to an estimated level $427 billion in 2015/16, the fastest increase of any AAA-rated nation over that period.
Although from a low base, the trend in the chart below — the outstanding level of Australian government debt expressed in both dollar terms and as a percentage of GDP — is alarming.
It’s little wonder that Australia’s top-notch rating is now starting to be questioned.