Malcolm Turnbull's offer to restore business confidence is contradictory, but just might work

Malcolm Turnbull says he challenged Tony Abbott for the leadership of the Liberal Party because of the government’s failure to address sagging confidence in the business sector.

“Ultimately, the Prime Minister has not been capable of providing the economic leadership our nation needs,” Turnbull said today.

“He has not been capable of providing the economic confidence that business needs.”

The first budget from the Abbott government crushed consumer confidence under a wave of surprise announcements about welfare, education, and health spending cuts.

The second budget, while providing a short-term fillip via instant tax write offs on asset purchases under $20,000 for small business, was received with some scepticism, because of its failure to lay out a meaningful plan for addressing the structural weaknesses in the nation’s finances.

Here’s the three-year chart showing the trend in business confidence from the agreed standard measurement, the monthly NAB business survey. It shows business confidence has been sagging over the past two years, and the recent resurgence has now retraced.

Source: NAB Business Survey

The trouble is, the change of leaders now could do more damage to confidence by confirming the Coalition is just as unpredictable as Labor when it comes to knifing prime ministers if confronted with weak polling. It would serve to enshrine the Australian political establishment’s reputation for unpredictability. This is not an ideal investment environment for major decisions.

Besides, the success of whoever leads the nation depends on their ability to pass legislation through the Senate with the support of the unpredictable crossbench.

But it is hard to differ with Turnbull’s assessment that the government’s stewardship of the economy has been wanting.

While job creation has been strong, GDP growth has been slowing and global commodity prices, Australia’s crucial source of export revenue, are falling around the world. Treasurer Joe Hockey’s insistence that a bright economic future remains betrays an unwillingness (or, worse, an inability) to deal with the facts as they are and explain them to voters frankly.

And even on the bright spot – job creation – mostly via a construction boom in the eastern states, and the knock-on activity that it creates, is not the basis for sustainable economic growth.

Despite his notorious arrogance Turnbull is a capable communicator with a detailed grasp of policy. So despite the potential uncertainty this latest episode of Canberra intrigue may create for business, the potential upside of having someone of Turnbull’s persuasiveness running the government is a compelling case to be mounting to Liberal MPs.

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