At a Glance
Wow! What an outcome. Donald Trump is President-elect of the USA – a result no one saw coming accept his die-hard supporters and very few political pundits.
The Trump victory has proved that in politics never count your chickens until they are hatched.
What might the lessons be for Australian politics? What messages can we take away and what might business learn from what is widely seen as an upset victory.
First and foremost, never presume. Never presume that the Government of the day can’t lose and the Opposition can’t win.
Never presume that the policy environment you and your industry currently operate in will be the same policy environment tomorrow.
The one key message from the Trump victory is that presumption, in politics, is risky.
We Have Seen it Before
There are two events in recent Australian political history that prove business should never presume.
Cast your mind back to 2009 when Tony Abbott became Opposition Leader. Keven Rudd was Prime Minister and the prevailing view was that Tony Abbott was, in effect a ‘stop gap’ leader. At the time, very few believed he would go on to be Prime Minister.
Here, history has shown us never to presume.
In 2012 Campbell Newman became Premier of Queensland winning with the largest electoral landslide in Australian political history. Holding a 67-seat majority, many in business had pencilled in a decade of LNP rule. A short 3 years later, at the 2015 election both the Government was gone and so was Campbell Newman (who unbelievably lost his own seat).
It is worth noting that prior to the election, the Queensland Government had made a major commitment to a privatisation program, the proposed asset sales would have raised billions of dollars.
Business quite rationally started to prepare for the sales program on the basis the Campbell Government would be re-elected. This turned out to be a false presumption.
These two examples alone demonstrate that in the current environment politics is both fickle, fluid and constantly changing.
It means that business need to be constantly assessing and evolving their political risk management strategy.
Food for Thought
Another example of an industry facing heightened political risk is currently playing out in the Parliament.
The Government currently has before the Federal Parliament a package of Bills to reform the vocational education and training sector. This follows a litany of complaints and publicity in regards to unscrupulous operators in the sector.
This industry was put on notice that reform was coming, having been flagged earlier this year by the Government.
What has taken many by surprise is the speed with which the government is now seeking to implement these reforms.
The package of Bills was only introduced into the Parliament in mid-October and will most likely be passed by the Senate this week, with the changes due to take effect on 1 January 2017.
This is a very short period for the industry to adjust and implement major structural changes.
It is a tangible example of political risk in action. A major industry sector has become defined by the bad operators. The Government and Opposition are united in their support for a crackdown in this sector. This will have a major impact on the reputable operators that will remain.
This example, highlights the stark reality of how the actions of Government can and will have a major impact on an industry sector, where the disruption and cost will be significant.
Business as Usual?
After the Trump victory, can we truly say that it’s “business as usual”?
Business can no longer take for granted that the community will accept that, what is good for business, is good for the community, in terms of their individual economic outcomes.
Politicians are ultimately representatives of the community. In this political environment politicians, will be increasingly wary of being seen to support policies that just benefit business to the exclusion of individual voters and the community at large.
That is why the Government’s ability to pass large scale tax cuts for big business is proving so difficult.
The term “big” in itself has become a term of derision when it relates to business.
Last week, the ABS reported that wages growth for the July-September quarter was the lowest on record at 0.4% and annual wages growth was only 1.9%. The legions of people experiencing stagnating or marginal wages growth will be asking themselves… how will a corporate tax cut for big business be of benefit to them?
The electorate is sceptical that a corporate tax cut will lead to increased wages. They are more of the opinion that these benefits will be passed onto shareholders or perhaps even higher salaries for CEOs.
This is the challenge that the major political parties face and it is the strain of resentment and anger that Donald Trump tapped into.
Australia is Not Immune
‘The Trump Phenomenon’ has already played out in Australia in several ways.
- Firstly, at the recent federal election, Pauline Hanson’s One Nation Party received 500,000 votes and won 4 Senators.
- In the Senate, there are now 20 crossbenchers, (an all-time high), where 1 in 3 voters now refuse to vote for the major political parties.
- In the House of Representatives, approximately 1 in 4 voters now vote for minor parties.
This fracturing of the vote is a manifestation of a reaction against the established parties. The community are sending a very clear message they will vote with their heart, not their head – no matter how illogical or impracticable the alternative parties policies may be.
This phenomenon, at its core, means that political risk is heightened and will continue to be so for quite some time to come. Businesses who ignore this message leave themselves exposed to significant commercial risk.
The Trump victory has proven that in politics and policy, the only certainty is uncertainty.
For businesses to prosper they usuallly require both policy and political certainty. While this is not an unrealistic expectation, it’s not necessarily realistic in the current political setting.
The political environment is challenging and this means political risk is ever present and business needs to manage, mitigate and minimise political risk like never before.
Be it Trump in the US, Brexit in the UK, One Nation in Australia or 20 crossbenchers in the Senate.
It’s a new world order for business when it comes to politics.
Political disruption is here to stay. Business needs to take this seriously and plan accordingly.
With the Trump victory, fresh in our minds, be sure to watch out for the French Presidential election in April 2017 (where Marine Le Pen of the right wing National Front is doing very well in the polls).
It will be fascinating to observe how this “phenomenon” plays out in the Australian Parliament in 2017 in regards to policy positions parties seek to adopt.
For more information, in regards to this or any other public affairs issue you may require assistance with please don’t hesitate to contact me or visit the Insight Strategy website at http://www.insightstrategy.com.au