Tuesday 2nd February 2016 - 7:12 pm

Prepare for a union election

by Alan Thornhill

The Prime Minister, Malcolm Turnbull, told coalition MPs today that an early Federal election might well be a “live option.”

He also signaled in Federal parliament later that he is prepared to fight that election on industrial relations in the building industry, when he declared that his government would again introduce a bill to set up an industrial relations watchdog, the Australian Building and Construction Commission.

The Senate has already rejected a  similar bill.

Mr Turnbull also told parliament that he is prepared to construct his government’s policies for economic recovery on the “very strong” base of the construction industry, which directly employs more than 1 million Australians.

Every lever of the government and every lever of our economic policies will be directed towards producing a big performance,” Mr.  Turnbull declared.

An election had not been expected until September, when the present government’s three year term is due expire.

However it could be delayed until 2016.

The Prime Minister also welcomed remarks the Reserve Bank Chairman, Glenn Stevens had made slightly earlier, when he said  that the bank’s marker interest rate would stay on hold at the historically low rate of 2 per cent for another month, as expected.

The PM said he was not prepared to accept the level of industrial disruption and strikes which had persisted in building and construction, after it had subsided in other sectors of the economy.

These led, eventually, to the appointment of a Royal Commission to investigate the industry.

It has just reported, although  the government has kept some volumes of its report secret.

Mr Turnbull also welcomed observations Mr Stevens made about signs of  improvements already evident in both the Australian and global economies.

He said, too, that Australia’s economic growth is roughly twice that of Canada, which is also  resource based.

Mr Stevens said in  his statement that recent information suggests the global economy is continuing to grow, though at a slightly lower pace than earlier expected.

“ While several advanced economies have recorded improved growth over the past year, conditions have become more difficult for a number of emerging market economies, ” he said

:”Commodity prices have declined further, especially oil prices.

This partly reflects slower growth in demand but also very substantial increases in supply over recent years.

“The decline in Australia’s terms of trade, which began more than four years ago, has therefore continued.

Financial markets have once again exhibited heightened volatility recently, as participants grapple with uncertainty about the global economic outlook and diverging policy settings among the major jurisdictions.

“Appetite for risk has diminished somewhat and funding conditions for emerging market sovereigns and lesser-rated corporates have tightened. But funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.

In Australia, the available information suggests that the expansion in the non-mining parts of the economy strengthened during 2015 even as the contraction in spending in mining investment continued. Surveys of business conditions moved to above average levels, employment growth picked up and the unemployment rate declined in the second half of the year, even though measured GDP growth was below average.

“The pace of lending to businesses also picked up.”

Mr Stevens  said”:”Inflation continues to be quite low, with the CPI rising by 1.7 per cent over 2015.

“This was partly caused by declining prices for oil and some utilities, but underlying measures of inflation are also low at about 2 per cent. With growth in labour costs continuing to be quite subdued as well, and inflation restrained elsewhere in the world, consumer price inflation is likely to remain low over the next year or two.

“Given these conditions, it is appropriate for monetary policy to be accommodative. Low interest rates are supporting demand, while regulatory measures are working to emphasise prudent lending standards and so to contain risks in the housing market.

“Credit growth to households continues at a moderate pace, albeit with a changed composition between investors and owner-occupiers. The pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities.

“”he exchange rate has continued its adjustment to the evolving economic outlook.

Mr Stevens said”’ “At today’s meeting, the Board judged that there were reasonable prospects for continued growth in the economy, with inflation close to target.

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Alan Thornhill

Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.

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