Australian Tax Problems May Mean Early Submarine Announcement

The Australia Government of Prime Minister Malcolm Turnbull is suffering from a low revenue problem. This makes it difficult to pay for important social programs and difficult to buy submarines. There may be a 50% chance of an early Election - in March or April 2016.

Reasons for this are:

-  lower demand from China for Australian coal and iron ore mean there has been a sharp reduction in Australian State and Federal tax revenue. The reduction being in income tax, company tax and mining royalties.

-  this means that the Turnbull Government must find sources of revenue elsewhere. The Turnbull Government has suggest increasing Goods and Services Tax (GST) from the current 10% to 15%. The GST is a consumption tax which is legally and, in practice, easier to collect than company or income tax.

-  however a GST increase is unpopular with the public, opposition parties, and unpopular with Members of Parliament in Turnbull's own Liberal party.

-  Over the last 2 days Turnbull has withdrawn the GST increase suggestion. But:

-  Turnbull still needs to increase tax revenue.

-  This makes it more likely that Turnbull will hold an early election first (in March or April 2016) (using a double-dissolution trigger. Then Turnbull will announce tax revenue (GST or other unpopular) increase measures in the regular May 2016 Budget.

See https://en.wikipedia.org/wiki/Next_Australian_federal_election#Election_date "On 2 November 2015, Prime Minister Malcolm Turnbull stated: "I would say around September–October [2016] is when you should expect the next election to be."^[8] However in December 2015, the ABC reported that some "senior Liberal MPs" had been seeking an election as early as March 2016.^[9] An election held at this time would require a separate half-Senate election to be held in late 2016 or early 2017 (unless a double dissolution were to occur in advance of the March 2016 poll).^[10]

Factors important to Turnbull include:

1. he and his Party are still decisively ahead in the Opinion Polls (averaging 54% to the ALP's 46%). But Turnbull's lead/popularity could decline by August 2016 after which a normal election might be held.

2.  so it is best to hold an election early before the Opposition Shorten ALP increases in popularity.

3. Turnbull does not have a majority in the Senate. A Double Dissolution could give Turnbull that Senate Majority so he can pass new Tax Laws and other financial Laws. The collapse of the rightwing Palmer United Party in the Senate (with key resignations) means there is a power vacuum  that Turnbull's center-right Liberal Party can fill. Turnbull could win at least 3 Senate seats currently held by Senators formerly in the Palmer Unite Party.
4. An important though more minor consideration is the expensive financial Submarine cost. This would be perceived by many Australian as a drain on revenue. So it is better that Turnbull can claim he has the tax revenue to pay for the submarines.

5.  There is also a submarine political cost in that the Turnbull Government that may prompt Turnbull to announce the Submarine Winner Decision until after an Election. This is because some States and Electorates will be unhappy that they will not get jobs from the decision.

So there is a strong chance (I would say 50%) that Turnbull will trigger a double dissolution process by March 2016 resulting in an early election in April or early May 2016.

For Japan, DCNS and TKMS this would allow Turnbull to keep his promise of making a submarine decision in the “first half of 2016” http://gentleseas.blogspot.com.au/2015/12/future-sub-decision-to-be-made-in-first.html . Low revenue also makes it more likely Turnbull will decide on only 8 submarines.

Pete