The recent election results in Australia have brought about a fragile coalition government, constraining Prime Minister Julia Gillard’s ability to enact a forceful agenda and clouding the future of energy policy in the country. The ruling Labor government now depends on both the Green Party, which wants a tough carbon pricing scheme and a stiff tax on mining profits, but also on rural independents that are wary of both policies. Gillard thus faces a difficult balancing act that could easily fall apart, and may even lead to new elections. Despite BHP Billiton’s announcement that it now favors a carbon tax, seemingly irreconcilable differences between Australia’s political parties and the high-profile legislative defeat of a carbon trading system earlier this year may complicate efforts to enact new legislation in the near future.
Source: The Lowy Institute
Until the most recent election, there has been only one precedent in Australia for a “hung” parliament, where the government does not have a majority in the House of Representatives. Now, however, the ruling Labor Party only has 72 seats in the House, despite needing 76 to govern. The conservatives (a coalition of the city-based Liberal Party and the rural-based National Party) won 73 seats, and got the support of one rural independent (ex-National Party representative Bob Katter), leaving them two short. While Labor started with only 72 seats, they were able to cobble together a coalition including one Green Party representative, one left-leaning city-based independent and two conservative-leaning rural independents. It was the two rural independents who ended up being the kingmakers, keeping the nation waiting for several weeks while they entertained competing offers from the major parties. Their decision was particularly dramatic considering that the majority of voters in their electorates preferred a conservative government.
It is not clear what this fragile coalition will be able to achieve with respect to climate and energy. Although there is little difference between Labor and the Liberal-National coalition on foreign affairs, regulation, welfare, health, education or labor, one area where the major parties are sharply divided is energy policy. For the past year the two big political debates in Australia have been about whether to introduce an emissions trading system, and whether to introduce a tax on mining profits.
In 2007, Prime Minister Kevin Rudd and the Labor Party took control of the government and took immediate action on climate change by ratifying the Kyoto Protocol, leaving the US as the only developed country not to have done so. They then went about trying to implement an emission trading system, or Carbon Pollution Reduction Scheme (CPRS). The government commissioned several reports which all pointed to the need for such a scheme, and it seemed as though the legislation would be easily passed with bipartisan support.
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John Humphreys, Director of the Human Capital Project
23 September 2010