• Businesses are more optimistic since Turnbull became leader
  • New prime minister faces gauntlet of hard right of own party

Australian Prime Minister Malcolm Turnbull’s greatest challenge is to develop a new business model for the nation while boosting productivity, Reserve Bank board member Heather Ridout said Tuesday.

Business leaders are more optimistic following Turnbull’s replacement of Tony Abbott as the country’s leader last month and see the change as the establishment of a new government, she said during a lunchtime event in Sydney. But the new prime minister is going to have to deliver and execution of new plans is often the hardest part, Ridout said.

“Malcolm Turnbull’s real challenge is to get a new business model for Australia,” she said. In many of the issues he will face, including changing the tax system and tackling workers’ pay rates, “he is going to have to run the gauntlet of the hard right of his own party, which is going to make life just as complicated frankly as dealing with a lot of other oppositions.”

Ahead of Turnbull assuming the prime ministership, the RBA called for greater competition, improved infrastructure and a reform strategy that Australians could understand and support as it tried to stem a slide in the economy’s potential growth. The central bank cut interest rates to a record low 2 percent in May as business confidence slumped and firms forecast a 23 percent fall in investment for the year ahead.

Winning Lead

“He shouldn’t fight on too many fronts,” said Ridout, who is also chairman of pension fund AustralianSuper. “He should work with the states on a broad-ranging productivity agenda and tax is sitting there as a medium-term agenda.”

Since defeating Abbott in a ballot of lawmakers, Turnbull has taken the Liberal-National coalition to an election-winning lead, according to an opinion poll published Monday. The coalition leads the opposition Labor party by 53 percent to 47 percent on a two-party preferred basis, reversing an eight point deficit recorded in August, according to the Fairfax-Ipsos survey.

The prime minister has surged past Labor leader Bill Shorten in terms of personal popularity with 67 percent support compared with 21 percent.

Turnbull “has enormous reservoirs of political capital,” Ridout said. “He needs to spend it and he needs to spend it wisely.”

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