Turnbull Declares Victory Even as Australia Outcome Unclear

  • Coalition may clinch enough seats to form majority government
  • Former banker lacks strong mandate for economic reforms

Turnbull Claims Australia Election Victory

Prime Minister Malcolm Turnbull declared victory in Australia’s election, though more than a week after voting day it remains unclear if his Liberal-National coalition has enough seats to form a majority government.

“This is a great day,” Turnbull, 61, told reporters in Sydney on Sunday, hours after opposition Labor leader Bill Shorten phoned him to concede. “It is vital that this parliament works.”

The nation has been politically paralyzed since the July 2 ballot failed to produce a clear winner, and electoral officials are still combing through postal votes to determine the final tally. The Australian Broadcasting Corp. predicted the coalition would get 77 seats, scraping it to a majority in the 150-member lower house. As a fall back, Turnbull had spent the past week negotiating the support of independent lawmakers.

Either way, the election has raised questions about Turnbull’s leadership, and left him without a strong mandate for much-needed economic and fiscal reforms. S&P Global Ratings lowered the outlook on Australia’s AAA credit rating to negative from stable on Thursday, saying the result potentially dented the government’s prospects for reining in a budget deficit forecast to reach A$37.1 billion ($28.1 billion) in the year through June 2017.

The focus will now turn to the likely make-up of the upper house, where Turnbull will have to negotiate with disparate independents and minor parties to pass savings measures.

The tight result is one Turnbull “didn’t want or expect,” said Zareh Ghazarian, a politics lecturer at Monash University’s School of Social Sciences. “It’s going to have an impact on what sort of policies the government can get through.”

The election was an opportunity for Turnbull to get the clear backing of voters, nine months after he seized the Liberal leadership from Tony Abbott in a coup of ruling party lawmakers. He achieved the opposite.

The coalition, which went into the election with 90 seats in the lower house to Labor’s 55, now only has the slimmest of leads. The ABC predicts Labor will win 68 districts, with the remaining five going to independents or minor parties. The Australian Electoral Commission won’t declare a definitive tally before July 15, the deadline for postal votes to be received.

“I don’t envy Mr. Turnbull,” Shorten said Sunday in a concession speech.

Potential Kingmakers

If Turnbull falls short of 76 seats, he’ll need to rely on independents to pass legislation in the lower house as well. Among the potential kingmakers are parties seeking a crackdown on gaming companies, protectionists demanding more support for manufacturing and a lawmaker opposed to selling agricultural land to foreigners.

Turnbull said he’s had constructive talks with some independents, at least two of whom have said they’ll support the coalition in no-confidence motions and in budget talks.

Despite passing laws to make it harder for micro-parties to win Senate seats, the new upper house will remain eclectic. Populist firebrands including former soldier Jacqui Lambie, controversial broadcaster Derryn Hinch and anti-Muslim immigration campaigner Pauline Hanson are set to win spots. Like A$13 billion of budget savings that were blocked by the last Senate, Turnbull’s campaign pledge to lower company taxes may also founder.

Campaign Mistakes

Political analysts say several missteps by Turnbull contributed to the worse-than-expected result.

He waited too long to call the election after toppling Abbott and saw his initial opinion poll bounce wither. The eight-week campaign, the longest in half a century, was too drawn out and exposed a lack of policies. Despite promising to provide economic leadership to help the nation transition from a mining-investment boom, Turnbull shelved significant reform, such as an overhaul of the tax system.

Hamstrung by conservatives in the coalition, Turnbull was also unable to pursue the more socially progressive agenda that many voters expected of him. Badges with the slogan “I Miss Malcolm” were a common sight throughout the campaign -- a nod to the fact that many people didn’t know what Turnbull, once a passionate advocate of Australia cutting its ties with the British monarchy, tackling climate change and allowing same-sex marriage, stood for.

Political Unrest

The election also put Labor on notice. After years of political discord, with six prime ministers in eight years, the main parties’ share of the primary vote dropped to the lowest level since 1943.

While annual growth has accelerated toward its 30-year average of 3.2 percent and unemployment has fallen to 5.7 percent, Australians don’t feel richer. The nation is the world’s most China-dependent developed economy and needs new growth drivers after prices for its iron ore and coal exports plunged.

Markets typically don’t respond much to Australian elections, given limited differences between the major parties on fiscal issues. The Australian dollar was little changed at 75.63 U.S. cents as of 4:18 p.m. Monday in Sydney, about 1.1 percent higher than its level just before the S&P announcement.

“The immediate market implications are minor, with markets more focused on global than local events,” said Paul Bloxham, chief Australia economist at HSBC Holdings Plc in Sydney. “However, the more complex political environment is less conducive to reform, which could weigh on Australia’s medium-term growth prospects.”

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