Politics bad for business

Uncertainty likely to continue until the September election

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The current ructions in the governing Labor Party may have led to a lack of consumer confidence, causing a drag on the economy.

Luke Sawyers, chief executive of accounting firm PwC Australia has told The Sydney Morning Herald, that the political instability was discouraging foreign companies from investing in Australia. "Business looks for stability, clarity, decision and leadership that promotes investment and drives business," he said.

Myer Holdings (ASX: MYR) managing director Bernie Brookes has warned that distractions prevent proper governing, saying, "We rely on an elected government to manage and strategically direct everything from fiscal policy to social programs. Such actions require focus and direction."

Sylvia Falzon, director at Perpetual Limited (ASX: PPT) says that the whole political environment has held organisations back – from employing people, capital investments, all those issues, and that Labor needed to improve its consultation with business and give Australians confidence about what they stand for.

Some business leaders have said that until we have an election, uncertainty was likely to continue, with business and consumer confidence suffering. The Business Council of Australia (BCA) has called on the government to return its focus to policy matters that would benefit the nation.

Much of the events of yesterday's political drama appear to have been driven by rushed policies, with the media reforms likely a major catalyst. The government's controversial idea of appointing a public interest media advocate, amongst other reforms received a savage backlash, and variously described as an attack on free speech and anti-democratic. Seven West Media (ASX: SWM) chairman Kerry Stokes labelled the changes draconian, while News Corporation's (ASX: NWS) Kim Williams said the package breached constitutional rights and was an attempt for direct government intervention and regulation of the media. In the end, most of the reforms were abandoned.

Foolish takeaway

With the Labor Party's situation still unclear, it seems consumers and businesses will have to wait until the September Federal election before they can return to 'real life' as Bill Wavish, chairman of Myer Group said yesterday.

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