Australian Prime Minister Tony Abbott’s diminished mandate after a leadership challenge risks making it tougher for him to address the weakest economy in a generation.
With gains in tax revenues slumping, Abbott already faced a challenging job to prepare the annual budget for the fiscal year beginning July 1. Now he’ll have to craft it under a political cloud with almost 40 percent of his parliamentary colleagues voting Monday to unseat him. The scale of the party rebellion suggests political instability will persist.
“Ongoing uncertainty over leadership and policy direction is likely to remain a negative for business confidence, which is already languishing below its long-run average, with implications for business expenditure on both capital and labor,” said Su-Lin Ong, the head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney. That is likely to pressure the central bank to cut interest rates further to support the economy, she said.