This content is from: Portfolio

Malcolm Turnbull and Australia’s Experiment with Political Centrism

As many developed nations bifurcate into political extremes, Australia’s government has handed power to a pragmatic, market-friendly moderate.

Global reactions to Australia’s change of prime minister this past week have focused on the violent — and at times unpredictable — political culture of the world’s 12th-largest economy. Malcolm Turnbull, 60, became Australia’s sixth prime minister in eight years after toppling Tony Abbott in a dramatic challenge inside the ruling Liberal Party last week.

Plainly, Canberra is no place for the faint of political heart — or the easily confused. Abbott was two years into his first term in power. A similar fate befell former prime minister Kevin Rudd, who was toppled as leader of the left-of-center Labor Party by Julia Gillard in 2010, two years into his inaugural stint running the country. The cowboy booted-Rudd later returned the favor to Gillard, deposing her as prime minister just months before the 2013 election, which he lost to Abbott’s Liberals. Now Abbott has seen his party colleagues abandon him in favor of Turnbull.

Abbott has pledged to respect the decision and spare his conservative party of the factional destabilization, known Down Under as white-anting, that plagued the Labor Party through the Rudd-Gillard years. Unless Turnbull can quickly revive his party’s flagging fortunes at the polls, however, further political volatility seems inevitable.

Although the magnificent brutality of Australia’s two main political parties has captured much of the attention, what’s been overlooked is the broader policy shift heralded by Turnbull’s elevation to the prime ministership. Much of the developed world is in the grip of a heavy flirtation with the extremes of the political spectrum: socialist-leaning Jeremy Corbyn’s election as head of the U.K. Labour Party, the rise of Donald Trump and Bernie Sanders through the 2016 U.S. presidential primaries, and the increasing attraction of both extreme right and left movements through austerity-hit Europe all point to a deep disenchantment in the West with established political structures and policy orthodoxies. With Turnbull’s coronation, however, Australia, has gone in the opposite direction: toward the center. Abbott was a pugilistic and divisive leader who mixed hard-line views on social issues with a tough-on-refugees commitment to border defense and a shrill, inflexible policy of deficit reduction. His term in office will be best remembered for repeating ad nauseam his signature pledges to “axe the tax,” which led to the 2014 repeal of a carbon tax introduced by the former Labor government; and “stop the boats,” in reference to the comparatively minuscule number of refugee arrivals on boats from southeast Asia.

Abbott was a highly effective opposition leader but he lost his way once handed the mantle of executive leadership. He alienated the electorate with needlessly aggressive spending cuts while bizarre social policies made unilaterally, without party consultation, pushed away his parliamentary colleagues. Turnbull has promised to be his predecessor’s opposite, pledging a style of leadership based around substance and a pragmatic centrism. “We need advocacy, not slogans,” he announced on the night of his election as Liberal Party leader. “We need to respect the intelligence of the Australian people.” In a world awash with juvenile sloganeering and easy policy fixes, Turnbull offers a radical return to thoughtfulness. The rise of Donald Trump, in particular, offers the slightly alarming prospect of the world’s most powerful nation being run by a man with all the discipline and emotional self-restraint of a child who’s just been robbed of his spade in the sandbox. Australia, meanwhile, has handed the reins of power to an adult. Depending on how he fares, Turnbull may offer hope to those yearning for a global return to political maturity.

How he will fare, of course, is the key imponderable. Turnbull, comfortably the wealthiest member of the Australian parliament with a personal fortune estimated to be in excess of $150 million, has long been spoken of as a future prime minister. Brash, self-confident, and convinced of the shattering superiority of his own intellect and ability, he rose from poverty to enjoy a glittering career through the 1980s and 1990s as a barrister, investment banker and tech investor before turning his hand to politics. It says everything about his centrism that both major parties — Labor and the more conservative Liberals — courted him before he entered parliament. On social issues he is an avowed moderate, favoring same-sex marriage, which is specifically banned under Australian law. He is also a committed republican, arguing for end of Australia’s constitutional monarchy under the Queen of England.

As a boy, Turnbull attended Sydney Grammar School, an independent private school that is one of the oldest, most academically elite educational institutions in Australia. On Sydney Grammar’s website, the current headmaster states the school’s philosophy as follows: “We reject attitudes that belittle the importance of being human.” Turnbull seems to promise a style of government that follows a similar script. These socially liberal positions place him at odds with many of his more straightforwardly conservative party colleagues, however. The Liberal Party, despite the implications of its name and a history of social progressiveness, has in recent years drifted sharply to the right. How well Turnbull manages these tensions will be central to determining the success of his prime ministership; already some more conservative parliamentary Liberals have aired the possibility of a party split if the government turns too far to the left.

Tech investors in Australia like to say Turnbull “gets it,” the “it” in question being technology, business and the risks that accompany investment. His biggest successes came in the 1990s: his timely, if not also lucky, investment of $450,000 in internet business OzEmail blossomed into a $59.3 million exit, while the sale of his own boutique investment firm to Goldman Sachs in 1997 earned him, among other things, a partnership at the storied New York bank. Turnbull stayed at Goldman through its 1999 IPO; his 0.2 percent ownership stake netted him around $33 million. In his first words as leader on Monday, Turnbull painted a vision of the country’s future that could have been ripped from the pitchbook of a Silicon Valley kingmaker: “The Australia of the future has to be a nation that is agile; that is innovative; that is creative.” This was stirring stuff, and it predictably got the business community purring.

Early polls favor a return to power for the Liberal Party in 2016, which should give market watchers the chance to monitor the more interesting narrative of how a Turnbull government will execute its stated intention to wean Australia off commodities and turn it into an innovation-focused economy.

Australia, with its heavy dependence on selling oil and gas, coal and iron ore to China, has been hit harder than most advanced economies by the slowdown of the mainland economy. Australia’s GDP expanded 0.2 percent in the second quarter, significantly undershooting expectations. If there ever were a time more ripe for a risk taker to be in charge of the country’s economic direction, this surely is it. Business leaders are hopeful that Turnbull will pursue reform of taxation and labor laws, areas in which he has previously voiced strong views while having little impact on the course of eventual policy. And while his plan to turn Australia into Innovation Nation sounds promising, to date he’s offered little substance to back it up. How does a nation of 23 million with a comparatively small consumer base, an equities market focused around a couple of big mining names and relatively undeveloped startup financing structures turn itself into the South Pacific’s Silicon Valley? Turnbull himself seems unperturbed by the choppy waters ahead. In an interview last month with business paper The Australian Financial Review in which he discussed his own investment portfolio, Turnbull said, “Volatility presents opportunities for the more agile. Investors are looking for growth, they are looking for higher returns and asset values, but all of that comes with enhanced risk.”

For all its recent China-led economic travails, Australia boasts fundamentals most developed nations would kill for. According to the International Monetary Fund, net public debt reached just 17 percent of GDP in 2014, versus 80 percent for the U.S. and 127 percent for Japan. Turnbull will have the fiscal space to implement his vision for the country in a relatively unpressured fashion — a luxury the governments of many advanced economies, skirting close to secular stagnation, do not enjoy. With Turnbull’s ascension to the prime ministership, Australia suddenly figures as the laboratory for a style of government where thinking promises to trump shouting. It should make for fascinating viewing.

Follow Aaron Timms on Twitter at @aarontimms.

Get more on macro.

Related Content