Around this time last year, the Coalition government was trying to manage the nation’s economy despite political shakeups, we were all watching a country on the verge of leaving the European Union, and some businesses were in the spotlight for behaving badly. Anyone getting déjà vu?
As we look back at what made news in business and economics in 2016, there is certainly a little bit of history repeating, in addition to some being made.
Scandals, insolvency and bad behaving banks
Australia’s big four banks are some of the biggest businesses in the country and were also involved in the biggest scandals of the year. This all kicked off with an exposure of problems in the Commonwealth Bank’s insurance arm - CommInsure.
Then ANZ, the National Australia Bank and Westpac were all charged with rigging the bank bill swap rate worth some A$1.7 trillion.
By the time the Australian Securities and Investments Commission (ASIC) released a report saying the big banks were also charging customers for financial advice never given, politicians were baying for blood.
Debate raged as to whether a Royal Commission was needed to bring the banks into line or not? The government decided to make the heads of the big four banks answer questions from a senate committee instead.
This is where they were asked just how much money the banks were making on delaying interest rate cuts.
The process of compensating 7Eleven workers for underpayments exposed in 2015 was also dragging out, creating more controversy.
Questioning China’s influence in Australia
Chinese investors were getting mixed messages from the Australian government in 2016.
A Chinese consortium bid for Kidman & Co, the largest private land holding in Australia, was initially knocked back by the treasurer. But later in the year a joint venture between Outback Beef – led by Gina Rinehart’s Hancock with the Chinese-owned Shanghai CRED, passed the Foreign Investment Review Board hurdle.
Another Chinese bid for a piece of NSW electricity infrastructure Ausgrid wasn’t so lucky.
It’s not just China’s influence through investments that’s turning heads, but most aspects of the country’s rapid development from its property market to its currency. No doubt China will also be a focus of 2017.
The closure of the Ford plants and Arrium’s Whyalla steelworks seemed like a death knell for manufacturing. It raised those all too familiar fears for workers who will now have to retrain and find new jobs.
Dairy farmers were also pondering whether to stay in the business this year, as processors Murray Goulburn and Fonterra passed on the cost of falling milk prices, driving some to the wall. All this turmoil is exposing industries under pressure from external market changes, the question now is whether these industries will evolve or die.
Global waves beyond Australia’s shores
Millions of leaked documents, dubbed the Panama Papers, from tax haven law firm Mossack Fonseca exposed the legal but dubious tax dealings of well-known businesses and individuals. But as far as tax avoidance experts were concerned the information only revealed practises that have been allowed to continue for too long.
Later in the year a vote loomed to decide whether the United Kingdom should leave the European Union or to Brexit. The ensuing debate pitted populism against elite interests and signalled a strong backlash against globalisation.
It seems this dissatisfaction with the economic status quo was catching. A “YUGE” US Presidential Election result saw wealthy businessman Donald Trump become the leader of the world’s biggest economy.
Just in time to round out a year of turmoil in the international economy, Italy voted no to political and economic reforms leaving the door open to even more uncertainty in Europe.
Backpackers, 457 visa and migrant workers
These international events might have left some people googling where else they could live or work, but it seems Australia might not be a first choice after all.
So the political pressure was turned up when the government decided to tax those with a working holiday visa 32.5% in every dollar earned - the “backpacker tax”. After a lot of flip-flopping between suggested tax rates and horsetrading in the ensuing debate, the government finally did a deal with the Greens for a 15% tax.
Australian companies were facing a lot of disruption at the start of the year from the usual culprits: changing economic conditions in China and in commodity prices, innovative digital models from competitors and a slowdown in mining. This showed up both in the mid-year and end of year results.
Budget, election, budget update
The position of the 2016 Federal Budget didn’t budge much, despite the promise of jobs and growths from a company tax cut (still yet to pass as 2016 came to close). In fact the stalemate over the reinstatement of the Australian Building and Construction Commission (ABCC) forced Australians back to the polls once again.
Even though the Coalition won the election, and managed to pass some legislation, including setting up the ABCC, our economists weren’t impressed. With wage growth at a 20 year low and plenty of global uncertainty on the horizon, there are some bad economic signals for 2017.
But despite all this tension, it should be calm around the Christmas dinner table. As long as no one mentions smashed avocado…