The decisions of governments can have a dramatic impact on the fortunes or otherwise of companies. Cannings Purple’s Investor Insight team explain.
More recently, the term ‘transactional’ keeps appearing in the context of conversations around politics. Gone is ‘society’, replaced instead by the notion of governments operating in a similar fashion to companies.
The week, we have seen discussions between Australian PM Malcolm Turnbull and new US President Donald Trump focused on the transaction of the asylum seeker swap negotiated with the Obama administration. In return for the US taking up to 1250 refugees, at some point the US will want something in return.
In Australia, the recent politicians’ entitlements saga that scuttled Health Minister Sussan Ley, highlighted the relationship between politics and business, and in the ALP’s case, the union movement. Glitzy trips across the country have been explained away as networking and relationship building with constituents. However, opinion polls indicate that voters see these types of deals as failing the pub test.
Even where there aren’t direct interactions, the decisions of governments can have a dramatic impact on the fortunes or otherwise of companies. The recent migration ban in the US has the potential to be a positive for Australian educators and tourism as people look at different options. The decision to build submarines in Port Adelaide is likely to be hugely positive for local businesses.
Governments need businesses to thrive in order to support employment and tax revenue. Businesses need governments to function efficiently so that taxes are competitive and policies are stable and predictable. There will always be a delicate balance in the relationship between the two that needs to be kept in check.