Newly elected protectionist senators could harm Australia's trade ties

SYDNEY (Reuters) - Four weeks after Australians went to the polls in a tightly contested election, vote counting is almost finished and has left the government with a razor-thin majority and a Senate brimming with economic protectionists who could hinder trade ties with the likes of China, Indonesia and the United States.

Australia's Prime Minister Malcolm Turnbull (C) looks across at the Australian Governor General Peter Cosgrove as they laugh with members of the ministry as they pose for an official photograph after a swearing in ceremony for the federal government in Canberra, Australia, July 19, 2016. REUTERS/David Gray/File Photo

“Pro-protectionist forces are a concern because ultimately they will degrade Australian living standards and harm Australian jobs,” Australian Trade Minister Steve Ciobo told Reuters.

The new-look parliament is scheduled to sit August 30.

While the last few votes are still being counted after the July 2 election, it is clear that independent or minor party Senators will control the balance of power in the upper house.

This means the ruling Liberal-National coalition, which has a slim, one-seat majority in the lower house, will need either their political opponents or eight to 10 independents or minor party Senators to pass laws in the upper house.

Far-right One Nation, which has won at least two Senate seats, has already demanded that Treasurer Scott Morrison block the sales of electricity network Ausgrid and healthcare firm GenisisCare Ltd to Chinese interests.

“Why would Communist China want to own our electricity...I know how Australians feel about selling our assets, we’ve had enough. We do not want our assets sold,” said One Nation leader Pauline Hanson in a video posted to her Facebook page.

Such sentiment also threatens to scupper the sale of Australia’s largest farmland holding S.Kidman & Co, about the same size as Ireland, to a China-led consortium, another deal which requires the treasurer’s approval.

Australia has already rejected a A$371 million ($282 million) bid for Kidman by Hunan Dakang Pasture Farming Co Ltd 002505.SZ (Dakang), which would have seen a minority 20 percent Australian interest, ruling it was not in the national interest. The consortium has put a fresh bid on ice, concerned it could be derailed by protectionist Senators.

Prime Minister Malcolm Turnbull had called the election to clear away an obstructive Senate, but the move backfired at the ballot box, so much so that political scientist Haydon Manning says the government will now struggle to legislate.

“I can’t expect anything but a government profoundly frustrated,” said Manning, an associate professor at Flinders University in Adelaide. “Free trade is going to be tricky...I don’t see much headway there.”

Trade minister Ciobo, in Jakarta this week to seek a Free Trade Agreement (FTA) with Indonesia, said in a statement that “negotiations are making good progress”. But an Indonesian FTA and the Trans-Pacific Partnership, due to come before parliament in the coming sitting, will face headwinds in the Senate.

The latest Senate tally on Tuesday showed Turnbull’s coalition winning at least 27 seats, Labor 25, Greens 8 and the independents and minor parties winning a total of 8 seats, with eight seats still in doubt.

In the lower house, the opposition Labor party on Tuesday won the final seat, by only 37 votes, leaving the government with 76 seats, Labor 69 and a further five seats split between independents and minor parties.

Reporting by Tom Westbrook; Editing by Michael Perry