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Citizenship fiasco threatens economic confidence in Australia

[SYDNEY] Political turmoil in Australia risks undermining fragile economic confidence as the loss of another lawmaker in the dual-citizenship fiasco left Prime Minister Malcolm Turnbull leading a minority government.

John Alexander, 66, became the second government member in the lower house to resign, when he acknowledged on Saturday he likely inherited British citizenship through his father. While the government will survive with the support of independent lawmakers as Mr Alexander and former deputy prime minister Barnaby Joyce re-contest their seats, the saga is a major distraction and threatens to stall Mr Turnbull's legislative agenda.

"As the Australian economy balances the risks of a housing correction, record household debt and persistently low growth, the last thing we need is a crisis of political confidence that undermines economic confidence," said Andrew Charlton, director of consultancy AlphaBeta in Sydney.

"We don't have the fiscal or monetary policy firepower to deal with a negative shock."

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Australia's Parliament has been gripped by turmoil since two Greens senators in July discovered they held dual citizenship, in contravention of the constitution, and resigned. The fiasco engulfed the government last month when Mr Joyce, who inherited his New Zealand citizenship from his father, and four other lawmakers were told by the High Court they were ineligible to sit in Parliament. 

That ruling cost Mr Turnbull his one-seat majority, and with Mr Alexander's resignation he is now in an even more tenuous position in Parliament. Mr Joyce, who has since renounced his New Zealand citizenship, is seeking to regain his seat in a special election on Dec 2, which he's expected to win. Mr Alexander also stands a good chance of reclaiming his seat on Dec 16.

Nevertheless, the issue appears set to drag on into 2018 amid questions about the origins of several other lawmakers - distracting the government and making it harder to pass legislation, including company tax cuts. It risks tipping Australia into further political chaos after a decade in which no prime minister has served a full three-year term due to infighting and leadership challenges.

The turmoil is helping to turn voters off the government, with Labor increasing its lead over the coalition by two percentage points, 55 per cent to 45 per cent, according to a Newspoll published by the Australian newspaper on Monday. Mr Turnbull's handling of the crisis is also under the spotlight, with his standing as preferred prime minister falling five percentage points to 36 per cent - the lowest level since he claimed a razor-thin election victory in July 2016.

The ruling Liberal Party's leader in the Senate, Stephen Parry, quit Parliament on Nov 1 after it was confirmed he was a British citizen. Two independent senators, Rebekha Sharkie and Jacqui Lambie, have also said that they're looking into whether they could be dual citizens.

Adding to the sense of chaos, a senator on Monday quit his party only hours after being sworn in. Fraser Anning resigned from anti-Muslim immigration party One Nation to become an independent, leaving leader Pauline Hanson with three upper house seats, down from four.

"The ever deepening Australian citizenship crisis and associated rise in political uncertainty risks impacting Australia's share market and the Australian dollar," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. "I had hoped the High Court decision was the end of it, but that's clearly not so."

Australia's economy is struggling to gain traction as record household debt and record-low wage growth discourage spending and hurt consumer confidence. That's left retailers struggling, particularly as they confront foreign competitors that are driving down prices and leaving the economy with weak inflation. While hiring has been strong and unemployment has fallen, a lot of the jobs are in lower-paid sectors.

The Liberals and the main opposition Labor party on Monday agreed to require lawmakers to publicly disclose their citizenship history and whether they believe they may be dual nationals by Dec 1. Those under a cloud would then be referred to the High Court.

Labor's manager of business in the lower house, Tony Burke, took aim on Sunday at Turnbull's failure to deal with the ever-expanding crisis.

"This is a prime minister with no authority, it's a government with no majority," Mr Burke said.