SYDNEY- Australian financial markets offered a muted reaction to a change of federal government on Monday with the outcome already priced in and no radical change in economic course expected.
The victory of the center-left Labor Party after nine years of rule by the Liberal National Coalition had been flagged by opinion polls for weeks. It also seemed likely Labor could hold majority control and thus avoid a hung parliament.
“A majority Government carries the advantage of more certainty around the policy formation process and the Government’s fiscal strategy more broadly,” said Gareth Aird, head of Australian economics at CBA.
“In our view there was little proposed by the incoming Government during the election campaign that at this stage requires us to revisit our economic forecasts,” he added.
In particular, he saw few implications for the independent Reserve Bank of Australia (RBA) which this month began its first tightening cycle in more than 11 years.
The market continues to wager on another quarter-point rate increase to 0.60 percent in June, and a string of moves to around 2.5 percent by year end.
The Australian dollar was 0.7 percent firmer at $0.7088, though that had more to do with an improvement in global risk appetite than the election.
The ASX 200 share index was a shade firmer, while debt markets were equally unfazed with 10-year bond futures up 3 ticks at 96.700.
“Our base case is that the election outcome will not have major near-term fiscal implications,” said Andrew Boak, an economist at Goldman Sachs.
“Our analysis suggests Australian elections tend to have a modest temporary negative impact on ‘soft data’ such as consumer/business confidence, and very little real impact on ‘hard data’ such as consumer spending or business investment.”
Boak noted the success of the Green Party and climate-focused independents could eventually push the Labor government towards more ambitious targets on emission reductions.
