Saturday’s election was probably the worst outcome the investment markets could have had. Having delivered the first hung Parliament in Australia since 1940, it is now left to a handful of indpendents and one Green MP to decide who will form a government.
Already the Green’s MP has stated they will side with Labor; but the three Independents have suggested they will take their merry time in deciding who should form government. As any good politician will try to do, they will extract as much as they can for their electorate and given that they have got time up their sleeve, they will probably drag it along for as long as possible. Somebody better tell these Independents that the last government formed in Australia after a hung Parliament lasted just 12 months.
Just when investors needed a government’s long-term vision, a hung Parliament, for the investment markets, will only mean uncertainty – not only about who will form a government; but also worries about less decisive policy making and fears of less business friendly policies as a result of the increased power to the Greens.
In terms of the financial markets, we have seen throughout the election campaign both party’s having very different policies in certain areas. Investment areas that we believe will be significantly affect will be:-
- The telecommunications sector in particular the development of the National Broadband Network;
- The financial services sector with regulatory reform in the area of superannuation; and
- The resources sector through the proposed mining tax.
For the investment market to invest with confidence, we need the government of the day to be able to present and implement long term policies that can navigate around local and global issues. Some of these policies will be unpoular but hard decisions need to be made. However, minority governments will avoid negative publicity or public stoushes with powerful interests.
In a time where there is increasing global economic certainty, we need a government that is not afraid to lead. A hung Parliament will not provide this leadership quality. The next few months will be very interesting times for the financial markets. Hold onto your straps, we are in for a very bumpy ride.
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