One week out from the polls, with two major parties peddling two very different agendas that can have a profound effect on the Australian markets.
Share market
While the short-term volatility being caused by different political ideology could dampen growth, AMP believes that in the long term, it is unlikely to lead any major disruptions to the Australian economy.
AMP’s chief economist, Shane Oliver, believes that overall the election won’t have a huge swing on the markets, given the extremes of policies are not matched to those overseas.
“Historically, if you look at election campaigns, there is a tendency for the sharemarket to track sideways due to the uncertainty, and once the election is out of the way, you tend to see a bit of a rally.
“That’s not always been the case, and it has not always gone the way you’d expect. This time around, it has been a little bit different, with the Australian sharemarket pushing higher on the back of global developments,” Mr Oliver said.
The Aussie dollar
While investors’ share portfolio continues to rise, the Australian dollar has fallen throughout the campaign.
Mr Oliver believes this fall is also due to global developments and uncertainty around the Australian cash rate.
“Likewise, for the Aussie dollar, it has actually weakened through the election campaign again mainly on the back of global developments also interest rates in Australia,” Mr Oliver said.
The long game
The main difference depends on who wins next week’s federal election.
Mr Oliver believes if the Coalition wins, it will be back to business as usual, with the economy continuing on its previous course before the election was called.
If Labor wins, Mr Oliver believes it will all depend on what changes are made and how they spend new monies.
“If Labor won, I think you’ll see a bit of uncertainty particularly around taxation because Labor has policies to increase the top margin tax rate. They want to wind back capital gains, negative gearing and remove franking credits and crack down a bit on income paid by trusts and some changes around superannuation,” Mr Oliver said.
At the end of the day, it comes down to how Labor spends that money. If they spend it wisely, it could have a positive impact. There’s also a tendency for Labor to act quickly during a crisis. We saw that at the time of the GFC and through the 1980s,” Mr Oliver said.
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