What will the Labor win mean for markets?

Labor’s election victory marks the end of the Coalition’s almost decade long reign. This election has seen several successful ‘teal’ Independents, including Monique Ryan, who ran against the incumbent Treasurer, Josh Frydenberg.

With such closely aligned policies between the major parties, the main risk for markets will come if Labor needs to rely on the Greens to form government, as compromises could push Labor down a far less business-friendly path than its election platform suggested.

Unlike the election platform of three years ago, the primary policy differences this election were negligible, with Labor opting for a more moderate approach. Labor’s election campaign focused largely on repairing the budget through economic growth, with priority areas of energy, skills, the digital economy, childcare, and manufacturing. A platform that except for climate policies, had a significant overlap with the Coalition.

Labor’s renewables pledge

In his budget reply in March, Australia’s new PM Anthony Albanese promised to act on climate change and “seize the chance to transform our country into a renewable energy superpower”. Labor’s Powering Australia plan, unveiled late last year, aims to achieve an economy-wide emissions cut of 43 per cent by 2030, and net zero emissions by 2050.

Mr Albanese also spoke about revitalising Australian manufacturing and powering that manufacturing with Australian made renewable energy. “Exporting resources will always be important to Australia’s economy. But we should also use our resources – like our minerals and rare earths – to make products like batteries here, instead of just shipping them offshore and importing the finished goods.”

What about the markets? 

While post-election market and currency jitters have traditionally been slightly more negative following a Labor win, ultimately economic and interest rate cycles have a more dominant impact on investment markets rather than specific policies under each government. This is because political parties are usually forced to adopt sensible policies if they wish to ensure rising living standards. Arguably there has also been broad consensus in recent decades regarding key macro-economic fundamentals, being low inflation and free markets.

Regardless of the election outcome, the bigger question will be being able to govern effectively in a world of higher inflation and interest rates.

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