The S&P 500/ASX 200 index barely reacted to the election’s results

The results of the Australian election are being closely watched not just by politicians, but also by investors and financial analysts, since they will pave the way for future investment decisions and fiscal policy.

According to data from Bloomberg, history shows that the S&P/ASX 200 index increased in value in the 3 months after the election regardless of the winning party 8 out of the last 10 votes.

Today, Australian shares showed a soft start to Monday’s session, while the Australian Dollar slightly rallied against the American Dollar by .82% to $.7090 at the time of writing. Over the last 5 days, the Australian index is up 0.79%. Compared to last year to date, the S&P/ASX 200 is down 3.97%.

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Volatility is expected to remain high across all markets, as the S&P 500 technically entered a bear market last week by losing 20% from its latest record high, as worries about inflation and its consequences on company earnings and global growth prospects intensified and weighed on investor sentiment.

Australian election rundown 2022

With the polls closing on Saturday evening 21 st May, the Australian Federal Election has largely been decided, and as opinion polling predicted in the past few weeks, results have fallen in favour of the Australian Labor Party, and in a fairly devastating fashion.

After a long stretch of nearly 10 years of conservative leadership, Anthony Albanese has managed to persuade voters with a promise of “a better future” and claims the role of 31 st Prime Minister, in only the fourth Labor victory since WW11.

To form a government with a clear majority in Australia, either party needs to secure 76 of the 151 seats in the House of Representatives.

Labor thus far will be able to form a government, with 73 seats called in their favour so far, but is still waiting on more results to see if the party can govern in the majority, or have to rely on the backing of minor parties and independents. Some tight races are still being confirmed as local and international postal votes continue to be counted.

The Liberal Coalition in contrast has only currently secured 51 seats. A far cry from the 76 they held after the 2019 Election. 14 seats are still awaiting results and 13 have been confirmed for Independent candidates and the Minor parties (Katter, Greens and Centre Alliance).

The two major parties seem to have failed to motivate much of a groundswell of enthusiasm among voters during the campaign, as the Independents and Minor parties have diverted a decent portion of their previous support. With both the Coalition and Labor parties showing a record-low primary vote (this is the voter’s first preference), the Labor party actually recorded a 2% reduction in this number compared to 2019, with just over 32% of the vote so far.

The last weeks of the campaign eventually became something of a personality contest that highlighted to voters a sort of blustery and combative style of governance from Scott Morrison, where he openly admitted he could be “a bit of a bulldozer when it comes to issues,” whereas Mr Albanese managed to convince voters that he would be more collaborative and share the decision-making process as a ‘voice of the people’ from humble beginnings.

A career politician, Mr Albanese joined the Labor party as a teenager. He was elected to Parliament back in 1996. When Kevin Rudd won the election in 2007, he became the Minister for Infrastructure and through the turbulence of the Labor party’s next few years, he eventually became deputy Prime Minister for all of two months before Labor was defeated in the 2013 election. In 2019, after the Coalition surprisingly took power, Albanese became leader of the Labor party unopposed, becoming leader of the Opposition.

Mr Albanese has set his sights on raising the minimum wage to track inflation (5.1% in March 2022 according to the RBA), whilst also promising to fund what he described as the “caring economy,” such as child care, disability support, nursing homes, and general health care.

During the campaign, the Labor party also pledged to almost double the rate of carbon emissions cuts in line with other developed nations, with Albanese saying he wished to “seize the chance to transform our country into a renewable energy superpower.” This plan will include investment in metals produced using renewable energy or ‘green metal production.’

Other climate measures in the wake of recent flooding, drought, and bushfire disasters in the eastern states include subsidizing electric cars, upgrading the electricity grid to allow it to handle more renewable energy, and installing community batteries and solar banks around the country.

Given Labor’s lack of majority so far, Australian shares look poised for an uneasy start to the week. AMP’s chief economist Shane Oliver commented on the situation, saying “The main risk for markets will come if Labor has to rely on the Greens to form Government and they push Labor down a far less business-friendly path than its election platform suggests.”

“However, there will now be plenty of independents in parliament whose policies on climate integrity and health align more closely with Labor and for whom Labor should be able to gain support from.” Dr Oliver said.