Hung parliament could bring risk for Aussie markets

Barclays research has highlighted the possibility that neither of the two major parties will be able to secure 76 seats needed to form a government, leading to a hung parliament and subsequent market risk.

Opinion polls since last year had shown a lead for Labor with the most recent Roy Morgan poll showing that 54.5% respondents favoured a Labor government, on a two-party preferred basis.

The research said this election might have a similar result as the 2010 election, when a minority Labor government sought support from Greens and independents.

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“There is a strong push from independent candidates in several seats this time, mostly held by Liberals, hoping to benefit from dissatisfaction with the government,” the report said.

It said a risk for markets this year would emerge from a hung parliament or a minority government formed with the support of Greens or independents.

“A hung parliament could impede the passage of legislation or lead to the government being forced to pass laws that are less market friendly, especially if support from the Greens is required to form the government.

“For example, the Labor government of Prime Minister Julia Gillard with the support of Greens implemented a carbon tax in 2012. Labor, after switching leaders back to Kevin Rudd, changed its policy on the deeply unpopular carbon tax in the lead up to the 2013 election, which was won by the Coalition.”

The report also stated there was little difference in the policy agendas of the two parties in terms of economic impact.

“For the current election, there is little distance between the two major parties on jobs, childcare, aged care. While differences do exist, in terms of some taxes, timing of net-zero carbon emissions, the main aspects are similar. Fewer policy differences suggest less economic and market impact.”

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