Will hung Govt lead to less market-friendly policies?

Less market-friendly policies put forward by independents could pose a headwind for markets if they are asked to help form a government.

The Federal election was due to take place on 21 May and the Labor party, led by Anthony Albanese, was currently ahead of the Coalition in most polls.

Roy Morgan showed Labor was polled at 53% compared to 47% for the Coalition as of 18 May.

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Given the lack of polarising candidates or policy this year, unlike in 2019, this meant there was less likely to be a shock result which diverted from the polls.

However, problems would occur if neither party secured enough seats to form a majority which would present market headwinds if they then required the support of an independent candidate.

Tony Sycamore, market analyst at City Index, said: “In return for their support, independents may insist on policies that are less market-friendly. Examples include the Green’s economic policies of a 6% wealth tax on billionaires, and a corporate super–profits tax of 40%. In this event, expect the AUD, USD and the ASX 200 to take a short-term hit when they re-open next Monday morning”.

Shane Oliver, chief economist at AMP Capital, echoed this sentiment: “Unlike in 2019, apart from climate change policies the economic policy platforms of the major parties are not that different, so it’s hard to see a significant impact on markets from a decisive change in government to Labor.

“The main risk would come if neither of the main parties get enough seats to govern on their own forcing reliance on independents which could force a new government down a less business-friendly path, such as the Greens demanding an ALP-led minority government implement their proposed super profits taxes.”


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