Unlike three years ago, the policy differences in this election have been labelled a “non-event”, suggesting minimal impact on investment markets if there is a change of government.
This time around, Labor has opted for a more moderate approach, throwing out Shorten’s left-wing reconstruction, which, according to AMP’s Shane Oliver, offered the starkest choice seen since the 1970s.
As such, with the exception of climate policies, Dr Oliver is fairly confident that while there may be a little more nervousness in investment markets about Labor, “it’s hard to see a big impact on markets if there is a change in government”.
“Like the Coalition, the ALP is largely seeking to repair the budget through economic growth rather than austerity and its priority areas of energy, skills, the digital economy, childcare and manufacturing have a significant overlap with the Coalition,” Dr Oliver explained.
“Once in government, political parties are usually forced to adopt sensible policies if they wish to ensure rising living standards and arguably there has been broad consensus in recent decades regarding key macro-economic fundamentals – eg, low inflation and free markets.
“So ultimately economic and interest rate cycles have a dominant impact on investment markets rather than specific policies under each government,” he continued.
In saying that, Dr Oliver did acknowledge some minor policy differences between the two rivals.
According to him, Labor is likely to be more interventionist in the economy. He also tipped that as PM, Albanese could allow the tax to GDP ratio to rise above the Coalition’s self-imposed 23.9 per cent limit.
But, while party platforms vary to only a small degree, Dr Oliver did pinpoint an election risk – a hung parliament.
“The main risk for investment markets may come if neither the Coalition or Labor win enough seats to govern, forcing a reliance on minor parties or 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) – although the Senate may act as a brake on this,” he said.
Either way, Dr Oliver believes the next government does face some big economic challenges, including curtailing the budget deficit, boosting productivity growth and improving housing affordability.
