Earlier in the year, polls hinted at a potential upset for Labor, but as global dynamics shifted in recent months, the party secured a resounding victory, capturing more than 85 seats, well above the 76-seat majority threshold, according to ABC projections.
This marks the first time in 21 years that a sitting Labor Prime Minister has won a second consecutive term.
The loss was particularly painful for Peter Dutton, who was ousted from his seat of Dickson after 24 years in Parliament, as voters across the country swung decisively towards Labor.
The consensus is that Donald Trump’s first 100 days in office helped shift global sentiment towards stability, first in Canada, and now with Anthony Albanese’s victory in Australia.
Markets had largely priced in a Labor win, with opinion polls tightening in the final weeks.
Reflecting on the result, AMP chief economist Shane Oliver highlighted that Labor’s ability to govern without relying on the Greens or minor parties provides investors with a reassuring sense of continuity.
“As Labor’s return to government was flagged by opinion polls it won’t come as a big surprise for most investors and, as it won’t be needing support from the Greens as some had feared could have led to a less business friendly outcome, its return likely just means more of the same and so is unlikely to have much impact on the share market or the $A,” Oliver said in a market note.
He also noted that, with the budget trajectory largely unchanged from the March budget, there are no significant implications for the Reserve Bank. However, he cautioned that the extra spending announced since January means interest rates will likely be higher than otherwise expected.
Labor’s re-election signals policy continuity, including a 5 per cent deposit scheme, the Help to Buy program, and a $10 billion fund to build 100,000 homes. Legislated tax cuts and a $1,000 annual deduction remain, along with energy rebates, and a renewables target of 82 per cent by 2030.
“Most of Labor’s policy measures were announced prior to or in the March budget which saw a $35 billion fiscal easing over five years and it claims that the measures it announced after the budget will be covered by further savings from more cuts to consultants and increased student visa fees, with the budget being $1 billion better off over the next four years,” Oliver said.
“So basically, the fiscal situation remains as outlined in the budget.”
Reflecting on S&P’s warning that Australia could face a downgrade from its AAA credit rating if election promises result in larger structural deficits and debt, Oliver downplayed the risk, stating that the chances of this occurring are low, as deficit and debt projections align closely with those in the March budget.
Oliver, however, expressed concern over the lack of focus on boosting productivity or addressing long-term budget repair in Labor’s pre-election campaign.
“While the budget projections may not be that different to what was in the March budget, that budget had already seen an extra $35 billion in net spending promises compared to the December budget update. And, S&P is right to be concerned about the increasing use of ‘off budget’ funds (covering the NBN, Snowy Hydro, the Housing Australia Fund, etc) which don’t add to the underlying cash deficit but do add to debt,” the chief economist said.
“These funds are weakening budget discipline and are contrary to the Charter of Budget Honesty, which needs to be reviewed.”
Like Oliver, NAB’s chief economist Sally Auld sees Labor’s victory as providing financial markets with greater certainty and predictability.
In her market note, Auld said: “The government is likely to take the election result as a strong mandate and we would expect that the government’s share of economic activity in Australia will likely increase over the next three years.
“However, we expect the government’s agenda to proceed largely as it has in the first term; that is, relatively cautiously and adhering to a ‘no surprises’ policy.”
The chief economist expects fiscal spending to stay elevated, with the RBA likely adopting the government’s spending plans as the basis for future fiscal policy.
“All else equal, fiscal policy will continue to be supportive for economic growth,” Auld said.
In its analysis of Labor’s election win, Oxford Economics underlined it too wants to see Labor shift towards more fundamental economic reforms.
“The economic agenda through the first term of the Albanese government was relatively near-sighted, with a focus on bringing inflation down. With a stronger mandate from voters, hopefully the focus will now shift to the structural headwinds faced by the economy,” it said.
“While it was a non-issue in the election campaign, productivity growth is at the top of the list; Treasurer Jim Chalmers remarked yesterday that his ‘second term will be primarily about productivity without forgetting inflation’,” Oxford added.
Time for tax reform
In response to Labor’s re-election, Chartered Accountants ANZ (CA ANZ) called on the government to seize its second term as an opportunity for long-awaited tax reform.
CA ANZ CEO Ainslie van Onselen commended Prime Minister Anthony Albanese, emphasising the need for comprehensive tax reform: “We are especially keen for the government to review our tax system and implement a long-term tax reform roadmap.
“We cannot continue to over-rely on personal income tax and, following the decisive victory, Labor has an opportunity to make a real difference beyond the election cycle.”
The body’s chief economist Richard Holden warned of the fiscal challenges ahead, adding that the task of turning around 10 straight projected deficits will require “hard choices”.
“Labor’s landslide victory may give the government the confidence to address Australia’s fiscal challenges. But it won’t have $400 billion in unexpected revenues to help it this term,” Holden said.
Like CPA, CEDA too expects Labor to seize the opportunity to revitalise Australia’s economic agenda.
In a statement on Monday, CEDA chief executive Melinda Cilento said Labor’s historic election win and the Prime Minister’s inclusive rhetoric have opened a genuine six-year window for ambitious reform.
“I am excited by the idea that we now have a serious window of opportunity for reform before us,” Cilento said.
