With Labor expected to form a majority government following Saturday’s election results, many Australians are wondering what the change in government could mean for investment markets. We asked Sarah Gonzales, Apt’s Chief Investment Officer, to share her thoughts.
Sarah Gonzales: The change in government is not expected to have a significant or long-term impact on equity markets. Election results can impact markets in the short term; however, company earnings and the strength of the economy are the key drivers of long-term performance.
There were no significant policy differences between the two major parties going into the election, and neither party had specific policies to address rising inflation, rising interest rates or slowing economic growth.
Some key areas to watch include:
Climate and Environment
Labor went into the election with more aggressive climate targets and greater support for alternative energy sources, including providing low-cost financing options to upgrade the electricity grid, removing taxes for low-emission vehicles, building more electric vehicle (EV) charging stations and increasing investment in hydrogen.
This will benefit companies involved in EV production as it will make it cheaper and more convenient to purchase these vehicles. Companies undertaking hydrogen feasibility studies may also benefit.
While Labor will not stop the opening of new coal mines, The Greens and select Independents are demanding a stop to new coal mines and gas exploration projects. If this comes to pass, it will reduce Australia’s export earnings and impact the Federal budget over the long term.
Infrastructure
Labor is expected to proceed with most of The Coalition’s infrastructure projects and has promised to inject $500 million into high-speed rail. As a result, increased infrastructure spending will continue to support economic growth.
Tax Changes
A reduction in personal income taxes will likely see a positive flow through to household income. However, the Labor party is expected to focus on higher taxes for multinational companies.
Property
Labor’s ‘Help to Buy’ scheme for first home buyers will provide a level of support to property prices. However, it may not be sufficient to stop declining house prices in a rising interest rate environment.
Healthcare
Labor has promised to increase funding and support for childcare and aged care, and this higher targeted spending will benefit companies in these sectors. In fact, the market has already responded to anticipated gains; however, this may be a short-term reaction.
Government Debt
Government debt is expected to rise and the budget deficit to continue into the foreseeable future, with Labor having no significant policies to address spending. This limits the ability of the Australian Government to utilise fiscal policies in response to any future economic shocks.
General Advice warning
The information provided in this blog does not constitute financial product advice or a recommendation to purchase a particular product. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners Pty Ltd is not a registered Tax Agent. You should consider your individual situation and seek tax advice from a registered tax agent before making any decision based on the content of this document. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.
