There are parallels between Australia’s hung parliament and the same result in Britain three months ago: a big swing against the governing left-leaning Labor party, a prime minister fighting her (his) first election and a currency that dropped after an inconclusive vote. But the comparisons end there. Whereas sterling took more than two months to recover from its hung-parliament induced slump, the Australian dollar’s rebound took less than six hours. Ditto government bonds.
Pessimistic traders quickly realised that, for investors, there is little difference between Australia’s two political parties. Sure, shareholders in resource stocks will prefer the opposition rightwing coalition to even a weakened version of Labor’s mining supertax. Other policy disputes are of limited investment significance, for example the gap between Labor’s $43bn fast broadband plan and the coalition’s slower, cheaper alternative.
In any case, the next government will not face the British challenge of cutting the government down to fit the economy. The Aussie fiscal deficit is only 2.9 per cent of gross domestic product and net debt is expected to peak at barely 6 per cent of GDP next year.