Uncertainty Until Election

Talk of a double dissolution, race-based election, GST, dissatisfied electorate and possible hung parliament have been right across the media of late, and regardless of the pros and cons of the various issues, they point to a uncertain political future. This in turn leads to both domestic and international investors to be a bit more cautious when making an investment decision.

Throughout the course of its term in office, the Howard government has been following a policy of fiscal responsibility, and this was highlighted most obviously by the recent budget surplus. This is exactly what the markets have been asking for, and was received as such.

However, with the end result of the Queensland election appearing to go to Labor, as a result of One Nation eroding the conservative vote, markets while be keeping a careful eye on Australia on the next few months. Labor victories are traditionally read by the market as a signal that the budget will return to deficit, and until the issue is resolved at the next election, the market will be somewhat wary of an uncertain future.