· The ALP has won government and there will be changes.
· The Liberals have only themselves to blame.
· The Economy cannot find its way froward effectively without urgent and dramatic review of the RBA.
The Liberals have only themselves to blame in Australia. The only question is are they capable of figuring that out?
Congratulations to Anthony Albanese, being sworn in as I write this article, and to the ALP. Also to the Nationals who did well, the Greens picking up three seats in Queensland and all the independents who have done so well.
There were a lot of factors at play, but for me, the key points were that Bill Shorten lost the previous election, it was not so much the great Morrison victory the Coalition though it was.
And hence, the huge dis-satisfaction with Scott Morrison in the electorate, personally and on leadership and policy issues, that the Liberal Party did not pick up until it was too late. The Australian public simply decided that if the party will not get rid of him, they will.
The other massive factor was the increasing awareness of Australia’s climate responsibilities.
What now and what does this mean for markets?
Certainly, renewable energy companies should do well out of this change of government. There could also be a slow re-building of our relationship with China to some extent. Though this will be a difficult journey and will remain respectful at the same time of regional security issues.
There could also be a new financial industry of efficiently switching superannuation funds into property? We will see how this policy idea unfolds. For the Australian share market there will be a moment of caution.
Given the backdrop of the US stock market already having fallen 20% this year, and the change to a bigger regulation and spending government here, some caution on stock investment is appropriate.
It may in fact take a fresh impetus for many investors and funds to overcome this initial hesitation. None would seem to be immediately on the horizon. Though some day traders may see this as a 'sell the rumour, buy the fact' event. Any such immediate rally however, is likely to be short lived.
My central economic theme; is that the Australian economy is only just beginning to tip over into a far more challenging period, one made up of stimulus hangover effect, rising inflation, and the economic stewardship of one of the world’s least capable central banks.
In fact, what was lacking in the Federal election debate was perhaps the most serious economic challenge confronting us. The Reserve Bank of Australia having created artificially high property prices which ALP policy seeks to redress by allowing superannuation to be allocated to the family home. However, this will only likely exacerbate the property bubble risk now confronting the nation.
What is attractive personally, is not always what is best for the nation as a whole.
Australia needs higher rate settings in a more thoughtful and fresh approach. Australia needs and deserves a better Reserve Bank.
The economy cannot find its way froward effectively without urgent and dramatic review of our central bank.
Clifford Bennett
ACY Securities Chief Economist. The view expressed within this document are solely that of Clifford Bennett’s and do not represent the views of ACY Securities.
All commentary is on the record and may be quoted without further permission required from ACY Securities or Clifford Bennett.
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