With Liberals continuing to be in power, What does it mean for the Australian Stock Market?

Team Veye | 20-May-2019 Australian Stock Market

For more than 12 months, opinion polls have predicted a Labor victory and even senior Liberal strategists were not brave enough to predict a Coalition victory. Bookmakers had already paid out millions of dollars of money, confident that a Labor government would be elected comfortably. But Scott Morrison has defied years of opinion polls and public expectation to lead the Coalition to a shocking election victory. Although the counting is still on, but as results indicate, the opposition leader Bill Shorten has already announced that he will step down from the Labor Leadership. One aspect which was still not clear until yesterday morning was whether the Coalition will govern in majority or need to rely on a partnership of independent MPs in a minority government. 

So, what does this mean for the overall market?

With the uncertainty coming to an end and the Liberal’s re-elected, it’s likely that the housing markets would pick up by the end of the year. The Liberal win is expected to return confidence to property markets. 

The hottest topic of discussion during the election season had certainly been scrapping of franking credits i.e. taxpayers will no longer be able to obtain cash refunds for excess credits if they exceed tax liabilities (currently equating to a full refund for investors with no tax liability) but that will no longer be an area of concern for the investors as you’ll get to keep your excess franking credit cash refund.

The stock market and businesses were also experiencing uncertainty because of the anticipated change in leadership following the elections. But with the change no longer taking effect our analysts reckon that the stock market is going to get the much needed boost and may start heading north unless there are some global issues like US-China Trade War that may de-stabilize the growth trajectory. 

In parallel, the budget that was released in early April which is now going to get a push included Liberal’s plan to cut personal income taxes for all individuals earning up to $126,000 each year worth up to $1,080 for individuals or $2,160 per year for dual-income households per year. This will increase the disposable household income which in turn would boost the economy through spending and investments and a chunk of that will also find way into the stock market which would strengthen it further.

So overall, the election results have brought in much needed relief to the prevailing uncertainty for the time being.


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