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WEEKLY E-MAIL

WHAT A LABOR GOVERNMENT MEANS FOR INVESTORS

By Rebecca Lowe

Historically, Australian Federal election campaigns have typically seen the Australian share market trade sideways as it digests economic and policy uncertainty, followed by a rally once the election is over.

Source: FactSet, MWM Research, April 2022

However, given the lack of policies targeting long-term structural reforms, it is unlikely that a significant election-driven market rally will occur this time around.

Some of the key Labor government policies include:

  • Housing: A ‘Help to Buy’ national shared equity scheme in which a federal Labour government would help 10,000 low, and middle-income home buyers enter the housing market each year
  • Taxes: Labor will support the third stage of the legislated personal tax cuts but intends to crack down on “loopholes” to force multinationals to pay “their fair share of tax”
  • Wages: Encouraging the Fair Work Commission to raise the minimum wage by 5.1% in line with inflation
  • Aged Care: An extra $2.5 billion per annum in aged care funding
  • Healthcare: An extra $750 million on Medicare
  • Education: Creating 20,000 more university places and free TAFE places
  • Manufacturing: Support for domestic manufacturing with a $15 billion National Reconstruction Fund and Federal procurement programs
  • Child Care: Raising the childcare subsidy to 90% for the first child in care
  • Climate change: While the outgoing Liberal Government had a target to reduce greenhouse gas emissions by 26%-28% by 2030, the Labour government has a target of 43%

The new Government’s pre-election costings suggest extra spending of $18.9 billion over the next four years, offset by $11.5 billion in savings generated by taxes on multinationals, a crackdown on tax avoidance and a cut in public sector spending. This will add an extra $1.9 billion per annum to the Budget deficit.

We believe that the market reaction to the new Government will be minimal.

Ultimately bond yields, the Australian dollar and the Australian equity market are being impacted by global forces that the local election result is unlikely to change. Current equity market weakness is being driven by rising interest rates, declining liquidity and rising inflation fears.

Rebecca Lowe
Senior Para-Planner
Authorised Representative No. 453075

If you have any questions or comments, please email me at rebecca@gfmwealth.com.au

Disclaimer: This document is not an offer or invitation to any person to buy or sell any interest in or deposit funds with any institution.  The information here is of a generic nature, and does not take into account your investment objectives or financial needs.  No person should act upon this information without firstly seeking competent, professional advice specifically relating to their own particular situation.

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GFM Wealth Advisory