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Danville

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How long will the uncertainty last? A couple of days at very best and more than a few weeks at worst. With over 80% of the votes counted, it looks as though either the Coalition will just manage to scrape the 76 seats required to hold a majority in the lower house or there will be a hung parliament. In the event of a hung parliament, it could take another couple of weeks for the main parties to strike a deal with the crossbenchers. The last time there was a hung parliament in 2010, it took Julia Gillard 17 days to form a ruling coalition. Finally, the results of the Senate election always take around three to four weeks, and the early indications are that there won't be a clear majority in the upper house either.

2. What does it mean for financial markets? Since the markets had expected the Coalition to gain a clear majority, the initial response will probably be lower equity prices and a weaker dollar. Even the traditional safe haven of government bonds may not benefit much as the extra fiscal uncertainty brings Australia closer to losing its AAA credit rating. Indeed, a minority government is unlikely to pass the fiscal measures required to satisfy the ratings agencies. They may even pull the plug this week. That said, any fallout is likely to be modest and short-lived. It's telling that just one week after the Brexit vote, the UK's and world's financial markets have recovered a lot of their initial losses.

3. What does it mean for the economy? There may be some short-term hit to confidence, the housing market and some businesses may postpone, or even cancel, investment or hiring decisions. But it's more likely that the economy carries on as normal. The bulk of the six-point fall in consumer confidence after the 2010 election was reversed the following month. And the economy performed reasonably well in the second half of 2010, with GDP rising by an average of 0.8% per quarter. We have our concerns about the current outlook for GDP growth, but this is not due to the uncertain election result.

4. What does it mean for the RBA? So if the fallout on the financial markets and the economy is likely to be modest and temporary, then the RBA is unlikely to respond by cutting interest rates from 1.75% to 1.50% at tomorrow's policy meeting. You could argue that the Bank may want to take out some insurance against the recent rise in overseas and domestic political uncertainty. But it's hard for the Bank to do this when it won't know the election outcome by the time it announces its rate decision at 2.30pm tomorrow!

 

 

Read more: http://www.smh.com.au/business/markets-liv...l#ixzz4DOh6e5Vs

Follow us: @smh on Twitter | sydneymorningherald on Facebook

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interesting analysis.........

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The uncertainty is also reflected in our Index Option spread:

Open Interest in the July series (expiring on the 21st) has solid support at 5100, equally solid resistance at 5500, but much more balanced positions on 5200 (30% excess of Puts = support) and 5300 (25% excess of Calls)

 

I read that chart as suggesting we'll see continued indecision and comparatively wide (wild) swings in the days and weeks ahead.

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https://au.news.yahoo.com/a/32024027/we-re-...-victory/#page1

 

Mr Shorten conceded defeat in the federal election, while coalition frontbenchers clamoured to declare victory as their party crawls towards the finish line with a marginal majority.

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NFP last Friday give a big boost for other major market. now we have lib seems will form a govt. that royal commission thingy for our banks seems gonna put on hold.

bit up day for AUD and asx200 this session anyone???? :unsure:

 

 

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Upcoming Index Options, July series, show weakening resistance at 5400, with main interest at 5500.

 

post-20537-1468453300_thumb.jpg

Looks rather Bullish to me...

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