Australian Assets May Rally After Election Result, Analysts Say

t54q1159ds}75s3kt}9rwsm{_media_dl_1.png Bloomberg, MSCI

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(Bloomberg) — Australia’s shares and currency may post a relief rally on expectations of policy continuity under Prime Minister Anthony Albanese after his re-election for a second term.

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Local energy stocks in particular may benefit thanks to the ruling Labor Party’s support for the sector. The Australian dollar could get a further boost after it recouped losses since President Donald Trump announced reciprocal tariffs in early April and shifted the focus on a possible improvement in US-China trade ties. 

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Here’s what market participants had to say on the Australian election: 

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Shane Oliver, chief economist and head of investment strategy at AMP Ltd: 

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Elections generate uncertainty so there may be a relief rally in stocks. There was also doubts as to whether Labor would have to make deals with the Greens to form government and be pulled into a less business friendly direction, “so that risk has been removed.” Australia’s consumer shares may be supported given Labor’s policies toward the household sector, property stocks from first home buyer concessions and there’s more certainty for clean energy companies, he said.

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“There is potential for us to recoup some of the underperformance against Asia, but big uncertainty remains around trade and tariffs. Ultimately, to start outperforming Asia, you’ve probably got to see more substantive stimulus coming out of China. Or alternatively, some breakthrough in trade negotiations might help and a back down on the tariffs by Trump.” 

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Kyle Rodda, senior market analyst at Capital.com: 

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Australian stocks may see a small relief rally, all else being equal after avoiding a minority government which “reduces political risks and provides a more certain policy environment.” While differences in Labor and the opposition Liberal-National Coalition’s policies are pretty trivial, “the area of the market that could move because of policy differences is energy, effectively because of a more supportive environment for renewables versus hydrocarbons. Otherwise you’re getting a continuation of the status quo, for better or worse.”

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Fiona Lim, senior FX strategist at Malayan Banking Bhd 

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“AUD/USD could continue trade with an upside bias as the re-elected Albanese government supports growth with fiscal spending. An actual commencement of a US-China trade talk would also be constructive but given the fluid nature of trade negotiations, there could still be some volatile two-way action for the AUD. Break of the 0.6450-resistance would be key for further bullish extension”

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Nick Twidale, chief market analyst at AT Global Markets: 

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“If we get any response, it’s going to be short lived. Aussie dollar’s going to be dominated by international factors rather than local factors and I’m fading these rallies because tariffs will have a negative impact on the Australian economy.” 

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“From a political perspective, I don’t think there’s much a Labor government or Liberal government would have done that will spark any improvement in what’s probably going to be a tough three years for the Australian economy as a whole. The next 50 points in Aussie isn’t going to come from what Australia does, it’s going to come from what the US does and how it impacts the global economy.”