Snap Analysis: Australia election may roil markets

By James Grubel

CANBERRA (BestGrowthStock) – Australia may have elected its first hung parliament in 70 years on Saturday, realizing the worst fears of investors and posing serious uncertainties for the nation.

Following are implications for one of the most extraordinary election results in the nation’s history:

* The Australian dollar and locally listed shares are likely to face selling pressure, given that a hung parliament would spell days and possibly weeks of uncertainty. In the run-up to the election, investment banks had described a hung parliament as the worst-case scenario for financial markets.

* Investors fear political paralysis, with a minority government hostage to maverick and green-minded independents in the lower house and subject to a hostile upper house where Greens senators look likely to hold the balance of power.

* Government bonds could also suffer, with Standard Chartered warning that a hung parliament, where the Greens would favor higher spending and taxes, could jeopardize current plans to return the fiscal budget to surplus in three years.

* Mining shares, including global giants BHP Billiton and Rio Tinto, would be likely to bear the most uncertainty in the stock market, with the fate of the ruling Labor party’s plans for a 30 percent mining tax unclear.

The conservative opposition would kill off the tax if it formed government, but it is unclear how all of the independent lawmakers would vote on the tax. Apart from the global miners, others to be hit include Macarthur Coal, Centennial Coal, Fortescue Metals Group, Mount Gibson Iron and Atlas Iron.

* The Greens recorded their strongest vote on Saturday, giving the party the balance of power in the Senate. The next government may be forced to amend and negotiate its legislative agenda with the Greens, whose agenda includes raising income tax for the rich, higher company tax and a tax on carbon emissions.

* A Labor-led minority government would be likely to go ahead with the current government’s $38 billion national fibre-optic broadband network, given that several rural independent lawmakers as well as the Greens support the plan. As part of the project, the government would pay Australia’s biggest phone company, Telstra Corp, A$11 billion to rent its fixed-line assets and deploy them as the backbone of the new network.

(Editing by Mark Bendeich and Jonathan Thatcher)

Snap Analysis: Australia election may roil markets