Minority or majority government? Economist says outcome will have little impact on ASX shares

With the new Australian government now sworn in, many investors are undoubtedly wondering what impact new policy might have on financial markets and their ASX shares.

The S&P/ASX 200 Index (ASX: XJO) has bounced off its low on 12 May, climbing its way to close at 7,148 yesterday.

However, with the full election result not yet finalised, what impact does this uncertainty have on the market?

Uncertainty a ‘small negative’ for ASX shares, expert says

Chief economist at RBC Capital Markets Su-Lin Ong reckons the wait to confirm the election’s full outcome won’t weigh too heavily on investor gains.

In fact, Ong says a majority Labor government will likely yield a “temporary positive reaction from markets simply on a quick conclusion”, as quoted by the Australian Financial Review.

On the budgetary outlook under Labor, Ong said:

Parliamentary Budget Office election costings suggest that the budget would be $7.4 billion worse over the next four years with $18.9 billion in additional spending partly offset by $11.5 billion in savings measures.

However, on the topic of interest rates, the economist noted that Labor’s refreshed budget – planned for October – should push the Reserve Bank of Australia (RBA) towards a normalisation of monetary policy.

“This has more mixed longer-term implications for markets all else being equal – slightly positive for the Aussie dollar and marginally negative for bonds,” Ong said.

It also appears the new government’s spending patterns are set to be a shade higher than if the coalition was to have retained government, according to Ong.

The post Minority or majority government? Economist says outcome will have little impact on ASX shares appeared first on The Motley Fool Australia.

More reading

• What’s going on with the Challenger share price today?
• Is Macquarie a quality ASX dividend share worth buying?
• Is a big scary bear coming for ASX 200 shares, or could it be just a playful cub?
• 5 things to watch on the ASX 200 on Tuesday
• This fundie has beaten the ASX 200 every year for the past 2 decades. Here’s how

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/DWjLwUy