Tuesday, September 15 2015
Australia has chosen another Prime Minister! Turnbull is promising a ‘thoroughly liberal government’ promoting freedom of ‘individuals and markets’ and promising to consult and explain the case policy change. It is clear that the Prime Minister-elect is targeting business confidence and individual freedom, in a step to reinvigorate the prominence of the ‘small L liberals’ within the party.
We outline the implications for markets below:
- Turnbull will be seen as pro-business with the potential to boost confidence. A key criticism of Abbott has been his ability to sell the economic reform agenda. We expect the markets will be hopeful this will improve under Turnbull.
- There should be an increase in short-term sentiment for markets as a result. Follow through will depend on actual policy delivery.
- New leadership will allow a reset of budget priorities. They will not have to defend returning to surplus as aggressively and can present an argument to invest in infrastructure more aggressively to drive growth. To the extent that there is a change in fiscal policy setting this might result in less pressure on the RBA to continue to lower rates.
However we note there are a number of uncertainties that will need to be resolved in coming days including:
- Liberal Party will now have to re-negotiate its coalition agreement with the National Party.
- New portfolio allocations will be made in coming days in key portfolios such as Treasury, with government ministers indicating after the vote that Scott Morrison is likely to assume the position.
- It is unclear which policies will be subject to change under a new leader.
- It is also unclear whether there will be attempts from within the Liberal Party to destabilise the new leadership over time.
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