Australia's federal election on Saturday has yet to produce a winner but regardless of the outcome, a period of political uncertainty risks confidence, efforts at budget repair as well as key pension and property reforms.
Neither major political party has secured the 76 of the 150 seats in the House of Representatives, as the lower house of parliament is known, that are needed to form a majority government. With
"Whichever party forms the government, the lack of a strong majority (or maybe governing from minority) is likely to make a reform agenda more difficult," Paul Bloxham, HSBC's chief economist for Australia and New Zealand, summed up.
The incumbent Coalition, led by Prime Minister Malcolm Turnbull, is composed of two major political parties: the Liberals and the Nationals. Since taking power in 2013, Coalition has been criticized by the opposition Labor Party for its crackdown on immigration, delayed personal income tax cuts and its proposal to reinstate a building industry regulator.
"Even if Coalition manages to secure a majority Government, it will have materially less influence in the Senate and insufficient numbers across both houses [of parliament] to pass the legislation, which was the trigger for the early double dissolution election," warned Goldman Sachs economists in a Monday note.
In this scenario, the Coalition may be unable to pass this year's budget, the $18 billion worth of unlegislated savings from previous budgets, and its flagship policies on corporate tax cuts and superannuation, the note added.
Essentially, a Coalition win would mean more of the status quo, echoed Shane Oliver, head of investment strategy and chief economist at AMP Capital.