From the archive. First published on 23 May 2022 on weprivate.com.au. It reflects markets, rules and our views at that time and has not been updated. For current policy, see our latest insights.

Australia’s federal election was held on Saturday 21 May 2022. The Liberal-National Coalition government, led by Scott Morrison, was defeated, with the Australian Labor Party forming the next government under incoming leader Anthony Albanese. Some uncertainty remains as to whether Labor will govern in its own right.

Swings against both major parties, toward the Australian Greens and independents, dominated the vote, with the damage more significant for the Coalition. The lack of rigorous action on climate change, dissatisfaction with the handling of natural disasters and the pandemic, and the rising cost of living were key issues at the polls.

For markets, the election was fought along lines likely to be less impactful in the short term. While history shows the domestic share market has underperformed after elections where the governing party changed, shares were already significantly weaker than normal heading into this one. That reflects global geopolitics, inflation and rising interest rates, which will remain dominant in the period ahead.

The Coalition suffers a significant swing

After almost a decade in power, the Coalition was defeated. Figures at the end of counting on Sunday night suggested a 5.8% swing against the Coalition (35.7% of the primary vote) and a modest 0.5% swing against Labor (32.8%). Independents gained 2.2% (10.5% of the primary vote) and the Greens 1.5% (11.9%). One Nation and the United Australia Party also picked up votes. On a two-party preferred basis, there was a 3.8% swing to Labor.

Will Labor govern in its own right?

At the time of writing, the Australian Electoral Commission count suggested Labor would almost certainly secure 75 of the 76 seats needed to govern alone, with some outlets calling a majority. The Coalition appeared to have secured 54 seats and was leading in three more, with independents likely to hold about 10. Australia’s 47th Parliament looked set to have one of the largest crossbenches in its history. Postal votes, which tend to favour the major parties, could still move the result.

Climate, disasters, the pandemic and the cost of living

Commentators pointed to the government’s handling of the pandemic, vaccine and rapid antigen test supply, and its preparedness for floods and bushfires. The rising cost of living, led by petrol prices and pandemic-driven shortages, sent a strong message, with wages yet to catch up ahead of a rising interest rate cycle. The swing to climate-focused independents reflected frustration with the pace of climate action from both major parties.

What it means for markets

The main near-term risk for markets was a drawn-out period of uncertainty over who would form government. That risk has largely passed. Shares had fallen 4.1% in the lead-up to this election, against an average gain of 1.7% before previous elections.

Unlike recent elections, this campaign was not fought over negative gearing, capital gains tax, franking credits, trusts or income tax. Neither side committed to economic policies likely to move the share market much. Labor ran a small-target campaign, committing to the stage three tax cuts, to no new taxes beyond multinationals, and to matching the Coalition’s freeze on deeming rates.

The key policy differences were in housing, where Labor’s shared equity scheme replaces the Coalition’s plan to lower the downsizer contribution age from 60 to 55. Labor also committed to more spending on childcare, aged care and disability care, and to supporting wages growth, which could be a headwind for businesses with large wage bills. With most independents favouring stronger climate action, more spending on renewables and decarbonisation infrastructure is likely.

For bonds, currencies and eventually shares, the real test will be how the new government manages the economy: controlling the budget, lifting productivity and keeping inflation and interest rates manageable. For the next year or so, global developments in geopolitics, inflation and interest rates are likely to matter far more.

Challenges ahead, whoever won

• Foreign policy. China’s rise in the region, the Russia-Ukraine war, deglobalisation and supply chain security.
• Budget management. A deficit forecast well into the 2030s, faster interest rate rises, slowing growth through 2023 and 2024, and inflation above target.
• Climate action. Growing demand for real climate action, balanced against short-term costs.

General information only. It does not take into account your objectives, financial situation or needs. Past performance is not a reliable indicator of future performance.