Friday Feb 03, 2023

Sharemarket will be anxious about a Labor pact with Greens

Australian shares look set for an uneasy start to the week after Saturday’s federal election has so far left Labor short of enough seats to form a majority government, although the governing Coalition was clearly defeated.

AMP chief economist Shane Oliver said any reaction to Labor forming a majority government is likely to be minor given the key policies between the two major parties were not significantly different.

“The main risk for markets will come if Labor has to rely on the Greens to form Government and they push Labor down a far less business-friendly path than its election platform suggests,” Dr Oliver said.

“However, there will now be plenty of teal independents in parliament whose policies on climate, integrity and health align more closely with Labor and for whom Labor should be able to gain support from.”

A wealth of factors

Australian share futures indicate a soft start to Monday’s session after a mixed finish on Wall Street on Friday, recouping earlier sharp loses.

The US market continues to confront rising interest rates, high inflation, the war in Ukraine and a slowdown in China’s economy, which are raising fears of a possible US recession.

The S&P 500 finished up 0.57 points, or 0.1 per cent, at 3901.36. The Dow Jones Industrial Average ended 8.77 higher, or less than 0.1 per cent, at 31,261.90, while the Nasdaq composite index finished 33.88 points lower, or 0.3 per cent, at 11,354.62.

Australian share futures were down 15 points, or 0.2 per cent, at 7129.

On Friday, the Australian benchmark S&P/ASX200 index finished up 81.1 points to 7145.6, a 1.15 per cent gain.

During the six-week campaign Scott Morrison has been boasting to Australians about the strength of the economy under his stewardship.

The national accounts on June 1 will confirm whether that strength was just political propaganda from the outgoing prime minister, or that the economy has proved resilient in the face of ballooning inflation in the March quarter.

The key stats

Over the next week or so the Australian Bureau of Statistics will release a series of economic figures that contribute to the overall growth result, kicking off with March quarter construction data on Wednesday.

What is known so far is that retail spending is likely to have made a more modest contribution to growth than the December quarter, while exports are expected to be a net drag on the result.

Economists’ forecasts point to a 0.9 per cent increase in construction work completed in the quarter, recovering from a 0.4 per cent decline in the previous three months.

Business capital expenditure on Thursday is expected to have risen 1.3 per cent in the March quarter, building on the 1.1 per cent gain in the December quarter.

Early next week the ABS will release international trade, business profits and inventories, and government finances figures for the quarter.

Meanwhile, Reserve Bank of Australia assistant governor for financial markets Christopher Kent will address a conference on Monday on the next phase of the central bank’s bond purchase program, to which it turned to complement its record low cash rate during the pandemic.

RBA assistant governor for economics Luci Ellis will also address a conference on Wednesday, just weeks out from the next monthly board meeting where a further hike in the cash rate is expected after the increase to 0.35 per cent from 0.1 per cent earlier this month.


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