The Australian economy will be boosted by a growth dividend as Scott Morrison’s tax cuts start to drive spending, as shares in the country’s biggest banks surge on the prospect of loosened regulation and the absence of negative gearing reform after Labor’s weekend federal election loss.
Conservative Party leader Cory Bernardi had hoped for a Morrison victory on Saturday given Labor’s destructive socialist agenda threatened to wreck the Australian economy.
The Australian reports, at the opening of trade on the local stock market this morning, ANZ shares surged 5.6 per cent, while National Australia Bank rose 7.7 per cent. Westpac shares rose 8 per cent, while Commonwealth Bank surged 5 per cent.
The overall sharemarket rallied 1.6 per cent to an 11-year high of 6464 points amid the lessening of uncertainty after the Coalition unexpectedly retained power in the federal election.
The surge in the financial sector is providing most of the boost, with the major banks driving the gains.
With Bill Shorten now blocked from legislating a clampdown on negative gearing and reducing the capital gains tax discount, Morgan Stanley analyst Richard Wiles said the federal election result had reduced the “tail risk” in the $1.7 trillion mortgage system that could have eventuated if there was further downward pressure on house prices and steeper regulation was applied to the banking sector.
“We think the election result makes the status quo a more likely outcome and reduces some tail risks,” Mr Wiles said.
The Prime Minister, who was returned with a majority government following the weekend’s national poll, has proposed a string of measures to encourage the banking sector to lend more vigorously, including a number of interventions to help bring down interest rates for small business borrowers, fewer restrictions on property investors, and first home buyers scheme that will help a small number of borrowers access loans.
JP Morgan economist Ben Jarman said the Coalition’s budget proposals to cut personal income taxes and drive infrastructure spending would add an extra 0.15 per cent to economic growth a year over the coming period.
Josh Williamson, an economist with investment bank Citi said, “The election result means an end to potential Labor policies such as removing negative gearing and preferential tax treatment of investment properties, ending excess franking credits to shareholders.”
“Despite opinion polls claiming that taxation was not an election issue, we suspect that some of these issues cost the Labor party seats. The more contentious taxation policies towards investment capital may never be resurrected by the Labor party. The election result is therefore an incremental positive development for the housing and equity markets,” he said.