AUSTRALIA: Markets reaction to inconclusive election is remarkably calm, analyst says

Record ID: 555865

  • Title: AUSTRALIA: Markets reaction to inconclusive election is remarkably calm, analyst says
  • Date: 24th August 2010
  • Summary: SYDNEY, AUSTRALIA (AUGUST 23, 2010) (REUTERS) VARIOUS OF AUSTRALIAN STOCK EXCHANGE HALL WITH DIGITAL DISPLAY BOARDS SHOWING STOCK PRICES INTERNATIONAL FINANCIAL REVIEW SYDNEY BUREAU CHIEF JOHN NOONAN WALKING (SOUNDBITE) (English) JOHN NOONAN SAYING: "Remarkably calmly, we have had the stock market open up in Australia slightly in positive territory and that's led by the miners which make up the so much of the Australian stock market, they are actually doing better in the day because they believe remarkably is that the mining tax will be scrapped, that is considered to be a plus, I think the local markets are fairly sanguine about the fact that there is a hung parliament and there will be a government form and there will certainty returning and nobody wants to sell at the moment." MORE OF THE ASX DISPLAY BOARDS (SOUNDBITE) (English) JOHN NOONAN SAYING: "Well I think the risk would be if the markets has it wrong about the mining tax, if it looks as the Gillard led Labor government will take, will be able to make a government and form an alliance with the Greens if there is a view suddenly that maybe mining tax will come back to the table, then you may get a reaction."
  • Embargoed: 8th September 2010 13:00
  • Keywords:
  • Location: Australia
  • Country: Australia
  • Topics: Economic News,Domestic Politics
  • Reuters ID: LVAAWEJVCOVDK0N16B67GSK0PYOA
  • Story Text: Australian financial markets bet on Monday (August 22) that inconclusive weekend elections would deliver a change of government, ushering in a new minority conservative administration that would scrap a planned mining tax.
    Australia looks likely to be in political limbo for at least another week, as the vote count drags on and as the incumbent Labor government and the conservative opposition compete to secure the support of independent and Green MPs.
    But as Prime Minister Julia Gillard flew to Canberra for face-to-face talks with independent MPs, some investors and punters were betting hard on her demise, driving mining shares higher on hopes that her proposed mining tax would fall with her.
    The Australian dollar hit a low of $0.8833 in early trade, down a cent from Friday's close, in a knee-jerk reaction to the political uncertainty.
    Australian stocks rallied, led almost entirely by miners on hopes that Gillard would fail to form a government, spelling the end of her 30 percent tax on major iron ore and coal mines.
    The mining index firmed 0.8 percent on Monday, led by shares in the world's second-largest iron ore miner, Rio Tinto, up 1.2 percent, and the third-largest iron ore producer, BHP Billiton, up 0.8 percent.
    Shares in Australia's largest phone company, Telstra , sank, partly on concerns that Labor's ouster from power would also scupper a deal with Gillard's outgoing government which would have netted the firm A$11 billion ($9.84 billion).
    "Remarkably calmly, we have had the stock market open up in Australia slightly in positive territory and that's led by the miners which make up the so much of the Australian stock market, they are actually doing better in the day because they believe remarkably is that the mining tax will be scrapped, that is considered to be a plus, I think the local markets are fairly sanguine about the fact that there is a hung parliament and there will be a government form and there will certainty returning and nobody wants to sell at the moment," International Financial Review's Sydney bureau chief John Noonan told Reuters.
    "Well I think the risk would be if the markets has it wrong about the mining tax, if it looks as the Gillard led Labor government will take, will be able to make a government and form an alliance with the Greens if there is a view suddenly that maybe mining tax will come back to the table, then you may get a reaction," Noonan added.
    The scenario of a minority conservative government rests on voting projections that point to opposition leader Tony Abbott finishing with the largest number of seats -- 73 compared to 72 for Gillard's Labor, according to a respected election expert.
    A clear majority requires 76 seats in the 150-seat lower house, but ABC TV's polls analyst, Anthony Green, has projected four independents and a Green MP hold the balance of power.
    The new Green MP, Adam Bandt, has said he is more likely to support a minority Labor government than a conservative one, but he and the independents are all under pressure to support the party thatup with the biggest number of seats.
    All the independents have said they are keeping open minds and will want to talk to both leaders of the major parties.
    The negotiations, though, may not go too far until the final election results are known, which could take a week or more.
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