Australia: The hungover country

Australia has rejoined the world of political instability but that doesn't mean economic disaster.

The 2016 federal election has delivered an uncertain outcome, with counting not expected to resume until Tuesday.

At this stage, a hung parliament seems most likely, with either of the two main political groupings – the Liberal-National Coalition and Labor – potentially able to form a minority government.

Prime Minister Malcolm Turnbull, who called the election in the hope of shoring up his government’s support, is counting on postal votes to carry the day in seats where the outcome is unknown.

His opponent, Bill Shorten, has declared, "Labor is back."

When counting temporarily ceased, the Coalition had 67 seats, Labor 71 and seven were uncertain. Minority parties, made up of the Greens, Nick Xenophon Team and independents, had a total of five in the 150-seat House of Representatives.

Senate more uncertain
The Senate, which is elected on a proportional basis, is even more uncertain.

It is expected to have a larger number of independents and third parties from across the political spectrum than pre-dissolution.

Australian last had a hung parliament from 2010-13 but the then minority Labor government only had to deal with one party in the Senate to pass legislation.

During that time, the Australian economy performed well and the outlook over the next 12 months, given the momentum in housing construction and consumer spending, could see a rise in output of around 1% in GDP.

But the post-election political backdrop is unlikely to be conducive to the Coalition’s pursuit of a reform agenda, while Labor would struggle to deliver its big-spending election promises without further increasing the deficit.


Meanwhile, Citi, in its post-election analysis, says it still expects the Reserve Bank of Australia to cut interest rates further at its August meeting based on another low inflation reading to be released on July 27.

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