Jamie Gray

Jamie Gray is a business reporter for the New Zealand Herald and APNZ wire agency

Financial markets quiet after Abbott's victory

Tony Abbott's election victory comes as the Australian economy adjusts to a scaling back of mining growth. Photo / AP
Tony Abbott's election victory comes as the Australian economy adjusts to a scaling back of mining growth. Photo / AP

News of a change of government for Australia drew a largely ho-hum response from local financial markets yesterday, but the new administration could herald changes "at the margin", says an economist.

As pre-election opinion polls suggested, Australia's centre-right Liberal/National Coalition won the election with a big swing away from the Kevin Rudd-led Labor Party.

HSBC said the decisive result would lift Australian business confidence in the coming months because it had removed at least some of the previous political uncertainty.

"The market implications of the change of government are minor, with neither of the major parties proposing to make a change of substance to the macroeconomic framework in Australia," HSBC said.

"Market implications are limited, with both major parties espousing similar macroeconomic views, and the election result largely as expected," the bank said in a commentary.

The fortunes of Australia, which in the June quarter was New Zealand's biggest export destination, have ramifications for the local economy.

Last month New Zealand's biggest listed company, Fletcher Building, said Australia's economic downturn had detracted from what had been a strong performance in New Zealand.

ANZ Bank chief economist Cameron Bagrie said it appeared that incoming Prime Minister Tony Abbott was likely to play the fiscal austerity card, which could crimp Australia's economic growth in the short run, but which would be positive in the longer term.

Bank of New Zealand's head of research Stephen Toplis said some changes may arise "at the margin" from Abbott's win.

The coalition's intention to tighten up on government spending could represent a "headwind" for a faltering Australian economy, Toplis said, but would benefit the country in the long run.

"There will be slightly tighter control on the fiscal balances, which means that at the margin the Australian economy will be slightly weaker than it would have otherwise been," he said.

Toplis said the new government was unlikely to bring in reform on a "massive" scale, and that the main issue facing Australia was not politics but the end of several years of growth in the mining sector.

Late yesterday, the New Zealand dollar was at A86.8c - little changed from its Friday close, while the Australian and New Zealand share markets registered minor gains.

- APNZ

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