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Home / Business / Markets / Shares

Australian sharemarket won't tumble

AAP
3 Jul, 2016 05:00 PM2 mins to read

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Australian Prime Minister Malcolm Turnbull, center, leaves his polling station after he cast his votes in the federal election at the Double Bay public school in Sydney. Photo / AP

Australian Prime Minister Malcolm Turnbull, center, leaves his polling station after he cast his votes in the federal election at the Double Bay public school in Sydney. Photo / AP

The uncertain election outcome will send the Australian sharemarket lower but it will not be a repeat of Brexit, an investment expert says.

The market will start the week in the red and the lack of an election result is likely to weigh on shares in the short term.

Today's decline could be in the order of half a per cent or one per cent, although it was difficult to predict, AMP Capital head of investment strategy and chief economist Shane Oliver said.

He said another three years of de facto minority government looked likely which was not a good outcome for the economy and investment markets.

Australian shares had been on track for a rise today, with the futures contract up by 32 points in late Friday trade in response to gains on US and European markets.

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"But I think the lack of an election outcome and the prospect of minority government either in the lower house or via the Senate will be taken badly by the market," Oliver said. "It's just like with Brexit: markets don't like the uncertainty associated with these sorts of things and it looks like there's going to be a bit of policy uncertainty in Australia, and talk about a ratings downgrade probably won't help."

But he said the market's election reaction would not be on the Brexit level, when Australian shares tumbled more than 3 per cent amid global concerns about Britain's decision to exit the European Union.

Oliver noted Australian investors have had experience with minority government.

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The Reserve Bank of Australia's monthly board meeting is expected to play second fiddle to the election this week.

Oliver believes Brexit and election-related risks have added to the case for another interest rate cut, although he thinks the RBA will wait and see how the dust settles and keep the cash rate on hold at 1.75 per cent tomorrow.

"We still expect further easing this year with the August meeting providing a better opportunity to move as by then the risks flowing from Brexit and the Australian election will be clearer and we will have seen the June quarter inflation data." Oliver said the election result, Brexit and seasonal September quarter weakness could also result in more market volatility.

- AAP

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