THE outcome of Australia’s tight federal election could be the next catalyst for local assets as a tariff standoff between the US and China continues to rattle markets.
The benchmark S&P/ASX 200 Index is heading into Saturday’s vote down 5 per cent from its February record high as tensions simmer between the world’s two biggest economies. Meanwhile, Australia’s currency is the worst performer among Group-of-10 peers this year.
The next government will have the challenge of maintaining economic stability amid risks from US President Donald Trump’s trade agenda. While Labor Prime Minister Anthony Albanese and centre-right opposition leader Peter Dutton have pitched different policies on energy and housing, both of their campaigns have focused on cost-of-living relief.
Polls suggest a close race, with many pundits predicting a hung parliament in which neither of the two major parties holds a majority. In such a case, they would need to negotiate with independent lawmakers to form government.
Here are the stocks to watch ahead of the election:
Consumer boost
Consumer-focused shares stand to gain regardless of who wins, with both candidates vowing to lower taxes. Albanese has promised further reductions in the coming years if re-elected, while Dutton’s Liberal-National Coalition has proposed a one-off tax offset for low- and middle-income earners.
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The tax cuts, touted as cost-of-living measures, are “good for the consumer and should support the sector, which has been under a lot of pressure because of the US slowdown” said Jun Bei Liu, founder of hedge fund Ten Cap.
Stocks in focus: Coles Group, Woolworths Group, Metcash, JB Hi-Fi, Temple & Webster Group
Home builders
Both candidates have also committed to supporting first-time home buyers, which may lift shares tied to the property market.
Albanese said he’d allow those voters to purchase their residence with a 5 per cent deposit. He also pledged A$10 billion (S$8.4 billion) to build 100,000 homes for those entering the property market. Meanwhile, Dutton said he would permit a limited number of first-time home buyers to deduct mortgage interest payments from their taxes for five years.
Stocks in focus: Stockland, Mirvac Group, Lendlease
Energy
While the Labor party intends to continue its roll out of renewable energy infrastructure if re-elected, the Coalition favours nuclear power and gas in driving Australia’s energy transition.
Australian gas providers could benefit from a Coalition victory, though more investment is needed across infrastructure projects, according to Sarah Shaw, chief investment officer at 4D Infrastructure in Sydney.
Energy shares are the worst performers on Australia’s benchmark this year. They have lost 16 per cent as global trade concerns cloud oil’s demand outlook.
Stocks in focus: APA Group, Origin Energy, AGL Energy, Santos, Woodside Energy Group
Health
Both Albanese and Dutton have promised to invest an additional A$8.5 billion in expanding Medicare, Australia’s universal health care system.
The extra funding could boost small-cap health stocks like pathology company Australian Clinical Labs and radiology provider Integral Diagnostics, said Phillip Hudak, portfolio manager at Maple-Brown Abbott.
Stocks in focus: Australian Clinical Labs, Integral Diagnostics, Healius
Yield risk
For bond investors, existing concerns over increased debt issuance could be exacerbated should neither major party win outright and have to rely on deals with minority parties to form a government. That scenario may lead to larger deficits and higher bond yields, according to Philip Brown, head of research at FIIG Securities in Melbourne.
S&P Global Ratings even warned late last month that Australia’s AAA sovereign credit rating may be at risk if election campaign pledges result in larger structural deficits, debt, and interest costs. BLOOMBERG
