Aussie election set for September 14th

Prime Minister Julia Gillard has set the date for the next federal election. The move came slightly unexpected to the markets – it is not common for a government to set the date so far in advance but then again this will not be a normal election. The current Australian government is very unique – Labor holds government by a very slim majority in what is called a ‘hung’ parliament, requiring the votes of four independent representatives to pass legislation through the lower house.

A change back to the post-war status quo where one party holds a reasonable majority (without the need of independents) will be welcomed by the market. Regardless of which party wins in September, it seems that this is the most likely outcome from the next election.

Markets are unlikely to change too much on the back of this decision as most expectations were for an election sometime around August. The early campaigning though might slightly weigh on the Reserve Bank of Australia’s intentions to cut rates. We have previously written about the role monetary policy has played in light of heavy fiscal tightening in 2012-13. Gillard’s government will know very well the need to spend leading into an election campaign in order to win back vote. Any reversal away from prudent fiscal tightening might delay any imminent Reserve Bank rate cuts, adding support to the Aussie dollar which was last trading at around 1.0471 US cents and back above 95 against the yen.

The Australian ASX200 stock index remains in positive territory with about half an hour of trade remaining at the time of writing. If it closes in the green, it will mark the longest single winning streak since the end of October 2003, coinciding with the foothills of the largest major bull market.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.