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Weekly wrap: What an Albanese victory means for investors

May 25, 2022

Weekly wrap: What an Albanese victory means for investors

Labor was swept back into power and will control Australia’s 47th Federal Parliament under the leadership of Anthony Albanese. The Coalition was decimated, but voters abandoned both major parties in droves in favour of independents and smaller parties, signalling a widely held desire for political and economic change.

Labor was swept back into power and will control Australia’s 47th Federal Parliament under the leadership of Anthony Albanese. The Coalition was decimated, but voters abandoned both major parties in droves in favour of independents and smaller parties, signalling a widely held desire for political and economic change.

Labor’s election promises included tax breaks for electric vehicles, a National Anti-Corruption Commission by the end of the year, increased staffing for the aged care sector and the National Disability Insurance Agency, more generous childcare subsidies, and a new shared-equity housing scheme that would see the Federal Government essentially buying a share of a property together with the owner.

Tackling inflation and the rising cost of living was another key plank of Labor’s election campaign. It’s a problem many other countries are currently grappling with, contributing to the recent savage sell-off in consumer stocks in global markets.

UK inflation was last week revealed to have reached 9% in the year through April, the highest level since Margaret Thatcher was prime minister 40 years ago. And in the US, Jerome Powell vowed the Federal Reserve would keep tightening monetary policy until there was “clear and convincing” evidence that inflation of 8.3% per annum was trending down towards its 2% target.

In Australia, the Reserve Bank of Australia has made it clear that more rate rises are on the way to contain prices.

Logistics prices won’t help the new Australian Government’s war on the cost of living. Shipping goods to Australia is likely to remain expensive and slow until next year due to the Shanghai lockdown and the war in Ukraine, Toll Group MD Thomas Knudsen said last week.

Even if Shanghai were to allow some businesses to reopen soon, there probably isn’t enough time to re-establish transportation services ahead of the peak Christmas period, he said.

Lifting real wages was another core Labor election promise, but this is one they may be able to deliver on more easily. Australia’s unemployment rate was last week revealed to have reached a 48-year low of 3.9% in April, with an additional 400,000 people in employment since the start of the pandemic, and Westpac is forecasting it could fall as low as 3.2%.

Official data released last week showed wage growth sluggish at 2.4% in the March quarter, but anecdotally employers report they are now offering significant pay rises and sign-on bonuses to attract and retain some professional services staff.

KPMG senior economist Sarah Hunter says the economy now has no spare labour capacity left, and workers should soon start seeing bigger pay rises as employers compete for their services. The extent to which these may compensate for, or contribute to, the rising cost of living remains to be seen.

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