As this is written, the S&P/ASX200 index is up a sharp 77.7 points, or 1.2%, on the back of the unexpected win for the Liberal Party-led Coalition in the 2019 Australian federal election.
Currently trading at 6443, the S&P/ASX200 index is trading above 6400 for the first time since 2007 and is at a fresh 11-year high.
Top gainers include Medibank (ASX MPL) and NIB Holding (ASX NHF), both up over 10%.
This, despite opinion polls suggesting a win for the opposing Australian Labour Party (ALP).
Prime Minister Scott Morrison will be returned to a ‘miraculous’ third term in office, as voters apparently welcomed his pitch for economic stability versus Labour’s more dramatic reform agenda.
How Labour’s retiree-tax helped the Coalition win the election
The Australian electorate, particularly senior citizens and their children, apparently voted with their feet on some of Labour Party’s policies including its highly publicised franking credit policy.
The policy envisaged the abolition of net refunding of franking credits to Australian investors, other than for charities and endowments and pensioners.
This would have been a blow to self-funded, individual retirees, and by one calculation, result in a loss of 30% of their after-tax income.
The Coalition seized on this “retiree tax” and their Victorian MP Tim Wilson led a highly successful campaign against the policy that scooped up important seats in the east coast.
“In the same way that kids told their parents how to vote in the marriage equality postal survey, we saw parents tell their kids about the cost of voting Labour,” Mr. Wilson commented.
Investors cheer the status-quo
Investors are buying up banks and insurers in a relief rally.
They are thankful that certain Labour policies such as restrictions on negative gearing and on mortgage brokers and a reduction on the capital gains tax discount are now out the window. These would have crimped earnings at banks.
Given that the poll surveys were (wrongly) predicting an ALP victory, bank share prices have been under pressure in anticipation.
Investors and speculators are therefore scrambling to cover their underweight and short positions.
For private health insurers too, the electoral result is a shot in the arm because they were dreading ALP’s proposal to place a 2% ceiling on premium hikes for two years.
“The return of the Coalition represents a continuation of the status quo, with few policies outlined in the course of the election that would impact the banks directly (with the exception of the First Home Loan Deposit Scheme, which could provide modest support to house prices),” commented analysts at JP Morgan.
The ALP’s climate change policy also was their undoing, particularly in the coal mining heartland of Queensland state, which witnessed strong opposition to the party.
Whitehaven Coal (ASX WHC) is up 0.94% to $4.28, while New Hope Corporation (ASX NHC) has rallied 3.66% to $2.82, on subsiding fears of environmental action against coal companies.
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