Australia: Sectorial impact of the Federal Election 2019 after years of prime ministerial merry-go-round

After years of prime ministerial merry-go-round, the Federal Election on May 18th will take place at a turning point of the Australian economy with falling business confidence. Election poll shows that Australian Labo r Party (ALP) may have an upper hand over the Collation, but the advantage has now narrowed to 51 vs 49 . N ew trends on more first time voters, increasingly concern over climate change and future economic growth mean the election outcome is more uncertain than ever. From the general point of view, the policy divergence between the Collation and the ALP has only widened. The Coalition puts the focus on containing government expenditure but promoting growth via infrastructure spending and personal tax cuts. By contrast, the ALP favours a bigger government with higher taxes. In this report, we look into the implication on sectors that are the most affected by the divergence in po licies between the two parties. Strong demand from rising population and emerging e-commerce trend means infrastructure will be a winner even in an event of government change. The key difference is the Collation is likely to spend more with involvement of private investment. T he ALP’s tightening policy on negative gearing and capital tax break during a downward property cycle means further pressure on home prices and sales than the Collation. The overall mining and energy sector will undergo swings and roundabouts with internal resource reallocation under the ALP. An ambitious goal for renewable energy is negative for coal miners. However, external risks may be a bigger problem as Australia exports 69% of its coal production. And LNG exporters and utilities will face tighter rules. The spotlight is on renewable energy with quicker development under the ALP. The ALP aims to implement higher minimum wages and stricter employment rules. We think the overall impact on retailers is uncertain. Although higher wages could stimulate consumer spending, higher costs could erode corporate profits. In contrast, the impact on hospitality is negative with surging employment cost with risks in lower total number of workers. While the focus of election has been put on tax cuts and renewable energy, the question on productivity and economic reform are not well addressed at the campaign. C yclical fiscal stimulus measures may not enough to address the long-term economic issue s Australia has confronted and remain as a challenge for any party in power.