The focus of the Australian market is on the result – or rather lack of result – from the weekend’s federal election. It appears the most likely outcome is a hung parliament although we may have to wait some time until we know for certain. Unfortunately, the Australian Electoral Commission has made it clear that it won’t begin counting any more votes until Tuesday, leaving buyers and sellers in an information vacuum.

“Such uncertainty is never good for markets…. However, the Australian economy remains strong.”

As the possibility of a hung parliament looms closer, the financial market grows more and more uncertain. Additionally, the prospect of the second hung parliament within three years escalated speculation the governments AAA-credit rating will come under pressure in the coming weeks.

Such uncertainty is never good for markets, and traders may have to wait a month or even longer to start to get a picture on who will be forming a government for the next three years. However, the Australian economy remains strong. We do expect international money flows into our market will slow until the election outcome is known.

“If Brexit taught investors anything, at times of such economic uncertainty it is important to remember the golden rule; do not panic!” 

Australian Chamber of Commerce and Industry boss James Pearson believes it’s very likely that whoever does form government will now have to build strong relationships with crossbenchers “to get things done.” Sometimes a minority government can implement a higher level of discipline and ultimately work better.

If Brexit taught investors anything, at times of such economic uncertainty it is important to remember the golden rule; do not panic! Much to the surprise of market participants, equities and bonds have recovered most of the losses they experienced in the wake of the Brexit vote.

Additionally, The Reserve Bank is observing all of this unfold, potentially intervening with an interest rate cut on Tuesday, although economists think this is unlikely. We are also expecting a 0.5% month on month rise in retail sales reflecting a sustained rebound in consumer confidence following the RBA’s decision to cut interest rates in May.