Along with the daily updates on the election vote count, the main news for financial markets last week was the announcement by rating agency Standard & Poors that they had placed Australia’s AAA sovereign credit rating on negative outlook (from stable), as it warned that, given the outcome of the election, the prospect of fiscal-policy gridlock could obstruct government attempts to rein in a budget deficit. A similar outlook change followed quickly for state governments and this has had a flow-on effect, with the four major banks also placed on negative outlook.
The main effects of the announcement are likely to be via monetary policy, suggesting a possible additional incentive for the RBA to cut rates in August and some increased funding costs (a lower credit rating means higher funding costs).
On the election
Yesterday morning, Labor leader Bill Shorten telephoned then-caretaker Prime Minister Malcolm Turnbull to formally concede defeat, declaring Labor will not win enough seats to form government.
That afternoon, a visibly relieved and somewhat emotional Mr Turnbull claimed victory.There are five seats still in doubt as counting continues. Cowan in Western Australia and Hindmarsh in South Australia are trending to Labor. Three other seats – Capricornia, Flynn and Herbert in Queensland – will determine whether the Turnbull government gets the 76 seats required for a House of Representatives majority.