Asia-Pacific

Australia sets for hung parliament

(Xinhua)
Updated: 2010-08-22 14:17

Australia's Prime Minister Julia Gillard (L) and federal Opposition Leader Tony Abbott talk to their supporters in Australia in this August 21, 2010 combination photograph. [Photo/Agencies]

CANBERRA - Australia is set for a hung parliament in over 60 years as neither the ruling Labor Party nor the opposition Coalition is unlikely secure a majority in the 150-seat parliament in the federal election Saturday, which will in turn arouse financial turbulence and head off investors, political analysts said.    

The Australian Electoral Commission (AEC) on Sunday announced 77.85 percent of the primary vote in Australia has been counted, with Labor winning 71 seats, the Liberal- National Coalition 70 and Greens 1 and four other seats are projected to go to four independents.

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Although Australian Prime Minister Julia Gillard announced Saturday night that the election has been too close to call, and it will take a number of days to determine the result, a hung parliament is more and more likely, which means no side of political party holds a majority, the government must negotiate with independents, minor parties or opponents to pass laws.

Politics Professor Clem Macintyre, from the University of Adelaide, said negotiating with up to four independents would be challenging for any government.

"The whole situation becomes very unstable and you'd probably be expecting it to not last all that long," he told ABC Radio on Friday. "There'd be every chance that we'd be going back to the polls fairly soon."

Meanwhile, political analysts expected the condition of hung parliament not to have enormous impact on passing general economic policies.

"This is because broad economic policy is very similar among the parties, with both major sides promising a return to budget surplus in three years and to maintain an independent reserve bank, meaning the impact would be limited to a few areas of difference," Wayne Cole, political analyst of Reuters, said on Monday.

However, The Australian dollar and locally listed shares are likely to face selling pressure, given that a hung parliament would spell days and possibly weeks of uncertainty.

According to Reuters on Wednesday, a minority government would likely to represent the worst outcome for financial markets, with one analyst tipping a two to five percent fall in the local currency in that case.

"If there is a hung parliament...it means there is a heck of a lot of uncertainty," said Guy Bruten, Australia & New Zealand strategist for AllianceBernstein. "That...won't help the Australian dollar."

Cole also declared that investors hate uncertainty, so a result that would leave a minority government would be initially unwelcome to financial markets, hitting bonds and the Australian dollar.

According to Gary Head, who co-manages UBS's equities business in Australia and New Zealand, said the uncertainty of election result has been getting more and more difficult to encourage international clients to look at Australian equities as an attractive asset class because of the political risk, the sovereign risk.

"They don't want to be in a place where the rules change or the taxes change, compared with what they expected," Head said.

Meanwhile, mining shares, including global giants BHP Billiton and Rio Tinto, would be likely to bear the most uncertainty in the stock market, with the fate of the ruling Labor party's plans for a 30 percent mining tax unclear.

"Mining stocks and Telstra (who was assigned by Labor to build the National Broadband Network) were likely to be directly affected by the election results," GOMarkets Sales Trader Joel Murphy said on Saturday.