Fragile alliance breeds uncertainty
FINANCIAL markets have greeted the minority government led by Julia Gillard with scepticism, sending the Australian dollar lower amid fears for the stability of an alliance of Labor, Greens and independents.
And while business groups welcomed the end to election uncertainty, they urged the nation's leaders not to shy away from contentious policy debates such as population.
After the rural independents Tony Windsor and Rob Oakeshott threw their support behind Labor yesterday, the dollar slumped as low as US91.18¢, down from Monday's close of US91.70¢.
A sell-off in mining shares led a brief slump in the ASX 200 index, but stocks had recovered by the time the market closed.
Investors' biggest concern appears to be the mining tax, and the possibility that pressure from the Greens might prompt an increase in the proposed levy.
''There's a bit of unease in the markets that not only are we going to get a mining tax of some sort, but maybe it will be more punitive than the ALP's revised version,'' an economist at RBC Capital Markets, Su-Lin Ong, said.
More broadly, some analysts believe the alliance needed to form government will be fragile, threatening the ''certainty'' that businesses crave.
The managing director of White Funds Management, Angus Gluskie, said the slump in the dollar was probably triggered by international investors viewing the result with caution.
Some overseas investors held a general view that Labor governments tended to be higher taxing and bigger spending, but he said this generalisation had little substance to it.
''We know who is in government, but I think the bigger issue now is how is the government going to play out in practice,'' he said.
A strategist at Citi, Paul Brennan, said the government's narrow control of the Lower House would also allow the opposition to block legislation with relative ease. ''In these circumstances it is difficult to see the Parliament running a full three years,'' he said.
For specific industries, the election outcome has clearer implications.
Small miners, for example, used the result to claim the government had no mandate for its mineral resource rent tax. The Association of Mining and Exploration Companies called on the government to scrap its diluted tax proposal, which it argued had created uncertainty and confusion in resource industries.
On the other hand, Telstra is tipped to be a big winner from the election, after Labor agreed to pay the company $11 billion in return for its support of the national broadband network.
The wealth management industry is also tipped to benefit from a promise to increase the minimum superannuation contribution to 12 per cent from 2013.
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