With the dust well and truly settled after a most unusual federal election and the end of the financial year knocking on our door, we got to thinking, how does a change of government affect investment.
It’s no secret that business and households tend to put big decisions on hold when we are close to an election. Share markets track sideways, mostly due to uncertainty as each side of politics offer election promises with wild abandon and there is a general feeling of timidity around the financial sector as each side jockeys to show off their economic and fiscal projections.
Now that the Liberal National coalition have a majority, will we see a more buoyant market, and will there be a spending boom on the back of projected surpluses going in to the election.
In the short term, there may be some modest growth. History will show us shares rise to an average of 5% in the first three months following an election, however, global markets will contribute to changes we can’t control. With a trade war between the US and China, tariffs being slapped on goods from Mexico into the US and global uncertainty about the middle east means there is a different set off challenges that will have an effect on our economy.
We also know from history governments are often forced into sensible economic policy post-election to ensure living standards are maintained or rise, unemployment has an input to how the market responds and with historically low interest rates, there are more questions than answers.
What impact, if any, does it have on you? Both sides promised tax cuts and spending measures to grow the economy, but will there be more in your bank account at the end of the month? The increase in the tax-free threshold will mean some tax rates are marginally lower and that will impact some. The other thing to look out for is the flattening of the property market which will affect investors, particularly in the major cities and some key regional centres like Bendigo, Geelong and Ballarat.
It is always wise to talk to a financial planner to get the best advice to help you plan for your future and reduce the uncertainty, so that regardless of the election result, your financial plan is the best it can be. Give us a call – it might be the smartest call you make this year.