Sunday, 25 August 2013 07:52

The election is now in it's 5th year

Comedians Clarke and Dawe talk about the election that feels like it is in it's 5th year.

 

https://www.youtube.com/watch?v=QMayFCs5snQ&feature=c4-overview&list=UUPyb1dDiGoZ07j_DKzam4sQ

Published in Comedy

Image 1With the election campaign trail hotting up, do you find yourself wanting to throw a sandwich or a shoe at either (or both) of our political leaders.

Well, now you can.

The free to download iPad / iPhone application called "Abbott vs Rudd" can be found in the App Store by searching for 'election'.

The game allows the user to either throw a sandwich or a shoe at either candidate, scoring  higher points for a head shot.  Gamers also have the pleasure of being able to stop the candidate talking with an accurate shoe shot as real voice audio is contained in the game.

Bonus points are awarded for repeat accuracy.  Julia Gillard even makes random entries onto the screen shouting out "mysogynist", and additional points are given for smearing a sandwich on our first female Prime Minister.

Image

(Screen shot of application)

While clearly not a game for the whole family, this little application may just help you vent your electoral frustrations between now and the 7th Sept, without requiring any bail money.

Published in Comedy
Thursday, 08 August 2013 15:34

The Australian election and investors

The Federal Election

With the much anticipated Australian Federal election now set for 7 September it is natural to wonder what impact, if any, there might be on investment markets – both in terms of the uncertainty created by the election itself and in terms of the outcome. At present while opinion polls have Labor and the Coalition running at around 50% each on a two party preferred basis, according to bets placed on online betting agency Centrebet the Coalition remains the clear favourite.

Source: Centrebet

The performance of markets around elections

Elections can potentially have a short-term impact on investment markets. This is because investors don’t like the uncertainty associated with the prospect of a change in government during the campaign and then there may be relief once the poll is out of the way and possibly optimism associated with the election of a new Government.

The next chart shows Australian share prices from one year before till six months after Federal elections since 1983. This is shown as an average for all elections (but excludes the 1987 and 2007 elections given the global share crash 3 months after the 1987 election and the start of the global financial crisis in 2007), and the periods around the 1983 and 2007 elections, which saw a change of government to Labor, and the 1996 election, which saw a change of government to the Coalition. The chart suggests some evidence of a period of flat lining in the run up to elections, possibly reflecting investor uncertainty before the poll, followed by a relief rally soon after it is over.

Source: Thomson Financial and AMP Capital

However, the elections when there has been a change of government have seen a mixed picture. Shares rose sharply after the 1983 Labor victory but fell sharply after the 2007 Labor win, with global developments playing a big roll in both. After the 1996 Coalition victory shares were flat to down. The point is that based on the historical experience it’s not obvious that a victory by any one party is best for shares in the short term and, in any case, historically the impact of swings in global share markets arguably played a much bigger role than the outcomes of Federal elections.

What is clear though is that after elections shares tend to rise more than they fall.The next table shows that 8 out of 11 elections since 1983 saw the share market up 3 months later with an average gain of 5.4%, which is above the 1.8% average 3 monthly gain over the whole period.

Source: Bloomberg, AMP Capital

The next chart shows the same analysis for the Australian dollar. In the six months or so prior to Federal elections there is some evidence the $A experiences a period of softness and choppiness which is consistent with uncertainty about the policy outlook, but the magnitude of change is small – just a few percent. On average, the $A has drifted sideways after elections. While the $A fell soon after the 1983 Labor victory this was due to a policy devaluation in the dying days of the fixed exchange rate system.

Source: Thomson Financial, AMP Capital

The next chart shows the same analysis for Australian bond yields. Interestingly, on average bond yields have drifted down over the six months prior to Federal elections since 1983. The average decline has been around 0.75% which is contrary to what one might expect if there was investor uncertainty regarding the policy outlook. However, the tendency for bond yields to decline ahead of Federal elections appears to be more related to the aftermath of recessions, growth slowdowns and/or falling inflation prior to the 1983, 1984, 1987 and 1993 elections and the secular decline in bond yields through the 1980s and 1990s in general. More broadly, it’s hard to discern any reliable affect on bond yields from Federal elections.

Source: Thomson Financial, AMP Capital

Policy change and shares

Over the post war period shares have had an average return of 12.9% pa under Liberal/National Coalition Governments compared to 9.8% pa under Labor Governments.

Source: Thomson Financial and AMP Capital

Some might argue though that the Labor Governments led by Whitlam in the 1970s and Rudd and Gillard more recently had the misfortune to be affected by severe global bear markets beyond their control and if these periods are excluded the Labor average rises to 14.6% pa. Then again that may be pushing things a bit too far. But certainly the Hawke/Keating government defied conventional perceptions that conservative governments are always better for shares. Over the Hawke/Keating period from 1983 to 1996 Australian shares returned 17.3% pa, the strongest pace for any post war Australian government.

Once in government political parties of either persuasion are usually forced to adopt sensible macro economic policies if they wish to ensure rising living standards. Both the Coalition and Labor agree on the key macro fundamentals – i.e. the need to keep inflation down, to return the budget to surplus and in the benefit of free markets.

Policy differences

The main areas of difference between the two parties of probable economic significance relate to taxation, climate change, government spending & the budget and regulation.

  • in terms of tax the Coalition has promised to cut the company tax rate (although for large companies this is partly offset by a paid parental leave scheme) and abolish the mining tax;
  • the Coalition is proposing to abolish the carbon tax/Emissions Trading Scheme and will rather pay companies to reduce emissions;
  • the Coalition is likely to take a lighter/more business friendly approach to regulation than a Labor government. This may involve some partial wind back of industry regulation; and
  • the Coalition will likely try and speed up the return to a budget surplus by cutting government spending, much as it did under John Howard following the 1996 election.

As a result, perceptions that the Coalition will be lower taxing and less focussed on regulation and hence more business friendly than a Labor government may increase the chance a Coalition victory will result in a typical post election share market bounce. However, it’s worth noting that this may be partially offset if it announces aggressive fiscal tightening after the election (given the negative impact this could have on economic growth and profits at a time when the economy is already soft). What's more if a returned Labor Government follows up on its commitment to a National Competitiveness Agenda working to seriously boost productivity growth then it could have a positive long term impact on growth, profits and ultimately share market returns.

However, it does seem that there is the potential for significant sectoral impacts with the Coalition’s policies likely to be positive for miners, heavy carbon emitters and small companies (due to the company tax rate cut).

Concluding comments

The historical record points to the strong chance of a post election share market bounce. This may also fit in as we move out of the September quarter, which is often the weakest of the year, into the normally strong December quarter, as the profits reporting season ends in Australia and as uncertainty is removed post a possible September decision by the US Federal Reserve to start tapering its monetary stimulus.

Another potential positive from the election is that it is likely to see the end of minority government in Australia as whoever wins is likely to have a clear majority in the House of Reps. This could help usher in a period of more certain and rational policy making. However, it’s not guaranteed as whoever wins may still not have control of the Senate.

Dr Shane Oliver
Head of Investment Strategy and Chief Economist
AMP Capital

Important note: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.
Published in Australian Economy
Monday, 05 August 2013 18:33

Election cartoon collection

Sick of the election already.

Here we have put together some of the cartoons that have been created on the 2013 election campaign.

Enjoy.

2013-07-27-McMillan-Shakespeare-fringe-benefits-450

 

 

 

 

 

 

 

 

 

 

greens-warren

 

 

 

 

 

 

 

 

home-improvement-smaller

 

599046_521555084549309_2106560519_n

 

 

 

 

 

 

 

 

969224-mark-knight

AbbottTheHabbit

Published in Comedy

716719-kevin-ruddKevin Rudd last week announced the pre-election budget update.  Here is an extract from UBS economic team that provides a summary of this announcement.

Budget downgrade

 

 

 

Key new measures (over 4 years) are:

Savings:

Tobacco tax $5.8bn

PBS price changes $2.0bn

FBT on cars $1.8bn

Other ETS saves $2.1bn

Public sector efficiency $1.8bn

Delayed Foreign aid $1.0bn

Higher tax compliance $0.8bn

Bank deposit levy $0.7bn

Superannuation changes $0.6bn

 

Spending:

New PBSA listings $1.4bn

PNG aid and resettlement $0.5bn

Non-claw back of carbon comp $3-4bn

Deffered self-education changes $0.3bn

 

 

Published in Australian Economy