So what does the hung election mean for the economy, business and the markets?
It’s too early to say what the impact will be on the economy, but the dollar and shares will weaken today because of the uncertainty, which is a natural reaction.
Because we haven’t been in this situation since the dollar floated and deregulation started in the 1980,s the reaction could be large (i.e. big falls in the dollar, followed by big rises).
The sharemarket could open down sharply and trade uncertainly as the vote count continues, the final numbers are computed and then the horse-trading starts over a link up to the independents, which will impact policies.
The AMP’s chief strategist, Dr Shane Oliver said that coming at a time of renewed concerns regarding the global economic outlook, "the Australian election outcome will likely add to local investor nervousness in the short term".
"Uncertainty over the election outcome as to who will govern, fears of a possible drift towards less business friendly policies reflecting the increased power of the Greens, worries about less decisive policy making and a likely absence of productivity boosting longer term reforms under a minority government will all likely add to jitters in the Australian share market and in the $A in the week ahead.
"A further fall on Wall Street on Friday was already pointing to a weak start to Australian share market trading on Monday – with the futures index down another 9 points – and election uncertainty is likely to add to this. "
So watch some of the following sectors and companies.
Mining stocks will trade uncertainly with the opposition committed to dropping the resource tax, but investors should be alert to fact that if the Coalition manages to form government, it will have to deal with the Greens in the Senate and they are committed to a resources tax and one that resembles the first effort from the former Rudd Government.
So to get legislation passed, the Coalition will have to horse trade with the Greens, so don’t rule out a new mining tax completely.
But BHP Billiton’s 2010 results this week will be the most immediate dominant factor for the mining sector.
Don’t look for anything in the way of significant price rises for iron ore and coal miners, such as Macarthur Coal, Centennial Coal, Fortescue Metals Group, Mount Gibson Iron and Atlas Iron.
Mining contractors and service companies won’t be impacted either way.
Think Orica, Monodelphous Group, Campbell Brothers, Leighton Holdings, Worleyparsons, Clough, Downer EDI, UGL, Macmahon, Boart Longyear and a host of others in this sector.
But if the Opposition wins, the National broadband Network is off, so Leighton will be impacted as it’s the biggest contractor in the country and runs the NextGen fibre optic network.
Of course a Coalition government and the ending of the NBN will see big losses for Telstra, where the dividend is already under pressure.
Under Labor Telstra will get $11 billion in return for handing its fixed-line assets over to the government so it can be used as the backbone for the National Broadband Network.
Under a conservative administration, the firm would keep its quasi-monopoly over the country’s old copper-wire phone network, which is losing customers, revenues and profits daily.
In fact nearly 1,000 customers a day dropped their fixed line services with Telstra in the year to June.
A fall in the Telstra share price will cause bigger losses for the country’s Future Fund, which still owns 10.9% of the Telco.
Telstra’s rivals, Optus, Telecom Corp of New Zealand’s AAPT, iiNet and TPG Telecom will all lose under a Coalition government, but gain from the NBN if Labor holds on to power.
In healthcare, the Opposition revealed last week that it plans more cuts to the Pharmaceutical Benefits Scheme and to health spending on services, while it would sell Medibank Private, if it can.
There could be obstacles to the sale as there was when the Howard Government tried it.
Pathology groups are expected to be better off with a change of government. That would favour Sonic Healthcare, Healthscope and Primary.
Under a Labor government, pathology companies face more cuts in government funding for pathology tests, while historically, funding has been more stable under Coalition governments.
Primary Health Care, which also runs medical centres, would be a winner, as the Coalition has said it will dump plans by Labor to build new "super centres" for general practitioners.
In financial services, the big decision is with the ACCC on the NAB-AXA plan that will come around September 9, or a bit later.
If the deal is ruled out, there may be legal action by the NAB, or the AMP could step in, but it may be a stretch for the Sydney company after the weak interim profit last week.
In resources the big decision on the BHP-Billion-Rio Tinto iron ore joint venture is with the ACCC, and other regulators.
There’s nothing a new government (especially a Coalition one) can do to change any decision from the ACCC.
And despite who wins government, watch for the banks to try and push through a rate rise of up to 0.15%.
If the Coalition wins and the banks push up rates, it will test a new Federal Treasurer and Prime Minister.
Their reaction will be similar to what we heard from the Rudd Government, lots of noise, but ineffectual.
