Australian Election Too Close to Call as Vote Count Continues

Source: Forex News

Australia’s election came down to the wire on Saturday, with Prime Minister Malcolm Turnbull’s Coalition falling short of the 76-seat minimum needed to form a majority government.

By Tuesday evening, the Liberal/National coalition had secured 68 votes with the opposition Labor Party coming in at 65 seats. Neither side was on pace to form a majority. Elsewhere, the Greens had retained one seat, while independents had logged four. While the results were firming on Tuesday, analysts still hadn’t reached a consensus on a winner.[1]

Although Turnbull has remained confident that his party would win, he has also acknowledged his government’s missteps in handling the election and creating instability.

“There is no doubt that there is a level of disillusionment with politics, with government, and with the major parties. Ours included,” he said. “We note that. We respect it. Now, we need to listen very carefully to the concerns of the Australian people expressed through this election.”[2]

The neck-and-neck race is considered a huge boost to Bill Shorten’s opposition Labor Party, which saw a massive swing in support from the 2013 election. Shorten has already called for Turnbull’s resignation, indicating that he was “out of touch” with voters.

Shorten compared Turnbull to British Prime Minister David Cameron, who recently announced his resignation after he found himself on the wrong side of the Brexit vote.

“This guy is like David Cameron of the southern hemisphere,” Shorten said. “He leads a divided party, he has had an election and he has delivered an inferior and unstable outcome.”[3]

In the weeks leading up the July 2 vote, Prime Minister Turnbull had urged Australians to vote for stability amid the latest Brexit shockwaves, which wreaked havoc on the global financial markets and may have sown the seeds for a prolonged bout of uncertainty.[4] Those comments appear to have fallen on deaf ears, as the outcome of the national vote still wasn’t known three days after Election Day.

Australia’s economy has outperformed all of its advanced industrialized peers through the early part of the year, but strong deflationary pressures are raising fears about a slowing economy. The Reserve Bank of Australia (RBA) lowered its cash rate by 25 basis points to an all-time low of 1.75% back in May, as policymakers sought a more aggressive approach to combatting deflation. Analysts believe the RBA could be primed to slash rates again later this year.

The RBA held its cash rate steady earlier this week, but reincorporated language that implied further easing was coming.

Bank of England (BOE) Governor Mark Carney has already vowed that additional easing was likely in the coming months as the impact of Brexit begins to crystalize. Meanwhile, the Bank of Japan is widely expected to expand its embattled Abenomics program later this year. This highly accommodative policy environment is expected to continue for the foreseeable future.

[1] Gareth Hutchens (July 5, 2016). “Election results still unknown but Coalition not predicted to win majority.” The Guardian.

[2] Charis Chang and Benedict Brook (July 6, 2016). “Counting resumes to determine result of 2016 Federal Election.” News.com.

[3] Katharine Murphy and Paul Karp (July 4, 2016). “Malcolm Turnbull cannot command his party and should resign, Bill Shorten says.” The Guardian.

[4] Jane Wardell (June 26, 2016). “Australian PM urges stability vote in national poll after Brexit shock.” Reuters.

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