Scott Morrison mojo: sharemarket up $33bn

Scott Morrison’s election win delivered the second biggest post-poll jump in three decades.

Scott Morrison at the Commonwealth Parliament Offices in Sydney yesterday. Picture: AAP

Scott Morrison’s stunning election win delivered a $33 billion sharemarket surge, marking the second biggest post-poll jump in three decades as investors bet on a property market recovery, a stronger business environment and resurgent household spending spurred by tax cuts.

Banks and health insurers led a relief rally, now that Bill Shorten’s big-spending agenda, including a tougher regulatory environment for banks and a clampdown on negative gearing, has been binned.

Economists and business leaders are expecting an economic stimulus to be unleashed by the Prime Minister’s tax cuts which, when paired with the likelihood of two imminent Reserve Bank interest rate cuts, will reignite household spending after growth slowed over the second half of last year.

The return of the Coalition to power, with a likely majority in the House of Representatives, is also expected to draw business off the sidelines following a pre-election investment strike. The absence of any major change in government policy will settle the nerves of investors who have seen plans for ­expansion put on hold over the past 18 months.

Requiring 76 seats to win a majority, the Coalition has been declared the winner of 75 seats and is narrowly ahead in three of the six seats still in doubt.

The S&P/ASX 200 rallied to an 11-year high of 6474 points — up 1.7 per cent, the second largest ­increase in 26 years following the 2.2 per cent surge when Kevin Rudd came to power in 2007.

Former Business Council of Australia president and current Energy Australia chairman Graham Bradley said there was a “sense of relief” in business that it did not face months of policy uncertainty under a new Labor government, which would have had trouble securing passage of its ­reforms in a hostile Senate.

“We would have had at least six months of uncertainty about the impact of policies and whether they would occur such as negative gearing, energy policy, franking credits and even the limit on ­accounting fees,” Mr Bradley said.

Mr Morrison will meet Josh Frydenberg today to discuss the government’s economic plan, which includes bringing back parliament before the end of June to legislate the first raft of tax cuts ­announced in the April budget.

“It is a back-to-work day that enables Australians to get back to work,” Mr Morrison said. “We are creating 1.25 million new jobs. The government will be about those jobs.”

Mr Morrison and Foreign Minister Marise Payne were briefed by defence and security agencies yesterday on the escalating tensions between the US and Iran.

The government’s infrastructure plans — a 25 per cent increase in public works outlined in the budget — is also expected to help restore consumer confidence, while the prospect of lighter-touch regulation on the banking sector, which had bunkered down in ­preparation for a Labor government promising negative gearing and capital gains tax reforms, drove a resurgence in bank stocks.

The 1.7 per cent jump on the ASX yesterday was the second largest post-election rally since 1987, as fund mangers welcomed the nation’s rejection of Labor’s ­reform agenda, which included ­aggressive action on the banking sector, intervention in the private health insurance market, ­mandating significant pay rises for workers and reform of ­concessions on property taxes.

Contact Asset Management portfolio manager Tom Millner said: “We really do think the Labor attack on franking credits and other taxes on hard-working individuals and families who were seen to be ‘rich’ impacted the result of this election. This result has made it very clear that Australians just want to be rewarded for working hard, and the results in Queensland in particular were a clear indication that the mining community is still very strong.”

As the opposition grapples with the fallout from its loss, Anthony Albanese, a frontrunner to replace Mr Shorten as opposition leader, suggested the party’s planned ban on excess franking credit refunds was dead after describing it as a “very difficult” reform that would hit people who “weren’t very wealthy”. Josh Williamson, an economist with investment bank Citi, said the Coalition’s win was “a victory for employers of labour and owners of capital”. He noted that the “more contentious taxation policies towards investment capital may never be resurrected”.

Shares in the major banks piled on $28bn, experiencing one of their single biggest day gains as National Australia Bank and ANZ shares both jumped 8 per cent, while Westpac shares rose more than 9 per cent and Commonwealth Bank surged 6 per cent.

Morgan Stanley analyst Richard Wiles said the federal election result had reduced the “tail risk” of a deeper slide in the $1.7 trillion mortgage market, which could have eventuated if there was further downward pressure on house prices and steeper regulation was applied to the banking sector.

While both Labor and the ­Coalition had promised swift ­action in implementing the recommendations from Kenneth Hayne’s banking royal commission, the government has taken a slightly less aggressive posture in adopting the inquiry’s proposals.

More than $1bn was added to the value of ASX-listed health insurers Medibank Private and NIB, which had faced the imposition of a 2 per cent cap on annual premium increases. Medibank jumped 11.5 per cent and NIB 15.8 per cent. Retailers also surged, JB Hi-Fi jumping 5.2 per cent and Harvey Norman up 3.1 per cent.

JB Hi-Fi chief executive Richard Murray said the business community was looking for policy settings to give businesses confidence to invest. “In short, all business wants is stability, to ensure investment decision are made with confidence,” he said.

Business will also avoid a government intervention to raise salaries for millions of workers, which will help boost corporate profits.

Capital Economics analyst Marcel Thieliant said: “Businesses will probably breathe a sigh of relief as Labor’s living wage won’t become reality. If Labor had followed the demand of the ACTU, it would have had to lift the minimum wage by 6 per cent this year and by 5.5 per cent next year. As such, the Coalition victory bolsters the outlook for corporate profits.”

But with wages growth stuck at record lows, KPMG chief economist Brendan Rynne said Mr Morrison faced the challenge of getting ­positive real wages growth.