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Following Friday’s Liberal Party leadership spill, which saw former Treasurer Scott Morrison elected as the 30th Prime Minister of Australia, several industry stakeholders have raised concern over the effect that such instability will have on the domestic market.
ANZ senior economist Felicity Emmett noted the risks associated with political instability, despite claiming that markets may have become accustomed to changes in leadership.
“We [ANZ] acknowledge that uncertainty around the outlook and, particularly, around government policy has the potential to weigh on confidence and lead firms to postpone spending and hiring decisions. Uncertainty around government policy is high at present,” Ms Emmett said.
“While the link between political uncertainty and business conditions is inconsistent, we are alert to the possibility that the current mess in Canberra may delay investment decisions.”
The broking industry has also voiced its concerns, with a spokesperson from the Commercial and Asset Finance Brokers Association of Australia (CAFBA) stating that clients are calling for stability.
“In speaking with clients, [all] SME owners and operators, CAFBA knows that our clients want stability in government, as this increases their confidence in making decisions in the day-to-day running and the longer-term looking-forward aspect of shaping their businesses.
“CAFBA wants this stability, because what is in the best interests of our clients is CAFBA’s major concern in this current political climate.
“All government should work in the best interests of those that they serve — just as CAFBA members work to achieve the best results they can for their SME clients.”
CEO of the Australian Finance Group (AFG) David Bailey added: “My personal view is that I do get a level of concern as to the rate of change across both parties around prime ministers and unseating of prime ministers.
“I sometimes wonder whether the country’s interests are at heart with some of this. It just causes turmoil and confusion, and heaven knows what that means to the overseas investment community looking at Australia.”
However, Moody’s Investors Service has said that recent political changes would not alter Australia’s credit rating profile.
“The changes in the leadership of the ruling Australian Liberal Party have no implications for Australia’s sovereign credit profile,” Moody’s noted.
“Moody’s is assuming the absence of significant changes in the nature and implementation of policies.
"Australia’s AAA rating is supported by the country’s very high level of economic strength and moderate level of government debt.
“Our assessment of Australia’s institutional strength takes into account a greater degree of fragmentation in broad political representation at the level of the Commonwealth over recent years which, at times, constrains the capacity of successive governments to pursue policy changes.”
Ms Emmett also said that she does not expect the recent leadership change to have a “material impact” on economic conditions, but noted that ANZ would be keeping a close eye on developments.
“We will be watching the business surveys closely for any signs of a pull-back in hiring intentions or capex plans,” the ANZ senior economist said.
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