Headless galahs over Aussie election result

New Zealanders woke on Sunday to the sight of Australians behaving like headless chooks (or maybe headless galahs) over their first hung Parliament in the modern era.

They’re not used to that sort of thing over there. We could perhaps adopt a famous line from Australian film.

Hung Parliament? That’s not a hung Parliament.

This is a hung Parliament, mate.

The Australian Green Party will pretty clearly back Labour: that leaves the group everyone is calling a “handful of independents” to determine the result.

The “handful” are a many and varied group and appear, jointly and severally, to be very independent.

In fact, reading the campaign literature of one or two of them, they are clearly as independent as a cut snake.

We’re used to that sort of thing over here, of course. The Aussies need to harden up a bit.

Seriously, though, the immediate effect is likely to be a wobbly Australian currency.
As yet the election has not affected the New Zealand currency except for the New Zealand/Australia cross-rate, which has already seen a shift of more than half a cent.

Depending how long that shift lingers – and how much volatility accompanies it – this could adversely affect New Zealand firms exporting into Australia.

“The very low level of the kiwi/Aussie cross rate has been a key source of support for manufacturing in New Zealand,” Bank of New Zealand strategist Mike Jones said.

“The cross rate has already moved half a cent or more … Political uncertainty is not something financial markets like very much and we’re likely to see more volatility [on the currency] and perhaps more uncertainly reflected in the equity markets.”

As far as policy shifts the most important one - the development of a single economic market – is not likely to be affected.

That is, it will continue at much the same molasses-like pace it has continued at for the past decade.

As for major policy changes, Tony Abbott’s Liberal-National Party coalition promised a much larger increase in government spending - $A20 billion - than Julia Gillard’s shakily incumbent Labor Party did.

A change in government could see a significant boost in Australian government spending, with all the flow-on effects on the Australian economy – which is, never forget, New Zealand’s largest export market.

The other impact, if Mr Abbott becomes prime minister, is a dumping of Australian’s version of the emissions trading scheme. That could also put pressure on the New Zealand’ government’s ETS, which came into effect last month.