Punters backing the majority rule
The sharemarket hates elections, but it usually has a ball after them. Especially as there'll be a majority government. How can I be so sure?
By listening to the punters, not the pundits. Since money speaks the loudest it's worth checking Centrebet, which has never been wrong. When I last looked it was tipping a Coalition win with a 30-seat majority. Guess that's also why it sees Bill Shorten as Labor leader by year's end.
This might change after Labor's policy speech, which we don't hear until almost walking into the polling booth, but I can't see us risking a minority government again though goodness knows how the Senate will finish up. Ever since Federation the market has on average done better under the conservatives, according to a study by Andrew Worthington for the University of Wollongong. The wonder is that it hasn't popped up in the Coalition's advertising.
Maybe it's because the sharemarket had a rollicking time when the Hawke government won.
Then again there was also a global bull market, which wouldn't have cared who was running the shop here.
You'll be pleased to hear that for 30 years the sharemarket has typically gained 5.4 per cent three months after an election irrespective of which side wins. The average three-month gain over that times was 1.8 per cent according to Shane Oliver, head of investment strategy and chief economist at AMP Capital.
And this time the market has something to look forward to - the Coalition's 1.5 per cent cut to company tax. That has to be good for shares, surely.
Not so fast. It doesn't start until 2015 - a delaying tactic the Coalition learnt well from former treasurer Wayne Swan - and companies with profits over $5 million will be slugged by the paid parental leave levy anyway. Oh, it'll also trim the tax credit from dividend franking to 28.5 per cent.
Abolishing the mining tax would be good for resources stocks if they were paying it (they aren't). The Coalition also wants to review the banking oligopoly, which doesn't sound promising for bank stocks.
One thing we know about the market is, it likes the sight of blood. And the budget deficit has been fattened up for the abattoirs (should that be the Abbottoirs?).
Trouble is, Tony Abbott might be portrayed as a slasher but his list of promises reveals it doesn't come naturally. As another former treasurer, Peter Costello, once said, Abbott's spiritual home is the old Democratic Labor Party (DLP), which though socially conservative saw nothing wrong with government spending - especially on welfare and defence.
Which brings me to tax and the Coalition's promise of a review. Didn't we have one of those?
If it's done by economists, then surely they'll come up with identical recommendations to the much-ignored Henry report.
Henry's committee wasn't allowed to look at the GST but the new review will, with the bizarre proviso that the government won't accept whatever it says about it.
When both sides promise not to expand the GST, better watch out.
No, the real difference for the market will be wages costs. The playing field has been tilted so far towards more union power it's no wonder small businesses are sliding right off it.
Labor won't change the rules since it doesn't need to, and the big unknown is how far the Coalition, seared by the politics of Work Choices, would go.
Read David Potts in Weekend Money, with
The Sunday Age.
Twitter @money potts
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