Why Australia’s luck is set to run out
“From 2002 to 2012, Australian equities returned 11.8% per year in sterling terms”
On 21 May, Australia went to the polls. The incumbent prime minister and leader of the centre-right Liberal Party Scott Morrison sought to win a consecutive fourth term in office. Late on election night, Morrison conceded and on 23 May Anthony Albanese, leader of the centre-left Labor Party, was sworn in as prime minister. But Albanese’s victory may be a Pyrrhic one.
Labor’s election looks very much like a decision to kick out the other guy. Much of the debate was thin on policy discussion and heavy on personalised attacks on the likeability of the incumbent prime minister. Labor enters government with a narrow outright majority, but more of a wish list than a strategy. For example, Albanese has promised increased healthcare spending, increased education spending, increased childcare spending, and to promote renewables. He has also promised to give unions more power via laws criminalising “wage theft” and a commitment to reducing carbon emissions by 43% by 2030.
Australia has historically often delivered good returns for investors. In the ten years to the end of May, the MSCI Australia had an average total return of 9.3% per year in sterling terms, ahead of the UK (7.6%) although well behind the US (16.6%) like almost all markets. Over the previous decade – when the commodity boom was in full flow – Australia returned 11.8% per year, while the UK delivered 4% and the US returned 3.75%. So any investors who think another commodity super-cycle is getting under way may be
