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Investing.com-- Australian stocks fell on Monday, while the dollar firmed as investors looked to another four years under Prime Minister Anthony Albanese after the labor party won the 2025 elections with a greater parliamentary majority.
Analysts saw the move as presenting few changes to policy over the next four years, but warned that a greater parliamentary majority could see the labor party enact more government spending and potentially risk a bigger fiscal deficit.
The ASX 200 fell nearly 1% in morning trade, with major commodity and financial stocks losing ground. Australia’s big four banks were a major weight on the index, sliding between 0.8% and 3%, after major WBC clocked a softer first-half net profit and flagged headwinds from global trade tariffs.
The Australian dollar firmed slightly, with the AUDUSD pair adding about 0.3%.
Australia’s election, which took place over the weekend, echoed a similar trend seen in Canada less than a week ago. Conservatives were initially seen primed for a victory in both countries, before a sharp reversal in sentiment towards the liberals this year.
This turn came largely amid heightened global economic uncertainty stemming from U.S. President Donald Trump, which sparked backlash against conservative parties in some parts of the globe.
Albanese, who is Australia’s first prime minister to win a second consecutive term in two decades, benefited from a turn in sentiment in March, after the conservatives unveiled proposals to slash government workers and ban federal employees from working from home. The proposal drew flak for being similar to a move by the Trump government in the United States.
Treasurer Jim Chalmers signaled that Albanese’s government will prioritize the handling of a “dark shadow” under a U.S.-China trade war, and will also focus on U.S. trade policies.
But analysts expressed some concern over stretched government spending under labor. Albanese had overseen two years of increased social security spending and subsidies aimed at easing the high cost of living.
“Our forecasts had already assumed that fiscal policy would be loosened over the next couple of years. However, insofar as labor sees its landslide victory as a mandate for bigger government, risks are tilted towards higher deficit spending than we currently expect,” analysts at Capital Economics wrote in a weekend note.
“That’s especially the case with the US-China trade war creating headwinds for growth this year.”