What the 2010 Election Means for Investors

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Last week I attended an investment meeting. Top of the agenda was trying to work out what the likely ramifications were of each party winning on the weekend.

We concluded they couldn’t be more different.As one of my colleagues said, “If Gillard wins, we’ll see super contributions rise from 9 per cent to 12 per cent. They’ll also more than likely introduce Mysuper – a stock standard, no-frills account that reduces the cost of super by about 40 per cent and puts to bed many of the conflicts that have been rife in the industry for years.

“But if the coalition gets up, they’re unlikely to support an increase in super contributions, and they’ve even questioned whether they’ll ban advisor trailing commissions.”

Yet the wash-up of the weekend means one thing to investors: uncertainty. Markets hate uncertainty; it just adds another piece to the puzzle of investing.

The one resounding winner of this election was the Greens, who have transformed into a major political force. Their “greenslide” and likely control of the senate will be making some of our biggest companies very nervous.

First, the miners: The Greens have campaigned for a $2 billion increase of the super profit tax, as well as being strong proponents of passing an Emissions Trading Scheme (ETS).

Second, the banks: Word around the traps is the banks had been holding off hiking their rates (independently of the RBA) until after the election. This will be made all the more difficult given that Bob Brown floated the idea of a Super Profits tax after the CBA’s record $6.1 billion profit a few weeks ago.

Without a clear majority whoever gains government will have a hard time getting through its election promises. But let’s be honest: the reason we’re in this mess is a lot of voters didn’t think much about either parties’ policies.

Both basically tinkered around the edges, while China paid the bills.

And that gets to the heart of the problem. To make this boom really pay for our kids’ kids, the government of the day needs to invest in good quality infrastructure projects that make our nation more productive and profitable: high speed broadband, better roads, better education. But with both parties busy playing politics and pulling out the pork for the independents, the real loser out of this may end up being your long-term superannuation returns.

Photo: http://www.flickr.com/photos/slimjim/2502317801/in/set-72157600208179119/

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Related posts:

1. The 2010 Federal Election Guide