Australian Investors Nervous After Labor Party Election Win

Stock prices are likely to decline today as the market reacts to the ruling Labor Party’s victory over a pro-business coalition in Saturday’s national elections, traders said.

The victory by the Labor Party, which tends to favor easier credit, is likely to result in a half-point cut in the central bank’s 5.75% key interest rate, traders said.

Prime Minister Paul Keating claimed victory Saturday as results showed his Labor Party won 73 seats against 66 for the Liberal-National Party coalition.

Investors, especially overseas investors, had been bidding up Australian stock prices in anticipation of a Liberal-National coalition victory. The key stock market barometer, the All Ordinaries Index, soared 7.7% during the five-week campaign.

That may reverse itself now that Labor has won. “Overseas investors could be disappointed,” predicted John Bowie Wilson, a director at Hambros Securities. “There’ll be a bit of a knock (down) in the market at the start.”

Many analysts are predicting a cut in interest rates will follow the Labor victory.