Political uncertainty in Australia can hurt business sentiment, says Moody’s

The recent political changes in Australia can affect business sentiments negatively, according to top rating agency, Moody’s. Mr Malcolm Turnbull was sworn in as Prime Minister of Australia on Tuesday after a leadership vote that led to the ouster of incumbent Tony Abbott. Mr Turnbull became Australia’s fourth Prime Minister in 28 months. The change has evoked positive as well as negative reactions.

“If political uncertainty leads to economic policy uncertainty or dampens business sentiment, it would add to the challenges facing the Australian economy,” noted Moody’s associate managing director Atsi Sheth.

Generally leadership changes do not pose a risk to a country’s sovereign credit rating, but the “current change is occurring at a time when economic and fiscal challenges are rising,” she said, adding that “a multi-year period of strong growth supported by commodity-related investment and exports has come to an end.”

Financial sectors happy

Meanwhile, financial services giant AMP's chief head of investment strategy Shane Oliver expressed optimism that the change in leadership will help Australia’s economy. His view was also endorsed by many companies in the insurance and wealth sector, who hope the shake-up will inject more confidence in the business community, the Sydney Morning Herald reported.

The new PM’s appointment has been welcomed by many in the financial industry. Tim Plant, chief executive of QBE's Australia and New Zealand operations, said Mr Turnbull's acknowledgment of the need for a strong economic leadership “resonates across the business community”.

“We appreciate his recognition for the need for government to be truly consultative and the strong need for better understanding of complex issues, such as insurance,” Plant said.

The CEO added that it was gratifying that the new Prime Minister has recognised the need for fostering a culture of innovation and international competitiveness. There was a cheer in business circles as the Australian dollar rose slightly to US71¢ following Mr Turnbull's appointment.

Sam Hallinan, managing director of Nikko Asset Management also hoped the appointment would inject more certainty into markets and restore business confidence.

However, Wealth group Equity Trustees said a new Prime Minister does little to boost investor confidence in Australia. Paul Kasian, head of asset management at EQT, holds the view that multiple leadership changes in recent years has disrupted investor confidence and will dampen consumer spending.

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