Hung parliament to hit Australian markets: analysts

Agence France-Presse

Posted at Aug 22 2010 02:37 PM | Updated as of Aug 22 2010 10:38 PM

SYDNEY - Australia's political deadlock is set to hurt financial markets with the uncertainty expected to send share prices and the local currency lower, analysts said Sunday.

In elections Saturday, neither the ruling Labor Party nor opposition Liberal/National alliance won enough seats to govern alone.

"Markets traditionally don't like uncertainty and clearly markets would have been anticipating a (clear) result," UBS economist Scott Haslem told AFP.

"So the market will have to deal with some uncertainty when it opens up on Monday."

In advance of the election, Sydney's main share index lost 1.07%, or 48.1 points, to 4,430.9 on Friday in line with regional falls.

Haslem said the Australian dollar would likely fall amid the stalemate, which has seen Labor Prime Minister Julia Gillard and her conservative opponent Tony Abbott battling to win the support of five minority MPs.

"What is more likely is that you end up with more volatility than you end up with a fundamental move in the currency, because fundamentally nothing has changed (to the economy)," he said.

The hung parliament leaves the future of the government's plans for a tax on the nation's profitable mining sector and a national high-speed broadband network hanging in the balance.

Commsec chief economist Craig James said any political uncertainty was "a major negative for financial markets".

"In the short term the Aussie (dollar) has the potential to lose ground," he told AFP, saying the currency could lose as much as one US cent after closing Friday at 89.05 cents.