Australia has a new PM elect, Aussie dollar responds positively, ASX futures down 15 points

The last thing any Australian reader will need this morning is another political opinion, so I'll keep it narrow and report the facts for our readers overseas:

  • There was an Australian government leadership challenge last night
  • Will likely result in a coalition that remains intact, made up mostly of the Australian Liberal Party (centre/right, similar to UK Conservative Party) with support from the National Party, which represents rural voters
  • The new leader Malcolm Turnbull fits the New Zealand PM John Key's mould to some extent, a wealthy ex-banker that garners expectations of sound economic management skills - read his Wikipedia bio here
  • His new cabinet will have until some time in the second half of 2016 to please voters before the next Federal election
  • A mid-year economic and fiscal outlook document (a government economic update released between full budgets) will need to be delivered by 12 November, by my calculations - so this is a date to focus on with regard to changing economic policy in Australia
  • With falling tax revenues linked to commodity prices and a budget deficit that won't go away, there will be intense focus on the 2016 fiscal year budget and what the new leader and Treasurer can do to inspire confidence, which will be released in May 2016
The Aussie dollar responded well to this news - as you can see from today's first one-minute chart on the AUDUSD, the dollar began to rise when the leadership challenge was made formal - quite a few confident punters in that market, as the result of the ballot didn't become known until five hours or so later. Apart from that, the only practical matter that comes to mind this morning is one that Shannon Rivkin just raised, which is how will this affect the bid for Asciano (AIO) by foreign suitor Brookfield Infrastructure.

At this point, no new Treasurer--who has ultimate say over foreign takeovers--has actually been announced. But we do know that one of the mistakes that (presumably) outgoing Treasurer Joe Hockey made early in his tenure was to block a bid for Australian grain handler GrainCorp (GNC) by Archer Daniels Midland at the behest of the rural voters who back the National Party of Australia; however, the National Party's view on this leadership change is yet to be known - hopefully any paranoia about foreign takeovers of Australian assets has abated and the new Treasurer can carry the 'Australian Is Open for Business' torch. Brookfield Infrustructure was up a little overnight, but not enough to read into anything - Rivkin Trader clients can type in BIP to their platforms to view that price.

My apologies for yesterday, I said that Australia's ASX 200 had about 200 points cushioning between current levels and key levels around the 5,000 mark - that should have read 100 points. This morning the the ASX 200 futures are trading at 5,076, down 15 points from yesterday, and we have just under three days before the US Federal Reserve's decision is made known. So just keep in mind that trading into the Friday morning Fed interest rate decision (Sydney time) will bring with it a little more risk if we are at or around 5,000. 


Source: Rivkin, Saxo Bank

To view the Rivkin economic calendar and Global Markets matrix, members can click here.

This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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