60 Days On: Australian Election Impact on Markets

The decisive Labour Party win in May 2025 boosted market sentiment due to expectations that the renewed mandate for the Anthony Albanese government would bring policy stability. The Australian stock market has been on an uptrend since May, rising 6.86% YTD by the end of July. The election results also strengthened the Australian dollar (AUD), which surged to a 5-month high against the USD when markets reopened on the Monday after the election results were announced. By the end of July 2025, the AUD was up 5.19% against the US dollar.

The election outcome provided the Labor government with a clear signal that Australians value stability, targeted economic relief and a focus on long-term nation-building. So, how has the government fared in the first 60 days of being re-elected? Let’s take a look.

Policy Priorities Post-Election

Since May, the government has wasted no time in pushing forward with its key commitments.

Cost of Living Relief

A cornerstone of the Labour Party’s re-election campaign was further easing cost-of-living pressures. Immediately post-election, legislation was introduced to cap the cost of Pharmaceutical Benefits Scheme (PBS) prescriptions to A$25 from January 1, 2026. This move is projected to save Australians millions annually. Additionally, previously legislated personal income tax cuts, including further reductions to the 16% tax rate for lower income brackets in 2026 and 2027, are proceeding as planned, providing broader financial relief.

Housing and Infrastructure

The ambitious target of building 1.2 million new homes by mid-2029 remains a central pillar. The government is actively seeking to address “unnecessary regulation” and “red tape” in construction to accelerate this. This includes significant investments in social and affordable housing, and continued support for first-home buyers.

“Future Made in Australia”

The “Future Made in Australia” (FMIA) initiative is gaining significant momentum, with further funding announcements since the election. This includes a new $1 billion Green Iron Investment Fund to boost green iron manufacturing and supply chains, and a Green Aluminium Production Credit to incentivise smelters to switch to renewable electricity. The goal is to make Australia a renewable energy superpower and diversify its economy, with a legislated target to reduce emissions by 43% by the end of the decade.

Healthcare and Productivity

Beyond medicine costs, the government is committed to a long-term plan for more bulk-billed GP visits through direct incentives and investment in training more healthcare professionals. On the economic front, a major summit of business, union and industry leaders is confirmed for August, aiming to drive “economic reform to drive growth [and] boost productivity.” This comes as the Productivity Commission noted Australian productivity levels hitting a 60-year low, underscoring the urgency of this agenda.

Fiscal Management

The May 2025 Federal Budget, handed down by Treasurer Jim Chalmers, continued the trend of delivering surpluses, marking the first consecutive surpluses since 2007-08. This prudent fiscal approach, largely driven by strong commodity prices and a robust labour market in the preceding years, provides the government with a stronger platform to fund its commitments. However, future deficits are likely since structural spending pressures remain.

Impact on the Financial Markets

As mentioned earlier, the ASX 200 has shown resilience and continued its positive trajectory since the May 2025 election. The financial year 2024/2025 closed out with nearly 10% gains for Australian stocks, marking its best year since FY2020/2021. This performance can be attributed to several factors, including policy certainty, inflation management and rate cuts, sectoral tailwinds, andglobal market sentiment.

Finance, telecommunications and information technology stocks have especially seen significant gains. For instance, the stock of cloud connectivity services provider, Megaport Limited, was up 97.37% by the end of July 2025. E-commerce and gold mining stocks have also performed strongly. Plus, the government’s focus on renewables and green manufacturing should provide long-term tailwinds for companies in these sectors.

Meanwhile, theAUD saw an immediate lift following the election result, primarily driven by political stability, weakening US dollar, support from commodity prices and the Royal Bank of Australia’s (RBA’s) stance on interest rates. Future movements in the Australian dollar are likely to depend on the pace of further rate cuts relative to other major central banks.

How Traders Can Stay Prepared

For traders, the post-election period offers both opportunities and risks, shaped by a blend of domestic policy and evolving global dynamics. The RBA’s first rate cut in February 2025 and the May 2025 economic updates suggest a cautious easing cycle. So, closely watch upcoming CPI data and RBA statements. If inflation continues its downward trend, further rate cuts are likely, potentially pushing bond yields lower and making equities more appealing.

The “Future Made in Australia” initiative can create significant opportunities for trading stocks in the renewable energy, critical minerals processing and advanced manufacturing sectors. Do your research to discover companies positioned to benefit from government incentives and investments in these areas. The continued push for housing construction also presents opportunities in the building materials and related services sectors.

In addition, the August productivity summit is a key event to watch. Any concrete policy outcomes aimed at boosting Australia’s productivity could significantly enhance long-term economic growth prospects, making Australian assets more attractive to international investors.

The spectre of global trade conflicts, particularly from potential US tariffs, remains a significant external risk. Any escalation could dampen global growth, impacting demand for Australian commodities and putting downward pressure on the AUD and export-oriented companies. On the other hand, a de-escalation of trade tensions could provide an upside surprise.

To Sum Up

• Australia’s financial markets reacted positively to the decisive Labour Party victory in May.
• The government plans to hold a summit of business, union and industry leaders in August to drive “economic reform to drive growth”.
• The ASX 200 and AUD have continued their upward trajectory since May 2025.
• Finance, telecommunications, information technology and green energy stocks could offer significant potential.
• A weakening USD and the RBA’s monetary policies could continue to support the AUD.

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