Table of Contents
Australian Federal Elections and Their Impact on the Stock Market: A Historical Analysis
As Australia approaches its federal elections, scheduled for May 2025, the influence of these political events on the stock market is a topic of keen interest. Historically, Australian stock markets have shown resilience during election periods, with limited variations in performance when comparing the major political parties: the Australian Labor Party (ALP) and the Coalition. However, this upcoming election occurs amid economic challenges not seen in over 30 years, prompting questions about the potential implications of political outcomes.
Historical Context
Over the last half-century, Australian federal elections have typically coincided with market peaks rather than corrections. In fact, this will mark the first time since the March 1990 election that Australians are voting during a stock market correction—a situation that, back in 1990, preceded a significant recession, famously dubbed by then-Prime Minister Paul Keating as "the recession we had to have."
So, how have these two major political parties fared in terms of stock market outcomes over the years? A look at Australian federal elections since 1980 yields intriguing insights into the correlation between government leadership and stock market performance.
Performance of the ASX under Labor vs. the Coalition
When assessing the Australian Stock Exchange (ASX) performance across election years, both major parties held power for an equal number of terms—eight terms each. An analysis of the All Ordinaries Total Return Index (a historical benchmark that includes dividends) since 1980 shows that total stock market appreciation was significantly higher under Labor at 361.2% compared to the Coalition’s 265.1%. However, in terms of average appreciation per term, Labor led with a robust 45.2% against the Coalition’s 32.0%.
Interestingly, when examining median appreciation per term—an important metric that mitigates the influence of outliers—the results are far closer. Both parties displayed comparable performance metrics, with Labor at 29% and the Coalition slightly behind at 28%.
Market Volatility: Corrections and Bear Markets
Although both parties oversaw periods of market growth, an important consideration is the volatility associated with each administration. Since 1980, there have been 17 corrections and 12 bear markets, with Labor presiding over three fewer corrections than the Coalition (10 to 3). When it comes to bear markets, the Coalition, however, experienced a slight edge, having managed six compared to Labor’s five.
Notably, external factors such as global financial crises and the COVID-19 pandemic played significant roles during these downturns, highlighting that political leadership may not always correlate with market outcomes during crises.
Economic Management: GDP Growth
Examining the broader economic performance offers additional insights. There have been three recessionary periods since 1980, with one occurring under each of the two parties if the COVID recession is excluded. Despite a limited data set, Labour’s average GDP growth was slightly higher at 0.78% compared to 0.71% under the Coalition. However, median growth figures offered a different perspective, yielding 0.80% for the Coalition and 0.70% for Labor.
Furthermore, the Coalition managed to maintain stability, with a lower percentage of time spent in GDP contraction compared to Labor, arguing for a trend of sound economic management.
Conclusion
The data suggests a nuanced relationship between political parties and economic performance. Both Labor and the Coalition have experienced economic booms and downturns. If one were to lean towards a conclusion, based on available statistical data, it could be argued that the Coalition manifests slightly superior economic management metrics, particularly regarding median GDP growth and lower rates of economic contraction.
While the numbers provide an analytical backbone, it must be noted that political ideology and interpretation of data play significant roles in any discussion surrounding these outcomes. With upcoming elections looming, these statistical analyses may shape perceptions as voters weigh their options in choosing the leadership that may most influence Australia’s economic trajectory in the future.
