Labor doesn’t bother market: Economy round up

Australian sharemarkets have moved significantly higher this morning, but it’s thanks to a strong US lead and rising commodities prices rather than Labor’s Saturday win.

At 12.45pm the S&P/ASX 200 is up 1.6% on Friday’s close to 6434.1, following a 1.42% rise to 12,980.88 on the US Dow Jones Industrial index on Friday night.

The Australian dollar is also up to US88.12c at 12.45pm, lifting from Sydney’s Friday close of US87.72c as the memory of last week’s sub-prime driven market volatility fades from currency traders’ minds.

In the year ahead, however, there will no doubt be many Labor decisions that will affect the market one way or the other. All the signs continue to point to an Australian economy straining at the limits of its capacity, and there remains a chance that the Reserve Bank of Australia will lift interest rates when it meets on Tuesday next week.

During the election campaign, many economists argued that the economy could be pushed to boiling point when the big ticket items promised by both major parties hit the economy.

On that argument, Labor would be a more responsible government if it dropped, or at least scaled back, some of its election promises, particularly its $31 billion package of personal tax cuts.