As we approach the 2025 Australian Federal Election, financial markets are beginning to price in potential policy shifts. While election campaigns often generate short-term noise, certain fiscal and regulatory decisions can have material implications for Australian equities, interest rates, and credit markets.
At this stage, polling indicates a narrow lead for the incumbent Labor Government, though a hung parliament remains a possibility depending on key marginal seats.
Both major parties are outlining economic strategies focused on cost-of-living relief and productivity gains, albeit through different lenses. The Labor Party has flagged continued support for renewable energy investment, a reformed stage three tax cut package, and broader housing affordability measures, including incentives for institutional investment in build-to-rent. These policies could benefit infrastructure, construction, and ESG-aligned sectors but may place upward pressure on public borrowing in the medium term.
The Liberal Party, on the other hand, is focusing on fiscal restraint, a rollback of some Labor initiatives, and policies aimed at supporting small business and private enterprise. They have also signalled support for reintroducing elements of the original stage three tax cuts in full, which may spur consumer spending but reduce headroom for new government investment. Sectors tied to discretionary spending and financial services may see improved sentiment under this policy mix.
Inflationary Impact of Policy Areas – Based on Likely Scenarios from Australian Federal Election Outcomes
| Policy Area | Labor | Liberal | Inflationary Impact (Labor) | Inflationary Impact (Liberal) |
| Fiscal Policy | Expansionary (targeted investment) | Tighter fiscal control | Inflationary | Deflationary |
| Taxation | Modified stage 3 tax cuts | Reinstate full stage 3 tax cuts | Neutral | Inflationary |
| Energy & Infrastructure | Strong support for renewables and infrastructure | Support for traditional infrastructure | Inflationary | Neutral |
| Housing Policy | Institutional build-to-rent incentives | Private sector-led solutions | Neutral | Deflationary |
| Business Support | Targeted support for households | Small business and tax incentives | Neutral | Neutral |
| Inflation Pressure | Moderate (due to higher spending) | Lower (due to tighter spending) | Inflationary | Deflationary |
| Interest Rate Impact | Neutral to slightly higher | Neutral to slightly lower | Inflationary | Deflationary |
For interest rates and credit markets, including private credit, the election is unlikely to shift the RBA’s near-term policy path. However, fiscal discipline or the lack thereof will play a role in shaping bond markets and investor sentiment towards risk assets. A looser fiscal stance may contribute to persistently high inflation expectations, keeping rates elevated for longer. Conversely, a more disciplined approach may support bond yields and ease pressure on private credit spreads over time.
Historically, Australian equities have weathered election cycles with limited long-term impact, but sector dispersion tends to increase around key policy announcements. We continue to monitor positioning in infrastructure, financials, and property-related exposures in line with policy clarity as it emerges.
Irrespective, the RBA is unlikely to shift its current policy trajectory, which could see two further 0.25% rate cuts in the next year. Wherever interest rates eventually settle, they will be more normalised by historical standards, meaning opportunities for income-seeking investors.
While the outcome remains uncertain, we encourage clients to remain focused on long-term fundamentals and diversified portfolio positioning. Rivkin’s investment approach is driven on a risk-adjusted basis, with the flagship Events portfolio generating stable returns irrespective of the political, monetary, or geopolitical landscape. ASX Income provides compelling levels of interest, which are floating in nature, a natural hedge for investors who may be worried about inflationary policies. Our ASX Blue Chip portfolio focuses on high-quality established stocks with healthy balance sheets that pay strong levels of dividend income. They typically trade on lower valuations and generally experience less volatility than growth-oriented stocks. For those with longer-term approaches and higher tolerance for volatility, both our ASX Growth and US Growth portfolios offer long-term capital appreciation potential.
