Odds off for full term for Labor: UBS

UBS Wealth Management’s head of investment strategy George Boubouras has given a vote of no confidence in Labor’s ability to navigate a full three-year term.

Boubouras believes the Labor Government’s need to appease “all the interests of the existing coalition given such very different policy views” will create some uncertainty for business, and leaves Labor “just one by-election away” from more changes or another visit to the polls.

Boubouras questioned whether the Government as it is currently formed would be found to be a ‘practical’ solution.

“One could view that the increased debate in the lower house before legislation moves to the upper house for further debate will imply a status quo for existing policy,” Boubouras said.

“That is the optimistic view.”

Bourbouras said the first big test would be the Mineral Resources Rent Tax, from which Labor’s promise of a higher superannuation guarantee hangs.

“While a significant improvement on the [Resources Super Profits Tax], it has the potential to really test the will of the different [Labor] coalition members.”

“The reality is that a three-year term would be seen as a highly improbable outcome at this very early stage,” Boubouras said.

Despite pointing to short-term concerns for investors, particularly those in the mid and small cap coal and iron ore, gaming, health care and telecommunications sectors, Boubouras said the relative strength of the Australian economy and robust domestic demand were positive factors for the market.