One thing Australians are seldom accused of is a lack of confidence. However, low confidence can account for much of the slow down we are now seeing in the Australian economy. There are some obvious reasons for this.
The softer growth out of China has translated into lower prices for key iron ore and coal exports. This in turn has impacted plans for future capital investment by the larger mining companies. Also, job losses in manufacturing on the back of a high Australian dollar have hurt.
Nevertheless, in conversations with diverse Australian corporates over the last 6 months, the real source of uncertainty lies in the distinct lack of political leadership at the federal level. In our view, filling this void will see a significant lift in both business and consumer confidence. This is why the federal election on September 14 will be so important.
While a change in government will not be an automatic panacea, over time it will give business the confidence and flexibility to invest in improving productivity, which should increase profitability. Key beneficiaries will include companies in the manufacturing, construction, transport and services sectors.
A change in government could be just the tonic that the Australian economy and share market are looking for.