Ryan Lam, CFA Instant Thoughts Head of Research [email protected] +852 2841 5283

27 August 2018

Not Quite the Prime Minister

 , formerly Treasurer of , is sworn in as the nation’s sixth prime minister in just over a decade. The market likes the result.  In many eyes, Morrison’s appointment sealed the end of the political drama. But that’s just not true.  Some members of the National Party, the Liberal’s longstanding ally, have indicated they may withdraw support if Turnbull was removed from power . What keeps Liberals from no-confidence motion is just a single vote.  Sep 10 th is the first date where a vote of no-confidence may be called. Until the cloud lifts, the fragile political backdrop still remains a cause of concern for holding AUD.

There is no eternal ally or the perpetual enemy in politics. , the now- ousted Australian Prime Minister, learn his lesson the hard way. Turnbull lost his throne in a political coup instigated by his own fellow Liberals on Friday. Scott Morrison, formerly Treasurer of Australia, is sworn in as the nation’s sixth prime minister in just over a decade, after beating out his rival in a leadership contest.

Early election still in sight The market likes the result, probably for two reasons. It goes without saying that Morrison can unite the party and navigate the economic water along more or less the same bearing as Turnbull’s. What stays out of common eye is that the election for Turnbull’s replacement is a safe bet, as the Liberal obtained around 68% of the vote in 2016.

In many eyes, Morrison’s appointment sealed the end of the political drama. But that’s just not true. Make no mistake: The opposition Labour needs to get someone to cross the aisle to pass the no-confidence vote. Here’s the National Party, the Liberal’s longstanding ally, comes into play. Some members of the National Party have indicated they may withdraw support if Turnbull was removed from power. They are the venerable kingmakers - what keeps Liberals from no-confidence motion is just a single vote, as the Liberal-led enjoys only a one-seat majority in Parliament.

Not long ago, Labour reiterated its focus on removing the tax treatment on investor ownership of existing housing. This could have a materially negative impact on housing, which is bearish for the Aussie. Sep 10 th is the first date where a vote of no-confidence may be called after a summer hiatus. Until the cloud lifts, the fragile political backdrop still remains a cause of concern for holding AUD.

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