The election result isn't all bad. If you own shares, you shouldn't be unhappy we don't have a government yet. That's because there's a chance that the longer we don't have a government the better your shares will perform. Or at least that's the theory according to some American investment strategists.
A few years ago, economist Mark Skousen highlighted that between 1965 and 2007 the S&P 500 Index increased at an annualised rate of 1.6 per cent when Congress was in session, and 17.6 per cent when it was out of session.
Another study analysing sharemarket returns going back to the 19th century concluded that 90 per cent of the gains made by the Dow Jones Industrial Average occurred on days when Congress wasn't sitting. Starting in 1897, if a dollar had been invested in shares on days when Congress wasn't sitting, and was then converted to cash on days Congress was sitting, by 2000 that dollar would be worth $216. The strategy of doing the opposite would have turned that one dollar into the princely sum of two dollars.
In the US, the ''Congressional Effect Fund'' was established in 2008. It advertises itself as ''the first mutual fund to explicitly seek to minimise investor exposure to potentially negative impact of new and proposed congressional legislation on the broad stockmarket''. It rejoices in the insights of people like Thomas Paine, ''That government is best that governs least'', and judge Gideon Tucker, a New York circuit judge who in 1866 pronounced: ''No man's life, liberty or property are safe when the legislature is in session.''
The sort of analysis that's been done in the United States hasn't been performed for Australia. But there's no reason to think the theory wouldn't apply here as well. Just think what the national broadband network has done to Telstra's share price. Or what the resource super profits tax did to mining stocks. Plus, of course, there's the spectre of legislation to set a carbon price. (Incidentally, it's ingenious how Labor and the Greens don't talk about putting a tax on carbon emissions -- they instead call it setting a carbon price).
And those are only examples from the past 12 months. If you go back a century there would be dozens of examples of how successive Australian parliaments have destroyed shareholder value.
Admittedly there are some things that Parliaments do that are useful. Such as passing tax cuts. But the bad days in Parliament outweigh the good days. Even if Parliament isn't actually passing legislation, there's the threat of legislation, and that creates uncertainty, and uncertainty is bad for business. Even after a law is passed there's the uncertainty of how it will be interpreted. As laws become more detailed and more complex, uncertainty increases. Single pieces of legislation now routinely run to hundreds of pages. Barack Obama's package to overhaul financial regulation in the United States totalled more than 1000 pages. The legislation to establish Kevin Rudd's emissions trading scheme was 374 pages. Inevitably, a government will be formed in Canberra and at the moment it's likely that it will be Julia Gillard who'll be sworn in as prime minister, eventually. Soon enough Parliament will start passing laws.
It could be however, that as a result of the rise of the independents, the process of passing laws will at least be slowed down. If the power of the executive over Parliament were weakened if there were an independent speaker. and if committee structures were strengthened, there's the possibility well get fewer laws, and the laws that we get will be better.
There's scope for a lot more scrutiny to be applied to the proposals that governments present to the Parliament. An upper house not controlled by the government has the potential to do some good. Hostile upper houses are not necessarily an impediment to reform, and there are plenty of precedents to demonstrate this from here and around the world. John Howard ultimately got his goods and services tax through a Senate he didn't control. In the US, Ronald Reagan, for his entire period as president, never had the benefit of a Republican party majority in the Congress.
It's nice to see that Australians are learning to live without a government. We've adjusted quickly. After nearly a fortnight, the machinations in Canberra aren't even the lead story on the nightly news. Maybe some positives will have emerged from a hung Parliament. For one thing, maybe well have learned we don't need government quite as much as we think we do.
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