David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

Productivity isn't everything, Nobel-winning economist Paul Krugman once wrote. But in the long run it's almost everything.

That should give investors pause before panicking in the face of Australia's election Saturday, which so far has left neither party with enough seats to form a government on its own.

With the Australian dollar falling against even the British pound, economists warning of a threat to the country's AAA credit rating, and the S&P/ASX 200 index dropping briefly after a three-day rising streak, the situation may look alarming. But on recent evidence it's hard to demonstrate that political uncertainty always harms Australia's economy.

In 2010, Labor and the Liberal-National coalition found themselves tied with 72 seats each in the country's 150-member lower house, but Labor Prime Minister Julia Gillard managed to cobble together a workable minority government. Many Australians think of that period as a turbulent and unhappy one: The 2013 election that swept Labor from office delivered the coalition the biggest parliamentary majority in 17 years.

Of No Party or Clique
Annualized productivity growth under Australian governments isn't a party-political matter
Source: OECD, Bloomberg calculations

And yet the Gillard government coincided with Australia's best period of productivity growth in a decade , according to Gadfly calculations based on data from the Organisation for Economic Co-operation and Development.

Ah, but the period was a terrible one for investors, surely? That argument doesn't hold water either.

Former Prime Minister Tony Abbott won the 2013 election with calls to repeal Gillard's "job-killing" taxes on mining and carbon emissions. His manifesto promised a commission to slim down the government's role in the economy, which was ultimately drawn up by the head of the Business Council of Australia, an employers' lobby. The S&P/ASX 200 index put in its second-best post-election performance on record on the Monday after Abbott's victory.

Yet total returns on the index over the 2010-2013 period were healthy, especially for a country coming off the highs of a mining boom -- the Bloomberg Commodities Index peaked in April 2011 -- and compare well with previous governments.

Return to Oz
Annualized total return of the S&P/ASX 200 index under recent Australian governments
Source: Bloomberg

That's not as surprising as it may seem. U.S. stocks have for decades performed best when no single party controls the White House and both houses of Congress. A similar pattern holds up in Germany.

For all the doubts over who will end up holding the reins of government, and the possibility of a fresh election within months, Australia isn't yet facing a U.K.-style political crisis -- and even there, the FTSE-100 index has already recovered all its post-referendum losses.

One reason is that governments aren't so much the engine of the economy as its steering wheel. Australia's sharp reversals in productivity growth and equity returns in the past five decades are more to do with the country's passage in and out of recessions and commodity booms than anything that's been done in Canberra.

The other is that dramatic policy changes are the very definition of uncertainty. Investors may think they want the "business-friendly" prescriptions offered by right-of-center governments, and take fright at signs that they won't be delivered. But the implementation of such changes in a complex economy more often than not causes havoc with businesses' ability to forecast the future, which helps nobody.

A hung parliament , in which every change must make it past the moderating influence of independents and minor parties, can be an oddly congenial one for investors.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Going through the 19 governments that have had complete parliamentary terms since the OECD started collecting the data in 1964, you'd search in vain for evidence that elections matter very much. Labor and coalition governments have both averaged productivity growth of 1.8 percent a year over their respective administrations.

  2. Australian economist John Quiggin has suggested the term "deliberative parliament" as a replacement for "hung parliament" as a way of underlining the paradoxically beneficial effects of minority government.

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David Fickling in Sydney at

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Matthew Brooker at