Photographer: Jeremy Piper/Bloomberg

Powers Shocks Loom Over Australian Consumers

  • Citizenship row may roil already weak consumer sentiment
  • BHP shares rebounding as new chair brings greater discipline

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Australia’s stocks and bonds are rallying this month, and economic data mostly continue to surprise in a good way. But a constitutional crisis undermining the government, and the prospect of even higher household power bills threaten to hurt already weak consumer sentiment.

The following charts highlight key developments in Australia this week, including shareholder optimism that BHP Billiton Ltd.’s incoming chairman will bring a new era of disciplined spending.

The High Court said Thursday it won’t hear until October the cases of Deputy Prime Minister Barnaby Joyce and four other dual-national lawmakers who face being barred from parliament for breaching the constitution. If Joyce is ruled ineligible, Prime Minister Malcolm Turnbull’s government could lose its one-seat majority, bringing fresh political uncertainty to the nation.

Australia’s political climate has deteriorated over the past five years to reach the riskiest level relative to its peers since at least 2009, according to Bloomberg’s country risk gauges. The country has lost ground when it comes to scores for government effectiveness and regulatory quality.

The citizenship fiasco underscores the problems facing governments with small majorities and could become another factor locking in weak productivity and wages growth, according to Deutsche Bank AG’s Chief Economist Adam Boyton. That could further hurt consumer confidence that’s already beset by stagnant wages.

Another cloud hanging over Australian households is surging power bills, which Citigroup Inc. says are forecast to go on climbing after they already more than doubled in the decade through 2016.

The bank estimates the coming hit to household income will be equivalent to a quarter-point interest-rate increase.

Meanwhile, the company known as “the Big Australian” is looking a bit rosier. BHP’s shares have recovered as commodities prices rebound and investors gauge that its incoming chairman will be more likely to focus on investment returns. Montreal-born Kenneth MacKenzie, 53, takes up the post next month after influencing BHP’s decisions to exit shale and delay proceeding on the $4.7 billion first phase of the Jansen project in Canada.

— With assistance by Michael Heath, David Stringer, and Jason Scott

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