What Joe Biden's election will mean for Australia's economy


Global stockmarkets have hit the gas in the wake of Joe Biden's election victory - a stinging repudiation of an incumbent president who has repeatedly measured his stewardship of the US against the stockmarket.

The ASX closed today at an eight-month high, the DOW is up, as is the NASDAQ, and the Nikkei launched to a 29-year high. This is despite COVID-19 spiralling even further out of control in Europe and the US.

Investors like predictability, which is a big part of the reason markets are buoyed at the prospect of a Biden presidency.

joe biden australian economy

"Although a Biden win was pretty much priced in by the markets, his victory will eliminate uncertainty, which they loathe, and they will rally further as a result," says deVere CEO Nigel Green.

"Even possible legal challenges from Trump will be dismissed by investors who will instead be focusing on the renewed certainty and stability that a Biden White House will bring, including key areas such as trade tensions with China, keeping the US in the World Health Organization, resigning the Paris climate agreement, and abiding by other international agreements and longstanding international allies."

Markets favour a Biden presidency, so long as it's accompanied by a Republican-controlled Senate, which would block democrat-led reform that would be seen to hamstring companies.

"A divided government would constrain the Biden administration's ability to implement plans for large-scale fiscal stimulus and public investment, tax, healthcare and climate-related legislation," reads a BlackRock bulletin.

"We see an increased focus on sustainability under a divided government, but through regulatory actions rather than via tax policy or spending on green infrastructure."

On the trade front, a Biden presidency would probably reverse the economic isolationism championed by President Trump.

"It also would likely signify a return to more predictable trade and foreign policy - even as US-China rivalry is set to stay elevated due to bipartisan support for a more competitive stance."

Among the sectors, BlackRock expect tech and healthcare to perform well under a Biden divided government, with emerging market assets also likely to perform well on improved trade sentiment, especially in Asia with the exception of Japan.

So what difference will it make to the Australian economy?

"The main positive implications from a Biden Presidency for Australia are likely to be: ultimately a stronger US economy, which will benefit the Australian economy; a stronger, more consistent relationship with the US; a toning down of the trade war with China in favour of a more diplomatic and engaged approach to resolving trade issues, which will be less negative for Australia; and US re-entry into the Trans-Pacific Partnership," says AMP Capital chief economist Shane Oliver.

"More aggressive action on climate change in the US may also force Australia and Australian companies (that engage with the US) down a more aggressive response to climate change, too."

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David Thornton was a journalist at Money from September 2019 to November 2021. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.