Labor vs Liberal: Which government is better for Australian stocks?

Labor has secured 93 of the 150 seats up for grabs in the House of Representatives, with a few still in doubt - more than Kevin Rudd or Bob Hawke claimed in their maiden election victories - but does this historic win over the Coalition spell bad news for Australia's stock market?

History says no. Over the last 45 years, stock market returns have shown little correlation with which political party holds power, according to Morningstar equity strategist Lochlan Halloway.

Since January 1980 - the inception of Australia's longest-running index, the All Ordinaries, market performance under governments of different political persuasions has been similar.

Malcolm Fraser's Liberal government (1975 to 1983) delivered annualised returns of 5.7%.

Under Labor's Bob Hawke and Paul Keating (1983 to 1996), the index returned 16.5% per year.

John Howard's Liberal government (1996 to 2007) produced 14.3% annually.

Labor's term under Kevin Rudd, Julia Gillard, and Rudd again (2007 to 2013), saw returns of 0.4% per year.

The Coalition governments of Tony Abbott, Malcolm Turnbull, and Scott Morrison (2013 to 2022) delivered annualised returns of 8.3%, while under Anthony Albanese, the market has returned 8.4% per year so far.

Over the full period, Labor governments have averaged 10.85% per year, while Liberal-led governments averaged 10.87%.

"Returns have been remarkably similar between the two parties since 1980," Halloway said.

He added that while there's variation at the level of individual prime ministers - with equities performing best under Hawke and Keating (1983-1996) and worst under the Rudd-Gillard-Rudd period (2007-2013), both Labor governments - such comparisons can be misleading.

"Global forces play a huge role in Australia's equity market returns," he said.

"John Howard, for example, presided over a China-led mining boom-an event whose origins and benefits were largely external to domestic politics. Meanwhile, Rudd took office in the early days of the global financial crisis which had an enormous bearing on the woeful stock market performance of his tenure."

He said a better benchmark might be to compare the performance of the Australian market against global equities. That helps control for broader external forces and brings domestic factors - where government policy has more influence - into sharper focus.

"But again, the difference between parties is negligible," he said.

Australian equities underperformed the MSCI World ex-Australia Index by an annualised 0.1% under Coalition governments, and by 0.3% under Labor.

"Given that total returns over the period were nearly 11%, the magnitude of underperformance in both cases is trivial," he said.

"The bigger point here is that Australian equity performance has historically tracked global equity performance very closely-casting doubt on how much domestic politics really matters for our equity market."