The Australian share market has recovered from early jitters in the wake of the weekend's inconclusive federal election, but the closeness of the result is likely to play out elsewhere.
The benchmark S&P/ASX200 index of leading shares dropped more than half a per cent when the market opened on Monday, with investors in the dark along with everyone else over who will run the country.
But with fixed income investments offering little return in an era of low interest rates, the index recovered to close up 35.2 points - a 0.67 per cent gain.
"As with the Brexit vote, low interest rates are likely to mean that negative market reaction to the election outcome is brief," CMC Markets chief markets analyst Ric Spooner said.
"Low interest rates are keeping investors in equities until they are confronted by specific risks."
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
The Australian share market plunged about five per cent in the wake of the UK's June 23 vote to quit the European Union, but had recovered the vast majority of those losses by the end of last week.
The longer-term impacts of the federal election are likely to be felt beyond the share market, with tax reform a possible casualty of what could be a hung parliament and Senate gridlock.
"Whichever party forms the government, the lack of a strong majority - or maybe governing from minority - is likely to make a reform agenda more difficult," HSBC Australia and New Zealand chief economist Paul Bloxham said.
"The close result, and potential hung parliament, are likely to make it more difficult to pass budget reform, which we see as needed to remedy Australia's structural budget deficit and help to protect its triple-A sovereign rating."
JP Morgan Australia senior economist Ben K Jarman said there was a recent precedent for a workable minority government, but warned that the increased likelihood of a balanced distribution of Senate seats would make contentious reforms even more difficult.
"The Gillard Labor government was formed in a hung parliament situation, but was able to pass a lot of legislation," Mr Jarman said.
"This shows that the number of side-deals required, and who they're with, are important in both houses, and will define whether a minority government is workable."
