Australian shares have sunk following the High Court decision disqualifying Deputy Prime Minister Barnaby Joyce from sitting in parliament because of his dual New Zealand citizenship – a verdict that threatens the parliamentary majority of the Turnbull government.
After starting the day in positive territory, the benchmark S&P/ASX200 index plunged when the court’s decision was announced, dropping by 0.3 per cent from 5,913.8 at 1417 AEDT prior to the news, to 5,895.1 points at 1515 AEDT.
At its lowest the market retreated 0.8 per cent to 5,864.3 before regaining some ground.
The Australian dollar – already under pressure from a rising greenback – also lost ground to 76.34 US cents shortly after the High Court’s decision, from 77.09 on Thursday.
OptionsXpress market analyst Ben Le Brun said the political uncertainty had sent the market into a little bit of chaos.
“We were having a good day but we have certainly unwound all those gains on the political uncertainty that this creates,” Mr Le Brun told AAP.
He said the decision hit the market because of the possibility the coalition may no longer have a majority on the floor of parliament.
“It has always been considered that a coalition government is better for business than labour, and that is why it fell so dramatically,” Mr Le Brun said.
“If it was the other way around than the market might have actually liked it.”
But Mr Le Brun said the initial “knee-jerk” plunge could be an over-reaction.
“It is going to be an interesting final hour and a half,” he said.
“I think we can recapture 5,900 points as investors realise Barnaby will probably win the by-election and the markets will start to focus on other things.”
The major banks suffered the worst of the falls as the potential of a loss of majority for the coalition raised fears that the Labor opposition may find support for its policy of holding a royal commission into the financial sector.
“That would be one factor that the market is trying to price in today,” Mr Le Brun said.