Markets to take PM change in their stride

THE federal Labor leadership change to Kevin Rudd is unlikely have a material impact on Australian financial markets.

Mr Rudd won a caucus ballot against former prime minister Julia Gillard on Wednesday 57 to 45 votes.

RBC Capital Markets head of strategy Su-Lin Ong said the markets generally dislike uncertainty.

"But the political situation in Australia has been fluid for a few years now and tonight's events are unlikely to have a material impact on the currency or bond markets," she said in a note to clients.

Ms Gillard has run a minority government since late 2010 when she sealed a deal with the help of the Australian Greens and independent MPs.

However, the opinion polls point to a landslide win for the Tony Abbott-led Liberal-National coalition at this year's federal election.

TD Securities head of Asia-Pacific research Annette Beacher believes the switch back to Mr Rudd - who was toppled by Ms Gillard in June 2010 - may save a few Labor seats at the election but probably won't save the government.

"We believe a decisive change of government is positive for business and consumer confidence," she said.

"The coalition are on the record to 'responsibly' lower deficits and debts, while a strong majority government, in our view, could boost investment and employment as policy certainty and leadership are restored."

Business groups were quick to congratulate Mr Rudd on his return as prime minister.

Australian Industry Group chief executive Innes Willox said the ballot put to rest the leadership distraction which has added to the political uncertainty and weighed on both the community and economy.

"We have had a long and positive working relationship with Mr Rudd and business will be deeply interested in his policy approaches ahead of the election," Mr Willox said in a statement.

He said any government faces significant challenges, particularly around workplace relations, carbon, immigration, skills, infrastructure, and Research and Development.

"A big priority for any government should be to boost our productivity and reduce costs and regulation for business," he said.

He also offered his thanks to Ms Gillard for the enormous contribution she has made during her career including most recently for her strong support for the manufacturing sector and passion to deliver reforms in the education and training space.

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