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Australia markets take ruling Labor Party election win in

stride

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Labor's win boosts fiscal policy flexibility amid global

trade

tensions

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Aussie dollar hits five-month peak on broadly weaker USD

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Share market falls on Westpac earnings miss

SYDNEY, May 5 (Reuters) - Australian financial markets

on Monday largely welcomed a historic win by the centre-left

Labor Party as it strengthens the government's hand in dealing

with any serious threat to the economy from Donald Trump's

global trade war.

Prime Minister Anthony Albanese secured a resounding victory

in the nation's general election on Saturday, riding a voter

backlash against the policies of Trump that consigned the

conservative Liberal-National coalition to a heavy defeat.

The result expands the incumbent Labor Party's majority in

the lower house and boosts its ranks in the senate, providing

more leeway for the government to deal with what Treasurer Jim

Chalmers described as a global economy "going crazy."

Shane Oliver, chief economist at AMP, said Labor's victory

was flagged by most recent opinion polls and wouldn't come as a

big surprise for investors.

"I think it's probably going to be more steady as she goes

(on fiscal policy), rather than the aggressive change one way or

the other," said Oliver. "Now of course if the economic outlook

changes dramatically, then they may have to rethink."

"The trade situation is still a threat, even though in the

last few weeks that seems to have receded a little bit."

Goldman Sachs ( GS ) left its forecasts for fiscal spending, GDP

growth and RBA policy rates unchanged as the recent policy

announcement from Labor is unlikely to have a material economic

impact in the near-term.

On Monday, the resources-heavy share market slipped

0.4% but that was mostly due to an earnings miss from Westpac

bank. It has largely been driven by the volatility in U.S.

stocks over the last few months.

The Australian dollar hit a new five-month peak of

$0.6481 on the back of a soft dollar as Trump's chaotic trade

policies dented investor confidence in U.S. assets.

Ten-year government bond futures fell 5 ticks,

although that mirrored a fall in Treasuries on Friday after

solid U.S. jobs data added to market bets of more cautious

policy easing from the Federal Reserve.

For the Reserve Bank of Australia, swaps continue to fully

price in another quarter-point rate cut to 3.85% this month,

with a total of about four rate cuts expected by the year end.

Analysts say the election win strengthens Albanese's hand

with the United States in its trade negotiations and gives the

government more scope to ramp up fiscal spending to counter the

economic risks from a global tariff war.

Australia's economy is expected to pick up this year on the

back of a recovery in consumer spending, having expanded at a

sub-par 1.3% last quarter.

The worry for Canberra is that an escalation in tensions

between the United States, Australia's main security ally, and

China, its largest trading partner, risks seriously hurting the

domestic economy.

Fiscal spending has been a key driver of growth over recent

years, without which the economy would have stagnated.

TD Securities expects Australian yields to rise across the

curve particularly at the long end, adding that Labor's

resounding victory reinforces the view that larger fiscal

deficits are here to stay.

"Sure, budget deficits are not moving in the right

direction, but the election outcome is not enough to threaten

Australia's AAA credit rating," said Prashant Newnaha, senior

Asia-Pacific rates strategist at TD Securities.