by Duncan Murray

SYDNEY, May 20 (Xinhua) -- The re-election of Australia's conservative government on Saturday came as a relief to many investors and saw financial shares skyrocket in the week's early trading, as economic policies proposed by the defeated Australian Labor party sat dead in the water.

Prime Minister Scott Morrison's return to office was a surprise outcome to most, including investors who had begun to price in policies proposed by the opposition, including higher tax revenue and increased oversight of the banking sector.

"There were a number of areas of policy that were concerning from an investment point of view -- and given that it was conventional wisdom that it was very likely Labor would form government, investors had started to reposition themselves to defend against those potential changes in policies," CMC Markets' chief market strategist Michael McCarthy told Xinhua on Monday.

A number of those policies became key election issues and in the end, may have cost Labor the election -- including proposed changes to the rules regarding franking credits and negative gearing that would see some people, mostly older Australians, paying more in tax.

The rejection by the Australian people of the changes, along with a broadly held belief that the economy performs better under a conservative government, saw shares in the country's financial institutions surge as trade opened on Monday, including gains between 5-10 percent for big banks.

"I think the multiple policies that would affect bank bottom lines were a major area of concern and saw a lot of people shift away, so I think we could well see ongoing support over the coming days and weeks for that sector in particular," McCarthy explained.

The property market was also central to the election battle, with changes to rules regarding negative gearing capturing the interest of many young Australians, who saw it as improving their chances of being able to afford a home in the future, although in the end the changes proved too radical.

"There were concerns amongst homeowners that it would affect the value of their homes, and there were concerns among economists that the wealth effect of a big key in the property market could drag the Australian economy down," McCarthy said.

"So once again the removal of that potential policy has proved to be a positive for most groups but not all groups."

Now it is up to the government to live up to their reputation and deliver the promised prosperity which won them the election.

"I think they're more focussed on removing red tape and freeing individuals and companies up to go about their business," McCarthy said of the returning government.

"Philosophically, I think that's more aligned with a healthier economy." Enditem

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