Time‐Varying Influence of Australian Economic Policy Uncertainty on Traditional Energy Sector Performance

Abstract

This study addresses the critical problem of how Australian economic policy uncertainty (AEPU) affects the performance of the traditional energy sector, a topic of increasing importance given the sector's volatility and Australia's evolving policy landscape. Previous research has established that economic policy uncertainty generally depresses energy sector performance globally; however, there is a notable gap regarding non‐linear and frequency‐dependent effects specific to Australia's traditional energy market. To fill this gap, the study employs a novel methodological approach combining quantile‐on‐quantile regression with wavelet analysis. The empirical results reveal that, in the short run, uncertainty in Australian economic policies exerts weak and inconsistent effects on the performance of the traditional energy sector. In contrast, medium‐and long‐run results clearly demonstrate that prolonged uncertainty regarding Australian economic policies leads to a downturn in the performance of the traditional energy sector in the country. Building on these insights, we offer actionable recommendations: clearer, stable long‐term energy policies can buffer the sector from AEPU's drag; fossil‐fuel firms should strengthen liquidity and adopt phased investment plans under economic policy uncertainty.