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Jeffrey Hutton is a Morningstar contributor.

Domestic political uncertainty and the prospects for further corporate earnings downgrades may be the last remaining hurdles for a local sharemarket that has underperformed global peers since 2009.

Opinion polls this week showed opposition to the federal government's carbon tax climbing to a record, with support for Labor showing few signs of life.

"It's an input," says Morningstar's head of equities research Peter Warnes.

"You can't put a number on how much it's holding back the market, but it's meaningful. When you've got the pendulum swinging one way or another it affects sentiment."

At stake is the prospect for a domestic business environment that can seize on cheaper credit, improving overseas sentiment, as well as a more competitive currency and emerging signs that China's expansion is sustainable.

"This government is so on the nose that it affects consumer confidence," Warnes says.

After outperforming global shares through the last decade, Australian equities have underperformed since October 2009, says AMP Capital head of investment strategy and chief economist Shane Oliver.

The local market returned about 5.5 per cent a year during the three years ending 30 June, compared with 10.1 per cent for global shares in local currency terms during the same period, he says.

Over the past financial year, global shares have slipped 2.1 per cent in local currency terms, while Australian shares have slumped 6.7 per cent, Oliver says.

Even so, shares around the world are cheap. The average forward multiple of global and Australian shares is 10.8 times earnings - well below historical norms, Oliver says.

The gap between the forward earnings yield on shares and the 10-year bond yields in the US and Australia is almost as wide as it was during the global financial crisis, when investors dumped shares and piled into bonds for safety, he says.

While volatility will characterise the local market, most of the bad news holding it back is already priced into the shares.

"After worries about the global growth outlook and added constraints on Australian shares, sharemarkets are now very cheap compared to traditional defensive assets like bonds," Oliver says.

"They should benefit over the next financial year, even though the broad environment is likely to remain one of constrained growth and volatile returns."

A Newspoll this week, which averaged results over the past three months, showed support for the governing Labor Party stuck at 30 per cent, while a Nielsen poll in Fairfax (FXJ) newspapers showed 62 per cent of respondents opposed the carbon tax, which came into effect this month.

Recent corporate earnings downgrades include two from construction materials maker Boral (BLD) in as many months, as well as David Jones (DJS) and Myer (MYR), Seven West (SWM) and fund manager Perpetual (PPT).