Australian federal government budget – the main numbers and Australian dollar impact & outlook

  • A deficit of $A19.4 billion for 2012/2013 (going into the announcement expectations were for around $A17bn)
  • Deficit of $A18 billion in 2013/14 ($A11bn expected)
  • Economic growth outlook downgraded to 2.75 per cent in 2013/14 (3% previously)
  • Unemployment rate could reach 5.75 per cent in 2013/14
  • Net $A43bn of tax hikes and spending cuts, over the next 4 years

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AUD marked down on the session after the announcement and extended below 0.9900 in New York

Support for AUD has largely been from yield-chasing buyers, those seeing growth in non-mining related sectors of the economy, and those looking for an improvement in China. These factors have taken a back seat to concerns over commodity price falls, China slowdown, capex flows peaking, those not seeing much of a transition into non-resource extraction areas of the economy, and subsequent potential further cuts in interest rates. Overlaying all of the concerns has been the broad USD strength since late last week, which has hurried the AUD decline.

Where to from here? Well, I’ve just listed the factors to watch, and for now AUD is a sell on rallies. I’ll be back with orders and levels.

Author: Eamonn Sheridan

Eamonn Sheridan worked with Bankers Trust Australia for 13 years as a Spot foreign exchange dealer, trading across all major currencies and all time zones. He rose to a Vice President position, running spot operations during the busy European time, leaving the bank just prior to it being sold to concentrate on running his own business in the ‘real world’! The markets, however, had him hooked – he continued to trade equities, CFDs and then on to futures, giving him broad experience across financial markets. He is now active in FX and equity index futures as well as writing for ForexLive™. Eamonn is a graduate of The University of Melbourne in Australia and lives in New South Wales.

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