The Australian Federal Budget is due this evening at 7.30pm (local Australia time), which is during the UK morning… 0930GMT.
What to watch out for…
In brief – fears are for a ‘horror’ budget so any surprise is likely to be its not as bad as expected (see these posts in the past few days:
The ‘surprise side’ to watch out for is that the budget is not as horrible as predictions have been. The less fiscal constraint there is from the government, the more likely it is that the RBA will refrain from further interest rate cuts (subject to data going forward, of course). It may even lead to market chatter of it bringing forward rate hikes (again, subject to data coming in etc.).
For the AUD this all means the surprise side is likely to be a positive input and we’ll assess price moves in that light.
So, what are current expectations from the budget (look for results that don’t match these expectations in assessing the budget):
Budget deficit:
- Expected is around $27bn for 2014/15 (estimates range from 26 – 30bn, this compares to the mid-year review of $33.9bn)
Taxes:
- Deficit levy of 2% on incomes of $180,000 or more
- Reintroduce indexation of the fuel tax excise, adding between 2.5¢ and 3¢ to the price of petrol
- 1.5% reduction of the company tax rate, to 28.5%, to begin in July 2015
Major changes to government spending:
- Raising of pension age to 70, affecting people born after 1965
- Linking the disability support payment to inflation rather than wages growth
- Medicare fee on GP visits, of between $7 and $15
- Commitment to National Disability Insurance Scheme
- Tighter eligibility for family tax benefits with $100,000 means test
- Paid Parental Leave scheme, now a maximum payment of $50,000 for mothers earning $100,000
- 16,000 federal government jobs to be slashed
- 3000 jobs to go at the Australian Taxation Office
- $10 billion infrastructure package including spending on major projects and encouraging privatisation of state assets
