Well, that was quick.

From the Wall Street Journal: Australia Forecasts Budget Blowout (The Wall Street Journal is often gated, so if you’re unable to access the article try a search of Google news using the headline)

Here’s what readers will see, and what other media outlets will take their cue from:

  • Australia’s government forecast a 47 billion Australian dollar (US$42.3 billion) budget shortfall this fiscal year,
  • equal to 3.0% of national output,
  • widened by more than 50% on Treasury’s pre-election projection of A$30.1 billion
  • Treasurer Joe Hockey sketched a grim outlook
  • The budget wouldn’t return to surplus for at least a decade
  • Hockey forecast the country’s jobless rate would rise to 6.0% by the middle of next year, slightly better than pre-election forecasts of 6.25%
  • The government gave little detail about any new spending or cuts it would make to return to surplus.

Earlier posts here and here

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I’m going to sound like a broken record, but the risks from this are a further deterioration in business and consumer sentiment, and possible responses from the ratings agencies (this news is unlikely to be greeted with an upgrade, right …?).

The AUD is responding with a slightly higher rate. There are buyers below here through to 0.8900, and pops have so far been sold into up to around 60/65. I’ve got to remain bearish on it, but so is the market, a grind higher to take out some shorts cannot be ruled out, 0.9000 is not inconceivable. FOMC this week is going to be an important risk event too, and that’s getting close.