Australia: Alternative budget, but a better run of data - ANZ

According to analysts at ANZ, Australian Government’s budget seemed to disappoint some people from a macroeconomic perspective.

Key Quotes

“In part, we think this reflects a focus on only those tax cuts announced on the night, rather than taking into account the cuts announced last year and in the MYEFO, which households have not yet received because of the delivery mechanism (ie a refund payable after 1 July).”

“Households will get a considerable cash sum in the second half of 2019 that we see adding around 0.8ppt to income. And this will happen regardless of the election outcome, with Labor planning to add an additional $1bn in cuts to stage one of the Government’s plan.”

“Beyond that, Labor’s plans diverge considerably toward higher tax and higher spending. We don’t yet have the detail required to assess the plans overall.”

“”The recent economic data has mostly been stronger than expected, often by a considerable margin. While some caution about the bounce is appropriate, we think it indicates the economy has not weakened further in the early part of 2019. In our view, this should see the RBA on hold in May, which will challenge aggressive market pricing of rate cuts. Admittedly, we do have to get past the Q1 CPI first. A material downside surprise could trigger the RBA to act on what we view is its subtle easing bias.”