Australia: Budget time again

  • In Australia over the coming week, the handing down of the Federal Budget dominates. Overseas, the interest is in the latest inflation estimates in both China and the US.
  • The week kicks off on Monday with the release of the National Australia Bank business survey. In March the NAB business conditions index fell to +14.1 points from a downwardly-revised reading of +20 points in February (third highest reading on record). The business confidence index also fell to +7.4 points in March from a downwardly-revised reading of +9.1 points.
  • There are good reasons to expect that business conditions and confidence remain firm in April. Also investors will look for any signs of emerging wage or price pressures.
  • Also on Monday, ANZ releases the data on job advertisements for April. Hiring looks to have flattened. Job ads were broadly unchanged in March after falling 0.4 per cent in February.
  • On Tuesday the weekly Roy Morgan-ANZ consumer sentiment survey is released together with the latest retail spending figures from the Bureau of Statistics.
  • Consumers are cautiously optimistic and are spending a little more freely, in part by reducing lofty savings levels.
  • Retail trade may have lifted 0.3 per cent in March while over the March quarter a solid 1.3 per cent lift in spending is expected in inflation-adjusted terms. It needs to be remembered that retail trade only accounts for 30 per cent of broader household spending with services dominating.
  • Also on Tuesday the Federal Budget is handed down at 7.30pm AEST. The Federal Budget is seen as a once-a-year event. But in reality the government’s finances can be tracked over time.
  • Decisions can be made over time, rather than on the second Tuesday in May. While it is useful to have a stocktake at a point in time, most families and businesses know that budgets need to be managed and tracked over time.
  • As the Treasurer indicated this week, the government’s finances are better than expected – in fact around $7 billion better than expected. That is because consumers are indeed spending, people are getting jobs, the global economy is stronger and companies are operating efficiently.
  • Based on leaks, announcements and speculation so far, the budget will be focused on tax cuts and infrastructure spending.
  • On Friday, data on home loans (housing finance) is released. Demand for loans has softened in line with softening home prices. In fact the number of loans for owner occupiers has fallen in five of the last six months. But based on data from the Bankers Association, the number of loans may have lifted by a healthy 2.5 per cent during March.

Overseas: Inflation & trade data in focus

  • Inflation readings dominate in China and the US in the coming week. The other point of interest is Chinese trade figures, especially given the current stoush on trade issues with the US.
  • The week kicks off in China on Tuesday when April data on exports and imports (international trade) is issued. In March, China recorded a rate trade deficit of US$4.98 billion.
  • In the US on Tuesday, consumer credit data is released – a key measure of borrowing by US consumers. Economists expect that lending lifted by US$14.3 billion in March after a US$10.6 billion lift in February.
  • Also on Tuesday, a measure of small business sentiment – the NFIB business optimism index – is released. In February the index hit the second highest reading in the 45 years history of the survey. But after falling from 107.6 to 104.7 in March, a lift to 106.7 in April is expected.
  • The regular weekly data on US chain store sales will also be issued on Tuesday while mortgage finance data is on Wednesday and new claims for unemployment insurance on Thursday.
  • On Wednesday in the US, data on producer prices is expected while data on consumer prices is issued on Thursday. The core measure of producer prices (excludes food and energy) stands at a 2.7 per cent annual rate while the core consumer price index is up 2.1 per cent over the year.
  • On Thursday in China, data on consumer and producer prices is released. The annual growth of consumer prices may have eased from 2.1 per cent to 2 per cent in April with producer prices down from 3.1 per cent to 2.9 per cent.
  • On Friday in China data on money supply, new yuan loans and outstanding loans is expected.
  • Also on Friday, US data on export and import prices is released together with the monthly budget statement. If inflation is to start creeping higher, a key driver could be imported raw material costs including oil. At present, import prices are 3.6 per cent higher than a year ago.
  • The regular survey of consumer sentiment from the University of Michigan is also released on Friday.

Financial markets

  • Westpac releases its half-year results on Monday May 7.