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17 Dec 2013
Flash: Australia's MYEFO in focus - Westpac
FXstreet.com (Barcelona) - At 1.30GMT, Australia Mid-Year Economic and Fiscal Outlook is due, with Sean Callow, FX Strategist at Westpac, providing the Bank's take pre-release below.
Key Quotes
"There is no secret that the government will blame all the deterioration in the budget bottom line since the pre-election update on the Labor government which lost power in Sep. On our estimates, the largest contributor to a larger deficit in 2013/14 will be the new govt’s $8.8bn allocation to the RBA’s reserve fund. Other spending and revenue decisions will hurt the fiscal position both this year and the next but lower nominal GDP projections will also produce wider deficits."
"Westpac looks for the 2013/14 deficit forecast to widen to -A$43bn from -$30bn in Aug, -2.7% of GDP (though there are media reports of -$50bn this year). We expect the following 3 financial years to show steady reduction in deficits, but only to -$10bn/ -0.6%/GDP by 2016/17, rather than the pre-election projection of a small surplus. This is another challenge for AUD after a series of negative domestic headlines but (a) it not clear that wider deficits damage AUD given Australia’s very low net debt and (b) much wider deficits have been well flagged for weeks."
Key Quotes
"There is no secret that the government will blame all the deterioration in the budget bottom line since the pre-election update on the Labor government which lost power in Sep. On our estimates, the largest contributor to a larger deficit in 2013/14 will be the new govt’s $8.8bn allocation to the RBA’s reserve fund. Other spending and revenue decisions will hurt the fiscal position both this year and the next but lower nominal GDP projections will also produce wider deficits."
"Westpac looks for the 2013/14 deficit forecast to widen to -A$43bn from -$30bn in Aug, -2.7% of GDP (though there are media reports of -$50bn this year). We expect the following 3 financial years to show steady reduction in deficits, but only to -$10bn/ -0.6%/GDP by 2016/17, rather than the pre-election projection of a small surplus. This is another challenge for AUD after a series of negative domestic headlines but (a) it not clear that wider deficits damage AUD given Australia’s very low net debt and (b) much wider deficits have been well flagged for weeks."