Australian investors face significant news today. In a rare co-incidence, the RBA will unveil a monetary policy decision this afternoon ahead of the Treasurer delivering the Federal Budget tonight. The Australian dollar is trading higher, and futures indicate a positive start to share market trading, ahead of these key events. Regional markets are also buoyant after growth positive moves overnight as the US Congress inches towards another fiscal stimulus package.
Although interest rate markets are trading around 0.15% below the current Reserve Bank of Australia cash rate target, they are not necessarily indicating a rate cut. The RBA has maintained higher levels of liquidity as part of its pandemic response, depressing short end rates. A change in policy would risk perceptions of interference in the political process, and no mainstream analyst expects a shift at 2.30 pm AEST today.
The Federal Budget tonight will reflect the unusual economic times. In the modern tradition, most of the measures that will be unveiled tonight are already flagged. Extraordinary income and other tax cuts, support for job creation and business growth measures are all on the table, as is a likely record Budget deficit of more than $200 billion. The states could receive $10 billion in infrastructure spending, and gross government debt will approach $1 trillion.
The full impact of the budget will markets tomorrow, but steady monetary policy and a highly stimulatory fiscal stance could lift assets and the currency. Traders are alert for moves today on infrastructure and construction material stocks, as well as potentially less well-flagged beneficiaries such as education businesses.