- ASX SPI 200 futures up 1.4% to 6,764.00
- Dow Average up 2.5% to 31,082.56
- Aussie up 1.5% to 0.6378 per US$
- U.S. 10-year yield little changed at 4.2167%
- Australia 3-year bond yield rose 13 bps to 3.76%
- Australia 10-year bond yield rose 14 bps to 4.20%
- Gold spot up 1.8% to $1,657.69
- Brent futures up 1.2% to $93.50/bbl
- 09:00: (AU) Oct. S&P Global Australia PMI Servi, prior 50.6
- 09:00: (AU) Oct. S&P Global Australia PMI Compo, prior 50.9
- 09:00: (AU) Oct. S&P Global Australia PMI Mfg, prior 53.5
- 09:05: (AU) RBA’s Kent-Speech
- 11:00: (AU) Australia to Sell A$300 Million 1.75% 2051 Bonds
Australian Treasurer Jim Chalmers is aiming to establish the new Labor government’s fiscal credibility in his budget update, mindful of the chaos generated by the UK’s shock announcements and a domestic backdrop of hot inflation and rising interest rates.
Economists predict Tuesday’s fiscal blueprint will show an underlying cash deficit of A$35 billion ($22 billion), or 1.4% of GDP, in the 12 months through June 2023. That’s down from 3.4% of GDP forecast by the previous government when it laid out its budget plan in late March.
The difference mainly reflects windfall revenue from soaring commodity prices following Russia’s invasion of Ukraine.
Chalmers has sought to downplay expectations, saying his budget will be “solid” and “sensible,” delivering on Labor’s May election pledges and trying to pare back spending where possible. The government is acutely aware of the need to avoid adding to demand and making the Reserve Bank’s job even harder.
The treasurer told Bloomberg in an interview Sunday that he had taken some lessons from the UK’s disastrous mini-budget, which set off wild market fluctuations and ended in the the resignation of Prime Minister Liz Truss last week.
“You’ve got to nicely line up your fiscal policy and the monetary policy and when that gets out of whack the markets and others will react,” Chalmers said.
Incoming Australian treasurers traditionally try to paint a bleak picture of the economy and budget they’re inheriting in order to tarnish their opponents and lay a baseline to show improvement under their stewardship.
Chalmers and Prime Minister Anthony Albanese have been highlighting risks around the economic outlook, including the prospect of more than A$1 trillion in government debt.
But that argument is complicated by a fully employed economy. In addition, while the budget is deep in deficit due to the pandemic, a A$50 billion revenue windfall from high export prices will temporarily improve the bottom line.
Still, the debt and deficit left by the previous center-right government do provide Chalmers with an opening to rewrite a traditional narrative in Australian politics — that the country’s conservatives are better economic managers than Labor.
Chalmers, who served as a senior adviser to former Treasurer Wayne Swan during the 2008-09 financial crisis, is well placed to bolster Labor’s credentials, says Chris Wallace, a professor at the University of Canberra.
“Chalmers has a tough task,” she said. “But he’s a sensible, well prepared, intelligent treasurer backed by a department that’s still delivering very good policy advice. I expect we’ll see a very strong first outing from him.”
A Labor treasurer would normally want to quickly boost spending to aid low-income households, and the budget will provide some relief, but Chalmers is wary of adding to price pressures that have already pushed the RBA into its sharpest tightening cycle in a generation.
Treasury sees a quarter-percentage point hit to GDP growth and about an 8% increase in fruit and vegetable costs from floods that have inundated farmland across Australia’s east coast.
Inflation probably accelerated to 7% in the third quarter, the fastest pace in 32 years, economists predicted ahead of data out Wednesday. Finance Minister Katy Gallagher said indexation of government payments to inflation is set to lift budget spending by A$30 billion over four years.
Chalmers will also lay out economic forecasts in Tuesday’s budget that are likely to see downgrades to GDP growth and employment as rising borrowing costs cool demand. The RBA has raised rates by 2.5 percentage points in six months and further hikes are expected.
Stephen Halmarick, chief economist at Commonwealth Bank of Australia, reckons a budget deficit of 1%‑1.5% of GDP will be an important signal to financial markets.
“Small budget deficits will also help net debt decline as a share of GDP, adding comfort to Australia’s AAA credit rating,” he said.
Some lawmakers have suggested an easy savings measure would be to reconsider legislated tax cuts favoring high-income earners starting mid-2024, particularly after the chaos in the UK.
But, having gone to the election pledging to keep the tax cuts, Albanese and Chalmers are so far sticking with the measures at an estimated cost of A$250 billion over 10 years.
The treasurer told Bloomberg that he sees the current global inflation shock as potentially the third major international downturn of the past 15 years, following Covid and the 2007-08 crisis. But he says this one needs a different response to the prior two.
“When you’ve got all this uncertainty around the world you need a responsible budget at home and that’s what Tuesday night will be.”
A baffled mother arrived home to find her house had been mistakenly encased in scaffolding.
Sarah Johnson, who lives in Walnut Drive in Plympton, Plymouth, was out at the time workmen arrived.
Courtney Chapman, her neighbour, was first to alert her to the ‘bizarre’ situation and assumed her landlord had organised repair work.
It turned out, Ms Johnson’s street Walnut Drive had been mistaken for the similarly named Walnut Gardens, something Ms Chapman previously pointed out but had been dismissed.
On September 29, Ms Chapman asked what work Ms Johnson was getting done to her house and sent her a photograph of it covered in scaffolding.
Refusing to believe it, Ms Johnson says she still thought it was a joke or even a filter.
She said: ‘On my way home my neighbour rang me to ask what’s going on with your house and at first I thought she was winding me up. She sent me a photo and I still thought it was a joke, I even thought it was maybe a filter.’
However, she soon realised it was for real. She thought perhaps her landlord had organised some repair work but she said even he ‘didn’t have a clue what was happening either’.
Luckily, Sarah says she could see the funny side, so much so that when she and her son arrived home and saw it with their own eyes they burst out laughing. ‘Me and my son were laughing about it and when we got home and saw it we laughed some more because we just thought how bizarre,’ she explained.
Whilst the scaffolding was being erected Courtney says she tried to tell the scaffolders that the owner of the house hadn’t requested any scaffolding. She questioned the workers as to whether they had mistakenly got the wrong house because Sarah’s house is located on Walnut Drive, which leads to another road called Walnut Gardens.
Courtney said she was informed there had been no mistake and they even had a photo of the property but chose not to show her. Sarah said she tried to contact the scaffolding company to inform them of their mistake but there was no sign or anything to indicate who had left the scaffolding.
She said: ‘That’s when I started thinking this is a bit weird, like is someone trying to rob me?’
But after doing some digging she discovered that the scaffolding was for new windows. Clearly very confused at this point she spoke to the company where the windows had arrived from, but despite apologising they also had no idea why scaffolding had been built around her house.
Her next move was to upload a photo of the scaffolding covering her house to Facebook. In the post, she wrote: ‘Has anyone had this happen? Someone has signed me up for windows and it wasn’t me or my landlord.’
After receiving dozens of messages – largely from people who were as equally baffled – the boss of Plymouth-based company Scafftec Ltd messaged Ms Johnson to apologise.
It turned out that Ms Chapman had been right all along and the scaffolding was intended for Walnut Gardens.
The scaffolding stayed up at Ms Johnson’s home overnight and the company then took it down the next morning.
She said although the guys taking it down didn’t seem to be ‘very happy’, she did compliment the company’s boss who she says was ‘very apologetic’.
Scafftec said the issue had been dealt with and the clients affected had been contacted.