Flat To A Touch Firmer Vs. Pre-Budget Levels, Surplus Delivered, Although Deficits Seen Ahead

Aussie bond futures are flat to a little firmer vs. pre-Budget levels (YM/XM flattens a touch), with the government pencilling in the ~A$4bn surplus for the current FY that was touted via various press-outlets pre-release (facilitated by full employment-related tax takes & commodity price levels), more than reversing the deficit projected in the October update. Still, the government expects a slide back into deficit in the next FY (A$13.9bn), which is expected to widen further in the FY that follows (A$35.1bn) before peaking in FY25/26 (A$36.6bn), albeit with much more favourable deficit/GDP ratios than the G20 average.

• Treasurer Chalmers pointed to the government’s combination of fiscal restraint & a willingness to help those struggling to make ends meet.
• The government expects inflation to moderate back to 3.25% by mid-24, in line with the RBA view (although it’s view beyond there sees a slightly more aggressive downtick in headline CPI vs. available RBA projections), while wage price index growth is seen peaking at 4% and unemployment is seen at 4.25% in Q224 (roughly in line with RBA projections).
• S&P have since noted that the country’s commitment to fiscal discipline is critical to its AAA sovereign rating, although warned that an economic slowdown may pressure its rating.
• ACGB market participants now look ahead to the related AOFM issuance update, which should come early Wednesday Sydney time.