Australia: Infrastructure focus in budget - HSBC

Analysts at HSBC explain that the Australian budget bottom line was largely unchanged with infrastructure being in focus, but there was some policy action nonetheless.

Key Quotes

“The budget deficit for 2017/18 is estimated to be $A29.4bn (similar to the mid-year projection of $28.7bn) and the budget is still expected to gradually head back to budget surplus by 2020/21 (unchanged). On the funding side, the budget was supported by a moderately better nominal growth outlook, a new bank tax and a lift in the Medicare levy.”

“On the spending side, infrastructure and education were the highlights. Much of the infrastructure spending is off-balance sheet, so will not affect the budget deficit, although it does require more debt issuance. The focus on infrastructure and education, as well as previously announced SME tax cuts should be read as a move in the right direction on fiscal reform. Overall, net debt is forecast to peak at 19.8% of GDP in 2018/19, while net issuance peaks in 2016/17. We expect that today’s budget plans will see Australia keep its triple-A sovereign rating for now.”