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Australian Markets Weekly PBO budget outlook

Australian Markets Weekly: 議会予算局（PBO）の財政見通しと新たな住宅建設補助金の影響

Analysis

• With the government postponing its economic and fiscal update to 23 July, the Parliamentary Budget Office has published estimates of the impact of the virus on the budget.  These estimates point to a budget deficit of about $70 billion in 2019 20 (3.4% of GDP) and about $190 billion in 2020-21 (10.1%).  NAB’s forecast is the same for 2019-20, but higher at $210 billion next year (11%).  We do not make too much of this difference given the extreme uncertainty in forecasting at the moment, but note that we have a weaker outlook for wages/prices than the budget office and think more fiscal stimulus is likely.
• On the issue of more fiscal stimulus, the government is already tinkering with the JobKeeper wage subsidy which is due to end in September.  Governor Lowe has warned of withdrawing fiscal stimulus too quickly and the treasurer has suggested the subsidy will continue, albeit in a more targeted form.
• The government has also announced a housing subsidy, covering about 27,000 grants of $25,000 apiece, to support the construction of new homes and substantial home renovations in an effort to avoid job losses in the sector later this year.  There are limits to the scheme, but as an upper bound of the scheme’s potential impact, we estimate it could bring forward housing activity worth about 0.5% of GDP.  The other challenge facing the sector is the slump in population growth to its lowest level in a century.  Growth will pick back up when Australia’s border is re-opened, but that will likely take time.

The week ahead – AU home loans; NZ GDP partials; FOMC meeting

• Australia:  A quiet week with home loan data due.  The NAB business survey was released earlier today and showed some improvement as health restrictions were removed.  Surveyed levels are still consistent with very weak activity, but further improvement is likely in June as more restrictions were relaxed.  NZ: This week’s data are a mix of timely indicators and more dated GDP partial indicators for Q1. The timely indicators are expected to show improvement, some markedly so, while the dated data is likely to show weakness.  NZ data are likely to continue to improve over coming months given the move back to level 1, where social distancing is not required and only the international border is closed.
• Global: OPEC+ meets Tuesday and Wednesday. US:  Wednesday’s FOMC meeting will see an update on the Fed’s economic outlook, with formal forecasts and scenarios. Friday sees the Michigan consumer sentiment preliminary June reading.  CH: Aggregate financing figures that are due anytime in the week should show signs of stimulus hitting the economy.

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