Australia: Federal Budget to impact Monetary Policy? - Westpac

Bill Evans, analyst at Westpac, suggests that the Australia’s 2019 budget is likely to attract the interest of the Reserve Bank, unlike most other Federal Budgets which were partly targeted at households.

Key Quotes

“In previous years the Reserve Bank has generally observed that fiscal policy has had only a very limited bearing on monetary policy decisions.”

“It is reasonable to contemplate whether 2019 will be different.”

“Firstly, if we take the expected approach from the Budget (an expansionary budget with a focus on supporting households) then the Reserve Bank will be much more interested than in previous years.”

“We have estimated that the government will have around $3bn to allocate before June 30; and $5bn in 2019/20. In addition there will be the $2.5bn in 2019/20 which was earmarked in MYEFO as “allocated but not announced”.”