The Week Ahead: Budgets And CPIs

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By Greg Peel

Australia is bracing itself for the first federal budget of the new government to be brought down on Tuesday night. There’s been a lot of tough talk and a few early warnings, such as a luxury car tax increase. The government appears keen to offset the benefits of the $6bn in promised tax cuts with about the same amount in cut-backs and increased costs elsewhere. While the tax cuts are set to favour all, the cost side will probably hurt the more wealthy. The government needs to sterilise the inflation effect.

The extent of inflation will be the focus elsewhere this week as the US, UK and EU learn their April CPI numbers. A largish number in the US will provide more fuel for the argument that the Fed has stopped cutting rates for now. While this would provide support for the US dollar, a similarly large number in Europe will only confirm that the ECB will never cut its own rate, which does not help the US dollar.

Today in Australia we learn March housing finance and on Tuesday the NAB business confidence survey for April. The budget is brought down on Tuesday night which means Wednesday will be spent figuring out which, if any, stock market sectors are particular winners or losers. Wednesday also brings May consumer confidence and that nemesis of the RBA – first quarter wage cost.

The RBA provides a bulletin on Thursday as we learn May consumer inflation expectations. That ends the week.

In the US, the Treasury brings down its budget on Monday while Tuesday sees March business inventories, April retail sales and April import prices. The April CPI is released on Wednesday.

It’s a busy day Thursday with March long term TIC flows (movements in and out of US dollar assets), April industrial production and capacity utilisation, the NAHB housing index for May, the manufacturing indices of both the New York and Philadelphia Feds for May, and throw in weekly jobless claims just for fun. Friday is April housing starts and building permits, along with the Michigan Uni consumer confidence measure for May.

The UK CPI is released on Tuesday and Europe’s on Thursday. On Thursday Europe also learns its first quarter GDP as does Japan on Friday.

On the Australian stock front we have CSR ((CSR)) and SingTel ((SGT)) profit reports on Wednesday along with a Harvey Norman ((HVN)) analyst presentation.

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