Australian Federal Budget and implications for the ASX200

This coming Tuesday night, the 11th of May, the Australian Federal Government will hand down its 2021-22 Budget, after a year that included lockdowns, border closures, and a humanitarian crisis sadly still ongoing in some countries.

FED 10

The Australian Federal Government was one of the quickest to react to the onset of the pandemic, providing stimulus payments to households and to businesses to shield the economy. A strategy that proved highly effective, enabling the Australian economy to return to pre-pandemic levels just 14 months later.

Households and businesses are cashed up and monetary and fiscal policy settings remain supportive. Prices for key commodities continue to surge as do housing prices, while business and consumer confidence is at decade highs.

The current unemployment rate of 5.6% is lower than Treasury’s forecast of 5.75% in 2022-23, two years ahead of schedule. As a result tax receipts have been higher and welfare payments have been lower than forecast.

However, challenges remain.

The tardy vaccine roll-out is unlikely to see international travel resume until the end of 2022 weighing on the tourism, education, and hospitality sectors. Furthermore, pre-pandemic economic activity was below potential growth levels and the reason why the RBA cut interest rates three times in 2019.

In a pre-budget speech in late April, Treasurer Josh Frydenberg confirmed a pivot in fiscal strategy, away from fiscal repair until the unemployment rate was lower than before the pandemic. Previously it was indicated budget repair would commence once the unemployment rate was below 6%.

As such Tuesday's budget will likely remain expansionary and feature lower budget deficits. According to AMP’s Chief Economist, Shane Oliver, the deficit will be approximately $150bn this financial year and $50bn the next financial year (down from the $214 billion and $112 billion forecast in the 2020 October budget). A return to surplus may be possible in five years.

The fiscal support provided in Tuesdays Budget along with the RBA’s ultra-easy monetary policy settings will continue to provide underlying support for the ASX200 in the medium term.

Learn more about trading indices

In the short term, there are signs the uptrend is losing momentum as illustrated by the bearish divergence displayed on the RSI indicator. Therefore the preference is to use a pullback in the coming weeks, towards trend channel support near 6800 to consider long positions, in expectation of a break above the all-time high at 7197.2, towards 7400.

Australian Federal Budget and implications for the ASX200

Source Tradingview. The figures stated areas of the 6th of May 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

More from ASX


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.