Our budget, some sort of rescue plan for Europe and those volatile markets will all dominate business here and offshore this week.
The 2010-11 Federal budget will be handed down tomorrow night in Canberra by Federal Treasurer Wayne Swan.
Up till late last week, it was looking like it would be fairly boring, but the instability in global financial markets makes the document and the policies to be unveiled more important.
Spending will have to be constrained (the government has promised to limit outlays to 2% in the coming financial year) to allow for the emerging surge in our terms of trade.
That won’t be derailed by the instability in Europe and on financial markets, though it might not be as strong in a year’s time as expected.
This is also an election budget.
On Friday, the Reserve Bank was upbeat about our economic outlook in the second State Of Monetary Policy for the year.
The bank sees the economy growing at a faster than expected pace over the next two years, with inflation also expected to rise faster than previous estimates.
The bank says the reduced fiscal stimulus, a possible surge in commodity prices and a construction boom could accelerate growth and inflation at an even faster than predicted pace.
The terms of trade are forecast to go past their 2008 level this year, peak next year and then ease in 2012.
The bank said gross domestic product (GDP) is now expected to be running around 3.75% in the year to June 2011, up from the 3.5% forecast in February and then rising to reach around 4% by the end of 2012.
CPI inflation is predicted to grow at 3.25% in the year to June 2010, up from its previous forecast of 3%, then ease in the second half of this year to 3%, which is higher than the 2.5% forecast in February.
And, buried in the report was a comment that will surprise, the bank said that "The rise in the terms of trade is expected to increase domestic incomes by around 4 per cent this year (although the boost to national income – the income accruing to Australian residents – will be smaller) and nominal GDP is expected to rise by close to 10 per cent over 2010".
Who would have though the central bank or anyone would be talking about economic growth approaching double digit pace in the Australian economy by any measure?
And it’s for that reason the budget will have to be conservative.
As well as the budget, we will also get unemployment and jobs figures for Australia this week, while the ANZ jobs ads survey figures are out today.
As well, the April Monthly Business Survey from the National Australia Bank is also being released today.
Housing finance figures are out on Wednesday, along with the Consumer Confidence figures from Westpac and the Melbourne Institute.
It’s a quiet week for corporates; the budget will hog the headlines, along with the volatile markets.
Overseas, the Bank of England meets tonight, our time and China’s CPI and PPI and other monthly economic data are due out tomorrow and could show (especially figures on lending and house prices) if China’s moves to try and cool the hot housing sector have started working.
Japan’s Sony is expected to report its first operating profit in two years, thanks to strong TV sales, and Toyota is expected to see a loss because of its recall crisis and the poor figures for the first half of the March year.
Many other Japanese companies will also report this week.
Federal Reserve Chairman, Ben Bernanke, speaks at a Fed function on Thursday night, our time, and will have a question and answer session after his formal comments.
Europe, the US economy (with those solid jobs figures last month) and that trading problem on Wall Street on Thursday are all expected to be raised with the Fed chairman.
April US retail sales data will be released, along with quarterly profits from Walt Disney and retailer Macy’s.
Retail sales are out Friday, US time, as well as April industrial production data from the Fed and the first of the usual two monthly reports from the University of Michigan on consumer sentiment.
