🤯 Have you seen our AI stock pickers’ 2024 results? 84.62%! Grab November’s list now.Pick Stocks with AI

Morgan Stanley analysts weigh 2024 Australian budget impact

Published 05/16/2024, 02:20 PM
© Reuters.
MS
-

Investing.com - Strategists at Morgan Stanley (NYSE:MS) Australia have recently evaluated the impact of the FY25 Australian Federal Budget on the country's equity market. The budget, they say, is a mixed bag, providing some protection against downside risks but complicating the potential for significant cyclical upside.

The budget's primary focus is to mitigate the effects of headline inflation, address consumption risks through cost-of-living support and lay the groundwork for future investment pathways. However, the strategists argue that the budget provides more of a buffer than an outright boost to economic conditions.

Build an inflation resistant portfolio with InvestingPro! Unlock access to AI-powered ProPicks, ProTips and more! Use coupon code INVPRODEAL and receive an additional 10% off!

The tax cuts already legislated are substantial but require time to influence observable spending habits. Similarly, subsidies, designed to offset future expenses, will help alleviate the pressure of inflation but offer limited stimulus. For businesses experiencing a broader tightening in conditions, the July 1st stimulus and its associated lags may seem a long way off.

The Federal budget has also complicated the path to significant monetary easing. Although headline inflation is expected to decrease in 2024, the removal of subsidies will likely cause a reversal in base effects in 2025. Additionally, the longer-term investment policy, while sound, offers limited incremental incentives for accelerated spending.

Finally, the housing supply, necessary to address the lack of volume in housing construction and rents, is unlikely to rebound within a market-relevant time-frame based on the announced policy.

As such, MS strategists concluded that while some buffers have been reintroduced, a higher-for-longer rate environment seems probable. This is against the prevailing consensus positioning in cash-rate-sensitive sectors. While the budget helps protect against downside risks, the path to a significant cyclical upside remains challenging to navigate.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.