Budget Delivers Reform Amid Inflation Risks

• Canberra handed down the 2026/27 Federal Budget overnight, with the projected underlying cash shortfall revised to $31.5bn, an improvement of $2.8bn versus MYEFO estimates.
• The key policy changes were largely expected. The Government confirmed negative gearing concessions will be limited to newly built properties, while capital gains tax will move toward an indexed system with a minimum 30% levy on realised gains.
• From a market perspective, the package is unlikely to materially shift the RBA’s near-term outlook. However, the additional ~$18bn in spending does little to help the broader inflation challenge facing the central Bank.
• Away from the Budget, the latest NAB survey showed business confidence improving modestly to -24 in April from -29, though conditions remain weak. Firms continued to cite higher energy costs linked to Middle East tensions as pressure on margins and investment plans.
• Consumer sentiment weakened sharply in April, with the Westpac–Melbourne Institute index falling 12.5% to 80.1, leaving confidence at its lowest level in around 2½ years.