The Federal Budget and Wages Data Front of Mind in Australian Markets

• A busy week ahead with the NAB Business Confidence Survey tomorrow, the Federal Budget on Tuesday evening and Q1 wages data on Wednesday.
• The Federal Budget will be a key focus for local markets, with stronger commodity prices expected to provide around $27bn of support over four years. Markets will watch whether cost-of-living relief and higher defence, health and energy spending can be delivered without adding to medium-term inflation pressure.
• Q1 wages data will also be important for the RBA outlook, with consensus looking for a 0.8% quarterly rise in the Wage Price Index. An in-line result would suggest wages growth is easing gradually, though the upcoming minimum wage decision remains a key watchpoint.
• Offshore, hopes of progress between the US and Iran have weakened again after President Trump described Iran’s proposal as “totally unacceptable”. Renewed tension around energy supply and the Strait of Hormuz keeps oil prices, inflation expectations and risk sentiment headline-sensitive.
• The main US data focus this week is April CPI, with markets watching whether the recent lift in headline inflation stays energy-driven or broadens into core prices. A firm print would support the higher-for-longer rates narrative, while softer core inflation would give bond markets some relief.