The Australian budget for fiscal 2026 to 2027 comprises of significant policy changes, including capital gains taxation, negative gearing and the taxation of trusts, all of which are expected to improve the fiscal position in the long term, ANZ Research said Tuesday.
The firm said the underlying cash deficit is projected to be 1% of the gross domestic product (GDP) in the near term, reflecting a modest improvement on estimates from the mid-year economic and fiscal outlook in December 2025.
ANZ does not expect any direct impact on near-term growth or inflation forecasts from lower-than-expected net new spending in the 2026 to 2027 period.
The headline cash deficit is expected to be 2.1% of GDP in 2026 to 2027 amid a neutral fiscal impulse, and fiscal position is set to return to balance in 2034 to 2035 as per the budget papers.
"Overall, we see nothing in the budget to dissuade us from our view that the RBA is likely to keep the cash rate at 4.35% through 2026 and 2027," analysts at ANZ said.
However, higher prices and costs as reflected in the business survey data, coupled with weaker forward orders present a risk that policymakers may have to make difficult trade-offs in the coming months, it added.