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‘Commendable’ budget to inspire confidence, says economist

The federal budget should be commended but fiscal tightening remains an issue, according to the chief economist of an Australian investment manager.

In a post-budget communication issued today, Shane Oliver, chief economist at AMP Capital, said the budget contains several goodies and has a focus on fairness which should provide a boost to confidence and spending, while impact on the RBA is likely to be minimal.

However, he also issued a warning about the growth outlook.

“While this budget should provide a boost to confidence, ongoing fiscal tightening will act as a mild drag on growth in the years ahead,” Mr Oliver said.

“As such, it’s hard to see major implications for the RBA. In fact, recent data on trade and retail sales continues to point to more risk of a rate cut than a rate hike in Australia this year.”

Mr Oliver also welcomed the government’s $75 billion infrastructure spending spree on the western Sydney airport, inland rail link from Melbourne to Brisbane and various road projects.

He believes the increase in spending will provide more opportunities for private investors as many of the resultant assets are ultimately privatised.

“Infrastructure spending can help short-term growth, boost-long term productivity and can actually ‘crowd in’ private investment.

“Increased public investment is helping to offset weak private investment and the infrastructure commitment in the budget will help ensure this continues.”

The potential boost in confidence will also likely prove a small positive for the share market, with shareholders in construction stocks likely beneficiaries.

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‘Commendable’ budget to inspire confidence, says economist
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