What Tonight's Budget Means for Property Investors

Hockey told reporters this morning the underlying deficit will come in below $40bn - which if true is better than the mid year economic review forecast. This is surprising, since the RBA has cut rates twice in anticipation of a slowing economy. We'll get a better idea of the composition tonight, our initial impressions were the final number would be above $40bn would doesn't seem the case. Either way, the most important point for property investors is short term rates are falling but bond yields are rising, suggesting higher interest rates down the track. If Hockey is right and the number genuinely falls below $40bn, it will be the first sub $40bn Australian budget deficit since the GFC. Impact for property investors is 1) Take advantage of low rates to 2) Acquire high quality assets that can not only withstand rising rates but also benefit from higher inflation. Also 3) Watch for retirees selling investment properties and trading up their primary residence on pension changes. Our note published yesterday (pre-Hockey comments) (VIEW LINK)