Preview: Australians await 2023-2024 budget

Key dates

On Tuesday, May 9, at 7:30pm AEST, Federal Treasurer Jim Chalmers will unveil the annual Federal Budget for FY23-24.

The upcoming budget is expected to deliver a surplus, a significant milestone for the government, as the last budget surplus was recorded more than 24 years ago before the 2008 financial crisis pushed the budget into deficit. This is a significant achievement for the Labor government, and all eyes are on the budget announcement to see how it will affect the Australian economy.

What is expected?

A small budget surplus is expected to be announced in the vicinity of AU $3 billion, a significant turnaround from the deficit of AU -$36.9 billion projected in the October budget and the Coalition's pre-election budget of AU -$78 billion forecast in March 2022.

The fiscal turnaround is driven by surging tax revenues from high commodity prices, a tight labour market lifting tax payments, reduced welfare payments, and firmer-than-expected immigration.

• Part of the budget windfall will be used to relieve vulnerable households via energy and rental relief due to cost of living pressures from high inflation and higher interest rates
• Additional support will be given to the health sector, including a possible lift in the rebate for a GP visit
• The budget will focus on growing the economy and policies to ensure that the Australian economy can withstand international shocks, with incentives for businesses to invest in energy efficiency
• The improved fiscal position of the "Lucky Country" will continue into the next fiscal year (FY24), with a significantly smaller deficit of AU -$22 billion expected compared to the AU -$44 billion forecast in the October budget.

Implications for the AUD/USD

While much of the budget's new policies and initiatives have already been leaked, the Federal Treasurer will have saved a surprise or two for Budget Night.

However, it is unlikely that any surprises will be significant enough to change the macro-outlook covered above. As such, the impact on markets is expected to be minimal.

AUD/USD technical analysis

The closed higher on Friday at .6750, locking in a 2.05% gain for the week - its best week since late January. Last week's rally was supported by the RBA's hawkish surprise rate hike and improved risk sentiment into the weekend.

While the AUD/USD's ability to close above the 200-day moving average is currently at .6729 - a small positive, more significant battles lay ahead, including resistance from the top of its multi-month range at .6800/10. If the AUD/USD were to see a sustained break above .6800/10, the recovery would extend towards .70c.

Unfortunately, until then, it's business as usual, with more range trading expected between .6800c and .6570ish.

AUD/USD daily chart