ow pricing the possibility of 4.60% by September. Meanwhile, Treasurer Jim Chalmers is preparing a budget pitch that leans on housing and tax changes while trying not to add fresh fuel to inflation.
Why should I care?
For markets: Budget deficits can swing bond supply and yields.
Strategists think the 2025–26 deficit could come in about A$12 billion smaller, near A$25 billion. If that holds, the government may need to borrow less – trimming the amount of new bonds investors must absorb – which can ease the extra yield demanded on longer-dated bonds. The next focal point is 2026–27 issuance guidance: analysts are penciling in roughly A$135 billion of bond sales, and any surprise there can quickly ripple through Australian government bond yields.
For you: Rate expectations tend to show up in everyday borrowing costs.
The RBA’s policy rate is the reference point for what banks charge, especially on variable-rate mortgages and many small-business loans. So when markets start pricing a higher peak – from 4.35% now to 4.60% by September – lenders can adjust funding assumptions and pass some of that through. Add in energy-driven cost pressures for businesses, and the risk is that inflation stays sticky, keeping borrowing costs elevated even if the currency headlines fade.