Company Interview / A "high on spending, low on reform" budget

Key points:

Budget seen as high-spending, light on reform, leaving inflation risks elevated US equities driven by concentrated tech strength, with Nvidia ($NVDA) in focus Oil supply risks and Middle East tensions viewed as upside risk to inflation

Shane Oliver from AMP states that the federal budget falls short on spending restraint, tax reform and productivity, despite the government’s strong political position. Oliver views changes to negative gearing and capital gains tax as limited, arguing they do little to address Australia’s structural undersupply of housing. He suggests budget settings leave pressure on inflation elevated and do not materially ease the task for the Reserve Bank.

Oliver notes that global equity markets remain heavily influenced by US tech, with Wall Street at record highs and profits strong, particularly among giants such as Nvidia ($NVDA). He highlights that gains are increasingly concentrated, with fewer stocks trading above their 200-day moving average, which he sees as a sign of vulnerability and potential “bubbly” conditions. Ongoing closure of the Strait of Hormuz and warnings from the IEA are seen by Oliver as risks for oil prices and global inflation.

Domestically, Oliver points to weak business and consumer confidence alongside rising cost pressures in NAB surveys. He expects the Reserve Bank to prioritise inflation and warns of a likely rate hike in August. In his view, higher rates and tax changes will push Australian home prices into a period of modest declines, with investors demanding either higher rents or lower prices.