Markets on edge ahead of budget cash splash

The Australian sharemarket is headed for a subdued start ahead of a federal budget surplus and cost-of-living relief measures that may bolster the case for the Reserve Bank to keep interest rates high as it fights inflation.

Andrew Ticehurst, a rate strategist at Nomura, said Tuesday’s budget surplus could be as high as $12 billion, a big turnaround from a small deficit forecast in the government’s budget update in December. The upside surprise would be driven by higher tax receipts due to higher-than-forecast commodity prices and a strong employment market. The positive result will be the second consecutive surplus for the government.