US: Nothing special about the budget - ANZ

Donald Trump published his budget overnight, but most of it was largely leaked over the past week as the typically fiscal conservative republicans are straying into uncharted waters, opening the spending taps with the deficit ballooning to over 5% of GDP in 2019, explains the research team at ANZ.

Key Quotes

“Defence spending is set for a boost with military personal getting a 2.6% pay increase and ~USD25bn earmarked for boarder security (aka Mexican wall). The USD1.5trn infrastructure plan was also released with USD200bn pledged by the Federal government. This is expected to be funnelled into roads, bridges, airports, rural infrastructure and public utilities (such as water resources).”

“There are cuts in mandatory spending and nearly 2% yearly reduction in non-defence discretionary spending after 2019. Medicare cuts will save USD237bn over 10 years. The budget also does not balance in a decade, differing from republican administrations in the past. It all adds to the picture of higher public debt, more bond supply, extra inflationary pressures and the need for higher US yields.”