Markets unmoved by audit report

ECONOMISTS were unsurprised by the commission of audit report and say measures in it are unlikely to hurt economic growth in the short term.

The National Commission of Audit report contained 86 recommendations aimed at saving the budget up to $70 billion annually.

The recommendations were focused on the spending side of the budget ledger rather than the revenue side, and there was no mention of the rumoured debt levy.

The mooted spending cuts focused on health, the ageing and education.

National Australia Bank senior economist David de Garis said such measures should not hurt economic growth in the near future.

"You've got the infrastructure spending, which will kick in, but in time," he said.

"So that will provide support for the economy while there are other government spending cuts.

"I don't think it's a big issue for local interest rate markets or the Australian dollar."

There was almost no reaction the release of the audit report on currency markets, with the Australian dollar hovering between 92.85 US cents and 92.90 cents after the report's release on Thursday.

The Australian stock and bond markets also showed little reaction.

Commonwealth Bank chief economist Michael Blythe said the report was in line with expectations.

"We've had plenty of hints - means testing, co-payments and government removing itself from various areas where the private sector is better placed to deliver," he said.

"We've been given what we've been told to expect."

Mr Blythe said there is nothing in the report that should change the economic growth or interest rate outlook over the next year or two.

"When you compare their business as usual case with their reform scenario what stands out is you don't actually have to do much over the next three or four years," he said.

"It's only when you get to years three and four that's when the big ramp up in spending starts and when you've got to start to delivering the big savings as well.

"So for the short term outlook, if this is the basis for the budget it's probably not too damaging and one that probably doesn't change the Reserve Bank of Australia's outlook as well."

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