I thought a day ahead of the budget it was interesting to read  Bloomberg's article on how the Australian Economy is doing.  And it will be very interestint o see if it is consistent with what is said during the presentation of the budget.

 http://www.bloomberg.com/apps/news?pid=20601081&sid=a9mikBuOhVAM&refer=australia

Australian, N.Z. Dollars Decline on Signs Growth Is Slowing

By Ron Harui and Tracy Withers

May 12 (Bloomberg) -- The Australian and New Zealand dollars fell after reports today showed economic growth in both nations is slowing, undermining the case for the central banks to keep interest rates high enough to attract investors.

Australia's currency declined to near a one-week low against the U.S. dollar after the government said home-loan approvals fell more than economists forecast and an industry report showed business confidence slumped. New Zealand's currency slid to the weakest in more than three months after a report showed consumer confidence dropped to a record low.

``Signs that the economies of the commodity-producing nations can't avoid a slowdown will worsen investor sentiment toward their currencies,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``The Australian and New Zealand dollars may weaken.''

Australia's dollar lost 0.7 percent to 93.67 U.S. cents as of 1:05 p.m. in Sydney, from 94.35 cents late in New York trading on May 9. It reached 93.50 cents on May 8, the lowest since May 5. The currency weakened to 96.78 yen from 97.03 late last week when it reached 96.32 yen, the lowest since April 29.

New Zealand's dollar slipped to 76.40 U.S. cents, its lowest since Jan. 24, from 76.94 cents at the end of last week. The currency dropped to 78.94 yen from 79.13 yen.

Economic Reports

The Australian dollar weakened the most among the 16 most- active currencies versus the U.S. dollar as the Bureau of Statistics said the number of loans granted to people to build or buy homes or apartments dropped 6.1 percent in March from February when they fell 6.8 percent. The median estimate of economists surveyed by Bloomberg was for a 0.8 percent decline.

Australia's business confidence index fell 4 points to minus 8 from March, according to a National Australia Bank Ltd. survey of about 500 companies released in Melbourne today. A reading below zero shows those expecting business to deteriorate outnumber those predicting an improvement.

Benchmark interest rates are 7.25 percent in Australia and 8.25 percent in New Zealand, compared with 2 percent in the U.S. and 0.5 percent in Japan, making the currencies a favorite for the so-called carry trade.

In a carry trade, investors get funds in a country with low borrowing costs and invest in another with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.

`Slowing Economy'

The New Zealand dollar was the second-worst performer of the 16 major currencies against the U.S. dollar as a record-high 44 percent of 1,100 people surveyed in the two weeks ended May 4 said it was a bad time to buy a major household item, up from 40 percent in a similar survey in late April, according to Roy Morgan. Thirty-eight percent said it is a good time to buy.

``Worries about the slowing economy will likely continue to hang over the New Zealand dollar,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington.

The odds the Reserve Bank of New Zealand will cut its 8.25 percent benchmark interest rate next month were 34 percent today, compared with 12 percent a week earlier, according to a Credit Suisse Group index based on interest-rate swaps.

Central bank Governor Alan Bollard said last week the outlook for the economy has deteriorated while Finance Minister Michael Cullen said May 7 that households ``are under serious pressure'' and this month's budget will forecast slowing growth.

Australian government bonds rose for a third day, pushing the yield on the 10-year note down 4 basis points to 6.17 percent, according to data compiled by Bloomberg. The price of the 5 1/4 percent bond due March 2019 rose 0.262, or A$2.62 per A$1,000 face amount, to 92.80.

New Zealand 10-year government bonds were little changed. The yield on the 6 percent note due December 2017 was 6.32 percent, according to Bloomberg data.

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