The Federal budget next week is a vital one for the finance industry as it is expected to be one of the toughest in decades. Analysts are confidently predicting it will be the biggest shift from a previous surplus to a deficit in Australia’s history. Fortunately the Treasurer has been signalling all manner of leaks in the past few weeks to ensure there are no really bad surprises.

Australia‘s housing market continues to show wins and losses, according to the latest statistics which the Housing Industry Association describes as: ‘prices weather the economic storm.’ They show Perth prices are still reducing and Sydney’s are barely holding ground, but other state capitals have the top end incurring slight losses and the middle making very small gains. And while all this is going on, the lower end of the market continues to grow which could be dented by next week’s budget that is expected to announce the end of the First Home Buyers grant.

The round-up of financial positives emerging in the past few days has been very welcome. The most significant is the US Federal Reserve announcing the deepest aspect of the recession has been passed and continued growth can now be predicted. Certainly, our stock market’s long climb back has been consolidated and our dollar is holding up well.

Meanwhile, on the other side of the world, China’s economy is finally looking up with its factory output having expanded for two months. This vital piece of news is the main reason behind the way our minerals stocks have been gradually recovering.

As Australia continues to track better than nearly every other western economy, the biggest challenge will be maintaining our relatively high levels of employment. While major employee lay-offs like Pacific Brands’ 1800 redundancies caused considerable media hype recently, it’s good that Woolworths is looking to put on another 7000 staff by next month.

Most analysts agree the biggest single problem with the Australian economy right now is the way it is in limbo as too many people wait for the budget to be announced. They all agree this traditional calendar timing should be ditched to cope with on-going problems as early as possible.