May 3 will be a crucial day for the Australian economy on two fronts

Photo: Getty/Brendon Thorne

May 3, if it wasn’t already, now looms as one of the most important days for the Australian economy this year.

The date, coinciding with the Reserve Bank of Australia’s (RBA) May monetary policy decision, will now also see treasurer Scott Morrison deliver the 2016/17 federal budget.

The Budget was originally scheduled for one week later on May 10.

Earlier today, prime minister Malcolm Turnbull, announced that he has recalled parliament for April 18, paving the way for an early election with a double dissolution of parliament.

Turnbull said he had received permission from governor-general Sir Peter Cosgrove to recall both houses of parliament. The Senate will sit for three weeks before the Budget, as the PM pushes them to pass the workplace relations bills or face a double dissolution.

While some believe the early budget will reduce the likelihood that the RBA will cut interest rates on May 3, the heightened level of uncertainty generated by a potential double dissolution election could lead to households and firms postponing investment decisions, potentially escalating the need for additional policy stimulus.

Cash rate futures now put the odds of a 0.25% rate cut from the RBA in May as a one in three chance, down from 40% on Friday.

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