THE Australian share market is expected to open the week stronger, although investors remain hesitant ahead of Tuesday's federal budget.
CommSec chief economist Craig James said the budget would garner more attention than in recent years.
"While the figures will show the government accounts swinging sharply from surplus to deficit, it will also indicate Australia is in far better shape than overseas," Mr James said.
AMP Capital head of investment strategy and chief economist Dr Shane Oliver said the budget is likely to be a tough one for high income earners.
The 2009/10 budget papers on May 12 are expected to show another downgrade to economic growth forecasts and even more dire unemployment predictions, with a budget deficit of up to $70 billion.
"The key issue in the budget will be to strike a balance between continuing to provide support for the economy while at the same time limiting the blowout in public debt over time and mapping out a credible, but not debilitating, strategy to get the deficit and public debt back under control," Dr Oliver said.
Australian investors are very nervous about the budget and will listen to the treasurer's speech with more trepidation than for any budget in the past decade, an investors' group says.
"The Federal Government is softening up the community and the media for a bad news budget," Australian Investors' Association president Jolyon Forsyth said in a statement.
"Investors are concerned the budget will zero in on them and reduce their already shaken confidence."
The amount that can be salary sacrificed into superannuation is expected to be halved in the budget.
Mr Forsyth said the foreshadowed changes to superannuation could devastate investors, some of whom are planning for retirement and have seen their balances shrink by 30 per cent or more.
Mr James said there may be a bit of hesitancy by investors ahead of the budget, but overall they would be in confident mood on Monday morning.
"The futures market is pointing to a gain of 44 points and it could be even stronger than that," Mr James said.
"A lot of the uncertainty has been taken away now from the fact that US payrolls were better than expected, the stress test has come and gone with no major surprises.
"So really, in terms of the US market, it's only the potential bankruptcy of General Motors which really stands in the way of investors fully embracing the markets at the moment.
"The only real constraint on our market would be that the Australian dollar has risen significantly and that could be a consideration, particularly for some of the exporters, including mining and energy operations," Mr James added.
US shares vaulted higher on Friday after a largely positive report card on the country's leading banks as well as better than expected labour market data.
The Dow Jones industrial average rallied 164.80 points, or 1.96 per cent, to 8,574.65 and the broad-market Standard & Poor's 500 index added 21.84 points, or 2.41 per cent, to 929.23.
The Australian share market closed marginally higher on Friday with the benchmark S&P/ASX200 index rising three points to 3,941.7 and the broader all ordinaries index gaining 7.5 points 3,919.6.
Apart from the budget, also out this week are the latest housing finance, lending finance and average weekly earnings figures, and National Australia Bank's monthly business survey.
Commonwealth Bank of Australia releases its March quarter trading update and Optus its fourth quarter financial results.
AAP
