THE NEWS WRAP: Possible $20 billion deficit next year prompts rate cut speculation

The federal budget deficit could reach $20 billion next financial year, following a $17 billion shortfall in the current budget.

The news has prompted speculation about pressure on the Reserve Bank to cut rates at its official board meeting today.

“That case is the high Australian dollar, the lack of consumer confidence, the lack of business confidence, and the relatively low level of growth that’s in the economy,” Westpac chief executive Gail Kelly told The Australian.

Speculation George Soros could be shorting the Australian dollar

There is mounting speculation in financial markets that financier George Soros could be shorting the Australian dollar and was planning a raid ahead of the Reserve Bank’s official rate announcement later today.

“Someone … seems to be betting on a rate. I’ve heard the George Soros rumour tonight. A billion dollars sounds like a lot, but it’s not enough to move the Australian dollar and it’s not a lot for George Soros, but there is a play happening in the FX market,” one Sydney-based foreign exchange trader told Fairfax.

“If it is him, it’s probably a bet on a rate cut. These days a billion bucks can’t do much to the Aussie.”

Tabcorp and Tatts threaten to sue the Victorian government over poker machine levy demands

Victorian Treasurer Michael O’Brien is demanding the full-year rate of $82 million in poker machine levies, rather than a pro-rata rate, despite the fact the companies ceased operating the machines 46 days into the financial year.

“The Health Benefit Levy is applied consistent with the Gambling Regulation Act, and has been levied in the same way for more than a decade. There is no discretion under the (legislation) to apply the levy in any other way,” a government spokesperson said.

The news has prompted the gaming giants to threaten legal action against the state government unless a lower pro-rata rate is applied.

“Tabcorp is considering whether to commence legal proceedings to ensure the levy is applied on a pro rata basis,” a Tabcorp spokesperson said.

Overnight

The Dow Jones Industrial Average is down slightly to 14968.9. The Aussie dollar is up to US102.53 cents.