The government posted an operating surplus before valuation gains and losses of $7.5 billion for the 12 months ended June, well above the $3.5b surplus predicted in the 2019 budget forecasts.
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"It was a very nice budget surplus," says Tim Kelleher, head of foreign exchange sales at Commonwealth Bank of Australia, adding that it came hard on the heels of news that the US federal budget deficit for 2019 has blown out to its highest level in seven years.
The US annual deficit is estimated at US$984b ($1.5 trillion), up 26 per cent on the previous year, 4.7 per cent of domestic GDP and the highest since 2012, according to the Congressional Budget Office.
"By comparison, we look pretty good. The market's thinking that if the government starts doing some stimulus, the Reserve Bank needs to do less cutting," Kelleher says.
The government's accounts do show that it's finding it difficult to spend as much as it would like, though: cash spent on the purchase and construction of physical assets rose about $800 million to $8.8b, below the $10b forecast in the budget.
"If you add on top of that surplus, record short positioning in the kiwi, the ability for the currency to go a lot lower is severely limited," Kelleher says.
Traders are still keeping a nervous eye on the US-China trade talks set to officially restart on Thursday.
China is apparently balking at agreeing to serious reforms, such as removing government subsidies and regards US President Donald Trump as being weakened by congress initiating an impeachment inquiry.
In addition, the US has just added 28 Chinese companies, organisations which are primarily involved in surveillance and artificial intelligence, to its blacklist.
That will seriously curtail the ability of these firms to do business with US companies and is an ominous signal just as the trade negotiations are set to resume.
"I tend to think they will club together a little deal, but it won't be the one everyone wants," Kelleher says.
"China needs to buy pork and soya beans to feed their population anyway. I don't think they will get a big deal. It would be quite negative if it all falls apart," he says.
That eventuality would be "tricky" for the market to navigate, likely resulting in US dollar weakness and making it more likely the Federal Reserve will cut interest rates. That would result in a higher kiwi dollar, Kelleher says.
The New Zealand dollar was trading at 93.55 Australian cents from 93.39, at 67.76 yen from 67.47, at 4.4985 Chinese yuan from 4.4945, at 57.50 euro cents from 57.29 and at 51.35 British pence from 51.11.
The two-year swap rate edged down to a bid price of 0.8111 per cent from 0.8113 yesterday while the 10-year swaps rate rose to 1.1050 per cent from 1.1000.
