90 seconds at 9 am: Big AU budget deficit, with spending cuts and tax increases; 'immense' China risk; investors chase yield; equities at new highs; NZ$1 = US$0.819 TWI = 77.0

Here's my summary of the key news overnight in 90 seconds at 9 am, including important news from Australia.

The Australian government has unveiled its 2013 Budget including A$43 billion in spending cuts and tax increases over four years to pay for its key education and disability reforms and to fund a belated return to surplus in what is the last big roll of the dice for the ALP before the September 14 election.

There will be a 2013/14 deficit of A$18 billion.

Two of the big credit rating agencies held Australia’s AAA rating.

But at the same time, prominent economist Ross Garnaut has warned Australian policymakers need to make an "immense adjustment" if the country is to avoid a deep recession brought on by the end of the China resources boom. BHP is cutting back, in an ominous sign. The Aussie dollar is falling quite fast, and the Kiwi is going with it.

In the bond world, the risk scale is tipping towards greed as investors chase yield without concern for risk. 'Animal spirits' are alive and well some might say. Others have suggested a modern update though. 'Market jungle juice'.

In Europe, the appetite for yield was all too evident, and nowhere more so than in Spain. It sold 12-month bills at a yield of less than 1% for the first time since April 2010, and a new 10-year syndicated benchmark bond priced at 278bps over mid-swaps received bids of around €20 billion. And Spanish oil firm Repsol yesterday sold a seven-year bond at a yield of just 2.72%, yet another sign that demand for bonds remains amazingly strong, regardless of the risk. Investors are clearly confident that central banks are no nearer to turning off the liquidity taps.

In the US, the stock market has powered to yet another a new high. It was boosted by data that showed US households have now deleveraged to 2006 levels. US import prices also fell, keeping inflation in check. And as we have noted before, the US federal budget deficit is falling faster than anyone expected.

And finally, the days of key German influence in the EU may be waning. The ECB has clashed with Germany over how the EU will handle struggling banks and whether to create a common agency and fund to manage failures.

The NZ dollar starts today at 81.9 USc tracking the Aussie lower, 82.9 AUc, and our TWI now stands at 77.0.