The dollar continued to test fresh 11-month lows, extending a week-long decline built on rising concerns about the outlook for the resources-rich economy and renewed strength in the US dollar.
Late today, the Aussie was trading at US98.87c, compared with US99.22c late yesterday and US99.54c on Monday.
Treasurer Wayne Swan announced his sixth budget Tuesday, forecasting the economy to grow at 2.75 per cent in the next year, a pace below its long-term average of closer to 3 per cent, adding that inflation will likely stay tame over the forecast horizon.
Traders equated the outlook with an increased chance of further interest rate cuts in the next year, adding to the seven cuts since 2011, which has taken the Reserve Bank of Australia's cash rate target to a record low 2.75 per cent.
"The RBA has ample scope to ease further if needed ... We expect the bank to settle into wait and see mode to determine if its view of ongoing sub-trend growth is correct," said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore.
Mr Swan revealed a sharp deterioration in budget finances, saying revenues had slid steeply over the last year due to a high Australian dollar and falling export prices. He equated the decline in revenue in the last year to that witnessed during the financial crisis in 2008-09.
Financial markets are also weighing the possibility that the US Federal Reserve will start withdrawing economic stimulus, known as quantitative easing, relatively soon.
CMC Markets currency strategist Tim Waterer said the US dollar was rising on the speculation which was flagged over the weekend in an article published by the Wall Street Journal.
On top of that, commodity prices have been weakening, he said.
"The stronger US dollar-weaker commodity price story is plaguing the Aussie's performance and keeping the currency pinned below parity."
Earlier today, government data showed wage growth moderated in the first quarter, providing additional scope for the RBA to cut interest rates.
Australian wages excluding bonuses rose a seasonally adjusted 0.7 per cent in the first quarter of 2013 from the fourth quarter and rose 3.2 per cent from a year earlier, Australian Bureau of Statistics data Wednesday showed. Economists expected a 0.8 per cent rise.
"The tame growth of wages ensures that policymakers can maintain an easing bias ... However the urgency for another rate cut has clearly lessened with the recent slide in the Australian dollar," CommSec economist Savanth Sebastian said.
