* Sentiment slightly positive following optimistic budget
* Commonwealth Bank drags on Australian index
* Fletcher Building biggest drag on New Zealand
By Ambar Warrick
May 9 (Reuters) - Australian shares were flat on Wednesday as broad-based gains after a well-received government budget were offset when the country’s largest bank fell on a weak earnings statement.
The S&P/ASX 200 index fell 0.05 percent or 3.2 points to 6,090.4 by 0231 GMT after a marginal rise on Tuesday.
Australia’s government said it would return the budget to a small surplus in 2019/20, a year earlier than planned.
It also unveiled some big spending measures, including an income tax cut for low and middle-level earners, along with a substantial infrastructure and health care push.
The improved budgetary position was welcomed by the two biggest ratings agencies - Standard & Poor’s Global and Moody’s Investors Service.
“The impulse lifting the market today is the federal budget. The market is appearing to respond positively in a mild way to the reform of income tax and the increase in infrastructure spend,” said Michael McCarthy, chief market strategist at CMC Markets.
Material stocks led gains, with the sector index rising about 0.6 percent. Building materials maker James Hardie Industries PLC and plastics maker Amcor Ltd rose about 1 percent each.
Metal miners were also higher, with index heavyweight BHP Billiton rising about 1 percent.
Chinese steelmaking materials such as iron ore and coking coal saw stronger prices overnight, while some base metal prices also firmed. An uptick in metal prices implies stronger sales revenue for miners of metals.
But losses in Commonwealth Bank, Australia’s largest lender, single-handedly dragged down the index.
Its stock fell as much as 3.4 percent to the lowest since November 2016 after its third-quarter cash profit fell 2 percent.
“(Earnings) are a slight disappointment. An increase in expenses and loan impairment expenses is quite interesting, given the other banks have gone the other way,” McCarthy added.
“The net impact is a decline in the net interest margin, which is seen as negative for the bank. We can see the underperformance today with shares down 3 pct in early trade, in contrast with other majors which are flatish.”
Commercial explosives maker Incitec Pivot also dragged on the index, shedding 7 percent after its half-year profit fell.
New Zealand shares were largely flat as gains in healthcare and consumer staples were offset by declines across a variety of sectors.
New Zealand’s benchmark S&P/NZX 50 index rose 0.06 percent or 4.84 points to 8,599.43.
Dairy producer a2 Milk Co was the biggest boost to the benchmark, followed by Ryman Healthcare, but losses in Fletcher Building and telco Spark New Zealand pulled down the index.
Reporting by Ambar Warrick in Bengaluru;Additional reporting by Shanima A Editing by Eric Meijer