federal government Archives

Quarterly Economic Update: Jul – Sep 2023

11 October, 20238 November, 2023 Updated on8 November, 2023 Economy, Finance, Investing

Australia’s annual inflation rate has taken an unexpected step up, increasing pressure on the Reserve Bank to push interest rates higher and once again raising the prospect that Australia will fall into recession sometime over the next few months. The annual inflation rate for the year to August reached 5.2 per cent, up from 4.9 per cent recorded for the year to July, spurred by higher prices for petrol, financial services, and labour costs, following the 5.75 per cent wage rise for 2.4 million Australian workers in July. Some analysts believe recent wage increases and the Federal Government’s drive to reduce unemployment levels below their current historic low levels and provide more union friendly workplace regulations, will combine to push wages even higher. The prospect of further wage hikes, low productive improvements combined with continued high levels of inflation, threatens to return the Australian economy to the dismal economic days of the seventies and with it, stagflation. Of all the domestic price hikes though, higher petrol prices are seen as the most troubling as they have such significant flow through effects, making everything in the country more expensive to produce and so lifting the cost of living for all Australians. The prospect of higher oil prices internationally, following a decision by Russia and Saudi Arabia to restrict production to boost prices, has cast gloom across the global economy, putting economies everywhere under pressure of higher energy costs. Globally, US Treasury 10-year bond yields rose to above 4.5 per cent during the past month, taking them to their highest level since the global crisis started in 2007, as fears mount that climbing inflation will persist for years to come. This, and the generally accept downturn in growth in the massive Chinese economy, is prompting fears overseas that the US economy will certainly fall into recession next year, with developed countries around the world certain to follow. While there was hope the Reserve Bank was succeeding in driving down inflation, this latest uptick in prices and overseas interest rates, will put the Reserve Bank under renewed pressure to lift domestic rates yet again. Although the much talked about fixed-rate mortgage cliff seems to have been averted, where homeowners have faced the end of super low fixed rate loans and been forced to move to higher variable rate loans, pressure is emerging in the housing market. According to figures from the research house, Core Logic, the number of homes that have been sold at a nominal loss, and which have only been owned for two years or less, has increased from just 2.7% to 9.7% during the June quarter. Pressure is building most clearly in the sale of home units with 14.4 per cent of all unit sales across Australia selling at a loss during the June quarter, compared to just 3.8 per cent of all homes sold during the same time. There also seems to be a trend where people who moved to the regions during the pandemic are starting to sell up and drift back to the cities.  Resales within two years of purchase, made up 11.1% of all regional resales, compared to a decade average of 7.2% per year. A rare bright spot for investors remains the hefty returns to shareholders with Australia’s largest listed companies paying out some $21.7 billion during the last week in September, by way of improved dividend payments. BHP paid out $6.34 billion to their shareholders via a $1.25 per share dividend, Fortesque Metal paid out $3 billion via a $1 a share dividend and after posting a record-breaking profit, the Commonwealth Bank of Australia paid out $4 billion by way of a $2.40 a share dividend. The information provided in this article is general in nature only and does not constitute personal financial advice. 

Federal Budget 2023-24 Summary

24 May, 202318 May, 2023 Updated on18 May, 2023 Centrelink, Economy, Superannuation, Tax

Lady Luck has once again looked down fondly upon Australia, creating the first Federal Budget surplus in 15 years, through a higher tax take on record export earnings and increasing income tax receipts from higher job numbers. But how long will the good times last? Domestic economic growth is expected to buckle under the weight of higher interest rates. As a result, annual gross domestic product is expected to fall to just 1.5 per cent in 2023 -2024, recovering slightly to just 2.25 per cent the following year. This low growth forecast, down from 3.25 per cent currently, comes despite an expected surge in immigration numbers to 300,000, while inflation is forecast to stay stubbornly close to the 6 per cent mark for 2022-2023. The Budget papers suggest inflation will eventually fall within the Reserve Bank‘s guidelines, but not for some time, raising the possibility of stagflation engulfing economic growth. At the same time, unemployment is expected to rise from its record low level of 3.5 per cent to 4.5 per cent the following year and remain at this level for the foreseeable future. Nonetheless, this is a true Labor Budget. The Federal Government will boost Job Seeker payments by $40 a fortnight, provide greater rent assistance and energy subsidies to low-income households, as well as lower medicine costs and provide cheaper doctor visits for all Australians. Increased wage payments for those working in the aged care sector and increased childcare subsidies should also help to reduce the pressure on working families struggling to deal with the recent uptick in cost-of-living pressures. An estimated 60,000 single parents will also be able to claim the Single Parent welfare payment benefit from September 1, with the Government lifting the eligibility age for the youngest child in a family from 8 to 14 years. The Government insists these measured spending increases are targeted and restrained and will work to reduce the rate of inflation. However, only time will tell if the Reserve Bank agrees that a lift in overall government spending via the Budget will work to bring down prices. The Government hopes to reduce housing pressures by encouraging investment in rental housing by lowering the annual profit on build-to-rent projects from 30 to 15 per cent. But beyond this, this Budget has very little to help struggling businesses. It does, though, include some $4 billion to encourage new green energy programs, including $2 billion to support large-scale hydrogen production and $1.3 billion to help households upgrade their existing homes through the Household Energy Upgrades Fund. At the same time, big-ticket items within the Budget just get bigger. There is a brave estimate that spending within the NDIS will be restrained, yet there is no actual strategy for achieving this other than to reduce waste. The cost of providing health services has never been higher, while defence spending is expected to surge to $20 billion over the next four years, including some $9 billion to be spent on the new AUKUS nuclear-powered submarines. Little has been done to boost Government revenue beyond more fairly taxing windfall profits in the gas industry and increasing the tax bill for super accounts with more than $3 million in assets. Beyond this, nothing has been done to address the structural challenges within the Budget. Meanwhile, there is already unrest that the Job Seeker allowance is not being increased sufficiently to pull recipients out of poverty, with cost of living pressures at record highs for Australia’s most vulnerable people. All at a time when the Budget is in surplus. The information provided in this article is general in nature only and does not constitute personal financial advice.

Federal Budget Highlights 2022-23

13 April, 20226 April, 2022 Updated on6 April, 2022 Economy

The Federal Government has delivered a big-spending 2022 budget, taking immediate steps to reduce cost of living pressures for working Australians while implementing a range of massive infrastructure and defence spending measures. The Government will slash the fuel excise by half, effective immediately, as well as provide a one-off cash hand out of $250 to a range of social security recipients, and a $450 additional tax offset for low- and middle-income earners. Productivity will be boosted across the nation by enhanced training incentives, dramatic tax measures to drive greater digital adoption and improve computer-based efficiencies as well as steps to boost the nation’s overall level of self-sufficiency. Concerns about the growing budget deficit, which has now reached $78 billion, have been largely put on the back burner with confidence placed in the fact that as the economy grows, this will naturally reduce. A bounding economy The Australian economy has posted astonishing growth. It has come roaring out of two years of pandemic induced lockdowns, to post strong growth across the nation, spurred on by higher prices for coal, iron ore and wheat. Gross domestic product is expected to expand by a massive 4.2% this year while wages are expected to grow by 2.75% and surge by 3.25 % in the following year. Unemployment is currently 4%, but this is expected to drop to 3.75 % over the next six months – its lowest level since 1974. An extra 100,000 Australians have found work compared to employment numbers recorded when the pandemic first hit in March 2020. This is expected to help slash welfare payments by $11 billion across the next four years. A focus on increased productivity Training and improved productivity remains a key focus, with the Government implementing a $365 million extension to the existing apprentice wage subsidy scheme, in an attempt to further boost apprenticeship training. The Federal Government is continuing its focus on boosting business productivity allowing a $120 tax deduction for every $100 spent on digital adoption technology, such as portable payment systems, cyber security measures and subscriptions to cloud based services. A similar tax measure will be introduced for businesses providing external training courses to staff whether online or in-person, to increase productivity throughout the economy. This will be supported by a raft of Government driven efficiencies such as digitalising trust income reporting, improved PAYG systems and automatic reporting of taxable payments. And a more efficient economy The 2022-23 budget also includes a raft of infrastructure projects that will drive greater efficiencies and economic growth across Australia in the decade ahead. In addition, the Government has announced steps to develop a circular waste economy, support low emission technologies including hydrogen, extended gas pipeline infrastructure and more efficient environment approval strategies. Source: budget.gov.au The information provided in this article is general in nature only and does not constitute personal financial advice.

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