The Federal Budget – the beneficiaries
By financial adviser James McFall (photo: Julian Meehan)
In the face of Australia’s worst economic downturn since records began in 1959, the Federal Government handed down a record setting budget on Tuesday 6th October, to help Australia’s recovery.
A clear objective is to put more immediate money in the majority of Australian’s pockets and as we are consumers, they are banking on us spending it. The main way they have done this is through tax cuts and creating supportive measures for businesses to hire staff, so more people will have jobs.
The tax cuts have been brought forward from 2022 and mean that if you are earning between:
- $37,000 – $45,000 or more, you will be better off by up to $1,080 p.a.
- if you are earning between $90,000 – $120,000, you will benefit further by up to $1,350 p.a.
Speaking as a business owner myself, these measures will encourage investment on our part into growing our business, but one concern I have is for older working Australian’s that are trying to find work. I fear they will now be extremely disadvantaged and this may be at the expense of women in particular that have taken a sabbatical from the work force to have kids for example. Perhaps these incentives should have been more broad based?
The job seekers that are best supported are between 16 – 35. There are specific incentives for businesses to hire in this age bracket in the form of specific wage subsidies and supportive measures for apprenticeships, which naturally lend themselves to this age bracket too.
The staff hiring support mentioned is just one of several measures the Government have implemented to help businesses grow and therefore it follows that business owners and shareholders are some of the major benefactors of this budget as well.
The businesses I expect will benefit the most include industries like:
Retail is a big winner out of the October Covid budget
All have been particularly hard hit due to Covid and typically hire people in the age brackets most supported by the announcements. This will help a lot of struggling businesses in these sectors get back on their feet and combined with other measures, will be welcome support.
Of the various business focused stimulus, significant incentives are provided for businesses to invest into plant and equipment, which is designed to aid growth and competitiveness for industry. These incentives will benefit the ‘goods’ part of the economy a lot more than the ‘service’, however will be welcomed by the likes of Agriculture, Manufacturers and Construction that have expensive machinery costs to operate.
First Home Buyers are being incentivised to buy a newly built home with an extension to the Governments First Home Loan Deposit Scheme. This scheme provides a Government guarantee of up to 15% to First Home Buyers, to help them get into the market sooner.
This measure is good for the economy at large and will be well received by some people eager to live in their own new home. But first home buyers should weigh up their key objectives and the potential compromise that comes from this decision when compared to the alternative options.
These measures have other short-term spin off benefits including helping to stimulate the Construction industry, which supports job growth and it also provides a pillar of support to the property market itself. It’s not commonly understood that property price growth pushes from the entry level, right up through to the prestige market.
Its not linear, but first home buyer demand is important to the stability of the entire property market and with so much of our wealth in Australia tied up in our homes, it is clear the Governments objective is to try and support the property market as a whole, to create confidence amongst Australian home owners that encourages spending, which the economy needs to recover. Therefore, alongside loose monetary policy from the RBA all existing homeowners are benefiting from this budget.
Another spending measure they have taken, that will benefit us all is a sharp increase in infrastructure spending. Besides benefiting from the finished products, it supports the theme of job growth.
The challenge with unemployment is significant. The unemployment rate is expected to peak in December at 8% and it is the Governments objective with this budget to put us on the path of getting back to where we were, which was 5.1% at the end of 2019.
Even considering all of the measures the Government is taking, they only expect the unemployment rate to be 6.5% by June 2022, so it will be a long road ahead and it would be wise to expect a lot of twists and turns.