David Koch says everyone is a winner in Scott Morrison’s third Budget
THIS is an election Federal Budget. It only happens every three years so, as Hot Chocolate made famous, “everyone’s a winner, baby, that’s the truth”. David Koch explains.
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THIS is an election Federal Budget. It only happens every three years so, as Hot Chocolate made famous, “everyone’s a winner, baby, that’s the truth”.
Treasurer Scott Morrison, is able to splash around the cash because he is the beneficiary of an economy going through a magnificent purple patch of prosperity. A big trade surplus, the best business conditions in 30 years, booming company and personals tax revenue, record job creation and a Budget deficit below what was expected a year ago.
It doesn’t get much better. What to do with this largesse has been the debate. Buy votes or stash money away for a rainy by paying down debt.
It’s a balancing act which he seems to have pulled off. Company and low to middle income tax cuts, big spending on infrastructure plus specific pork barrelling aimed at heartland Baby Boomers around home care and earning extra income in retirement.
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The big question is whether the next 12 months are going to “feel” any different to the last couple of years. Because, for most of us, it hasn’t felt as prosperous as the economic figures tell us.
Statistics still show you have never been wealthier. The average Australian is the second wealthiest in the world behind the Swiss. The problem is that growth in wealth has come through rises in the value of your home and superannuation … neither of which you can either eat or pay the bills.
So what is this Federal Budget predicting for your financial well being over the next 12 months.
YOUR JOB
As always, your future prospects depend on the sector you work in. According to this Budget the best prospects are anything to do with infrastructure. The massive investment in this area will accentuate the current shortages in jobs like engineering, construction, building services and materials supply.
Building and infrastructure helped drive the huge job creation over the last year and, according to the Budget, will continue to do so.
More generally the prediction is for unemployment to fall from the current level of around 5.5 per cent to 5.25 per cent.
But it seems as though there will be an easing in underemployment. This has been the hidden drag on employment. People who want to work more hours but aren’t.
It’s not much, but the Wage Price Index (which measures salary increases) is expected to rise from 2.25 per cent this year to 2.75 per cent in the next financial year.
The Budget is predicting bigger wage rises of 3.25 per cent in 2019/20 and 3.5 per cent in 2020/21. I wouldn’t bet on that happening … it’s just so far away. In fact, these wage rise increases are less than forecast this time last year.
YOUR FAMILY BUDGET
While wage rises have stayed low, so has inflation. Yes, power bills have been skyrocketing but the price of clothes, cars, electronics, travel and technology have been dropping significantly.
The Budget is predicting the Consumer Price Index will rise 2.5 per cent … which is slightly higher than the last 12 months.
Retailers have been doing it tough to make a buck.
They are under pressure from increased competition here and overseas from international retailers.
Scrapping the proposed half per cent rise in the Medicare Levy is a welcome saving and the personal income tax cuts is a bonus to the family budget.
Tax cuts of between $200 to $530 a year from changes to tax thresholds will help ... and the prospect of further fundamental overhaul, and abolishing a tax bracket, is a great initiative.
YOUR HOME
The biggest shock to a housing market would be a steep rise in interest rates. The Reserve Bank has been flagging for a couple of months that the next move in interest rates is up. But the big question is when and by how much?
Based on the forecasts in this Budget the answers are ... not for a while and not by very much. Economic growth of 3 per cent and inflation at 2.5-3 per cent doesn’t suggest an economy getting out of control anytime soon.
YOUR SUPERANNUATION
The Budget changes are aimed at giving you a better deal on your super. I love them.
With much in “lost” superannuation, the emphasis is going to change from you finding it to the tax office finding you and making sure the money goes into your existing active account.
The abolition of exit fees when changing super funds, a 3 per cent management fee cap on low balance accounts and preventing super funds from charging young investors for life insurance they don’t need are terrific initiatives and it will be easier for working senior Australians to continue super contributions.
Originally published as David Koch says everyone is a winner in Scott Morrison’s third Budget
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