David Koch: Federal Budget 2014 is from Dummies Guide For Politicians

OPINION: This Federal Budget comes from the Dummies Guide For Politicians – and it’s way more cautious than the reality as David Koch explains.

THIS Federal Budget comes straight from the Dummies Guide For Politicians.

Section 1. First Budget of new Government;

* Paint a dismal picture about health of the economy and Government finances (use words like crisis and emergency)

* Blame previous Government for their mismanagement.

* Make tough decisions and cut backs to save the country

* Under estimate economic forecasts

When things inevitably turn out better than expected … take a bow and the accolades.

While the Federal Budget is a financial blueprint for the nation, it also provides a rough blueprint of your financial life over the next year.

But this blueprint will turn out to be way more cautious than the reality. In fact, it’s predictions for the next financial year are a lot more conservative than virtually every other expert.

YOUR JOB

The Budget says unemployment will start to rise again to 6.25 per cent while virtually every other economist is saying unemployment has peaked at the current level of 5.8 per cent. Over 100,000 new jobs have been created so far this year and there’s no indication of deterioration.

So the consensus is, depending on your industry, jobs prospects will be pretty stable or strong.

This is backed up by the Budget forecast that wages will rise 3 per cent against inflation of just 2.25 per cent. If the job market was really going to weaken, wages wouldn’t rise more than the CPI.

There is going to be big demand for jobs in construction, engineering and planning to cope with the massive infrastructure projects outlined in the Budget.

Brace yourself ... unemployment is set to rise.

YOUR FAMILY BUDGET

Inflation is going to fall even further, according to the Budget which means prices are going to stay low and retailers will keep their “sales mania” strategy.

You’ll need it, because every Australian’s family finances are going to be cut from some measure in this Budget. Whether it’s a tax increase for the rich or the cutback to Family Tax Benefits and a raft of social welfare changes, the Government is slashing their help to average Australians.

So money will be tight, but should be helped by solid job market and subdued price rises.

Money will get tighter ... as inflation falls further.

YOUR HOME

If the Budget predictions for the economy hold true, it produces the perfect environment for the Reserve Bank to stay on the sidelines when it comes to interest rates … at least for a few months.

But if the economy performs better than the forecasts, as expected, then the next move in rates will be up.

While the Budget has attacked welfare and waste, the company tax cuts and infrastructure spending will boost the economy and keep it growing at a steady pace.

The Budget is also predicting a surge in housing construction which will partially offset the fall in mining investment. More housing supply means more stock coming onto the market which will dampen the boom in house prices.

Hit prediction ... a surge in housing construction is expected.

YOUR SUPERANNUATION

Like me, Treasury also seems to be a bit more relaxed about the global economic outlook. While the maturing Chinese see the rate of economic growth slow, it will still be healthy and the US and Europe look as though they are emerging from the GFC doldrums.

That’s good for trade, corporate profits, share prices … and your superannuation.

A boost ... your superannuation will have a chance to grow.

YOUR BOSS

The boss will still be worried and cautious over the next year … particularly if the politicians keep talking the economy down.

But hopefully they will become more confident as the economy grows faster than expected, unemployment stays low and consumers keep spending. The strong housing market is making consumers more confident and the infrastructure spending will underpin the jobs market.

Dummies Guide For Politicians

Section Two; Second Year Federal Budget

* Claim the turnaround in the economy and Federal Budget is because of you (start using words like “responsible economic managers”, “we’ve done the hard yards”)

* Start spending again to win back votes and identify pork barrelling ahead of next year’s spending spree ahead of the election.

Bosses will worry ... as the economy will take time to bounce back. Picture: Thinkstock

Originally published as David Koch: Federal Budget 2014 is from Dummies Guide For Politicians